Covid-19 accelerates digital business in 2021

The global pandemic has prompted organisations to double down on digital transformation.

Forrester’s latest research on digital business maturity shows that business leaders now consider accelerating the shift to digital business to be the most critical priority in 2021.

Yet it should come as no surprise that Covid-19 has widened the digital business gap, separating digitally advanced firms from those that were caught off guard by the pandemic. Less obvious are differences between how advanced firms operate compared with their less advanced counterparts. It’s clear from our research that advanced firms are more future-fit, which means they use their digital capabilities to help their businesses be adaptable, creative, and resilient.

Our maturity research divides firms into three categories of digital business maturity: beginner, intermediate, and advanced. Historically, advanced firms make up less than twenty percent of all organisations, and the same holds true in our latest data. This means that, despite an increased focus on digital transformation in the past 12 months, beginner and intermediate firms have been unable to catch up to digitally advanced firms.

Advanced firms double down on digital business

Our data shows that advanced firms are much more likely to be increasing their investments in digital transformation compared with beginner firms. These investments help advanced firms build and maintain a lead in the technology race that is a digital business.

However, one of the key differences in our data highlighted the ability of more established firms to take advantage of collaborations with services partners. Thirty-seven percent of survey respondents in advanced firms told us that they relied more on services partners during the pandemic compared with just 19 per cent of beginner firms. Many services partners worked with clients to accelerate their digital response to support employees in remote work and new digitally enabled distribution models.

This type of partnership is a key driver of any future-fit tech strategy, as it helps to deliver resilience to unexpected conditions, while also accelerating adaptability and creativity.

Revenue growth versus cost reduction

We found that advanced firms are more likely to use digital transformation to drive revenue growth compared with beginners, where the greater focus is on reducing costs. This is an important shift, as leading companies focus more on effectiveness and resulting outcomes instead of efficiency and output.

We also found that advanced firms are focusing more on improving IT capabilities to promote agility and innovation. This reflects the increasing importance of fixing underlying operating systems to get to the next level of digital business transformation. Agility and innovation are cornerstones in the adaptive and creative capabilities that companies need to deliver a future-fit tech strategy.

How to survive and thrive in the digital economy

The biggest obstacle to overcome is a legacy (analogue) strategic mindset. This is especially true when your business seems to be successful – after all, why change what appears to be working?

Digital leaders help to shift the leadership team to think about business opportunities from a technological perspective. That means a mindset that explores how they can use technology to create new sources of customer value. As businesses learn to use software and technology as a competitive differentiator, new challenges will surface. There will be questions to answer and decisions to make, such as where to fit digital products into the organisational structure.

Thus, the survival of each organisation will increasingly depend upon how well it learns to create value for customers through software. This is what it means to become a truly digital business.

For further insight and the latest research, please visit www.forrester.com

by Nigel Fenwick, VP, Principal Analyst, Forrester