There are numerous trends and challenges driving the new business imperative. Factors within organizations that both necessitate and complicate the process of digital transformation include:
Companies are modernizing front and back-end operations to support growth.
Cloud is a critical enabler of business transformation.
Security must be baked-in to digital transformation plans for success.
Resignations, reshuffling, and the expectations of younger, digitally-native employees are drastically altering the workforce.
The move to modernize and digitize business operations is hardly new. More than a decade ago, companies looked to update customer- facing applications to grab the lowest hanging fruit on the digital transformation tree. While this approach may have resulted in early wins with customers, it left functions like quality, regulatory, and safety – once considered back-office functions – behind. Now, these internal business functions are deeply connected to C-suite and boardroom priorities.
The quality, regulatory, and safety functions are not only organizational table stakes—they’re core to protecting brand equity, maintaining consumer trust, differentiating, and driving growth in highly competitive markets. The piecemeal approach to digitizing these internal functional areas, which treats them as an afterthought to customer-facing operations, is clearly no longer going to work.
In 2020, the problem with these functions continuing to rely on outdated tools and systems to execute critical work became instantly obvious. The COVID-19 pandemic quickly exposed all the weaknesses of managing business-critical functions using on- premises and aging technology systems that had been building under the surface for years. Given the reality of a near-overnight shift to remote work, companies had to quickly find ways for a newly home-based, distributed workforce to access data and processes based on paper, email, spreadsheets, and employees’ individual knowledge in order to survive.
This led many organizations to accelerate their transformation efforts and, in some cases, as a recent Deloitte article indicates, “mak[e] years of progress in a matter of months.”1 And despite the financial hardships many businesses suffered during the pandemic, investment in digitization efforts continues to increase at a 15.5% compound annual growth rate from 2020 through 2023, with total investment over that period reaching US$6.8 trillion.2
Digital agility is essential to successful transformation, allowing organizations to drive innovation at scale, deliver new initiatives faster and create the experiences that customers want.”
We call for a shift in executive mindset to project the future of the business with digital at the core. That is, to systematically deploy cloud and digital technologies to maximize growth in ways that put solving customer problems first and keep the business resilient from end to end...”
Companies must modernize systems to meet stakeholder expectations, respond to external forces, and alleviate internal pressures.
Of course, digitizing is more complicated than modernizing customer-facing and internal systems alone.
Companies must look holistically at all systems including those stemming from acquisitions, to avoid a redundant or siloed mix of legacy and new technology. As Venkat Venkatraman, Professor of Management at Boston University Questrom School of Business noted, successful companies approach digital transformation “as an enterprise-wide business activity rather than a set of functional-level technology projects.”3 Understanding digital transformation as central to all companies’ strategies will be critical to success moving forward.
Prior to the pandemic, companies across all industries were making or accelerating the move to the cloud as they embraced digital transformation. The pandemic played a role in further pushing companies to embrace the cloud. In 2021, Gartner estimated cloud services jumped by 23% and will again increase in 2022 by 16%.5 By 2025, over half of enterprise IT spending in categories that can transition to the cloud will transition to the cloud, compared to 41% in 2022. “Almost two-thirds (65.9%) of spending on application software will be directed toward cloud technologies in 2025, up from 57.7% in 2022.”6
Companies that failed to embrace cloud, found themselves behind their competition because they could not act as quickly. 65.9% According to Forbes, “The future belongs to the fast, and those who act fastest on their data will win.” 7
Some companies remain reluctant to move processes, documents, and data to the cloud from on-premises solutions noting concerns about security risks. But in practice, the real challenge is more often about comfort with the status quo, reliance on “tribal knowledge,” and fear of professional obsolescence than security. In other words, culture change is required.
of spending on application software will be dedicated toward cloud technologies in 2025.
The need to act quickly is especially true for companies operating in consumer goods industries. The pandemic forced consumers to adopt new behaviors in buying and consuming goods and services. Many switched brands and formed new tastes and preferences. Companies that were digitally prepared were best suited to make the adjustments needed to capitalize on these shifts.
People who have been buried in companies forever... don’t want to let go of their vine... You have to give them another vine to grab, which means [companies must tell their staff that] not only is it safer and more secure to go to the cloud and cheaper to go to the cloud, if you do it right, but ‘we’re going to train you and you’re going to learn new things and be more valuable, in general, in the market if you get on board and move this direction.”
Cyber-attacks and the cost to combat them are increasing due in part to remote/hybrid work, bring-your-own-device programs, IoT devices, and other trends which create vulnerability and increase the avenues for attack.
Supply chain cyber-attacks, in particular, are on the rise which is problematic for systems already stretched thin from pandemic-related challenges. When a single supplier is attacked it is enough to bring down a whole network of providers. Attackers have found that a company’s vulnerability lies with its suppliers, who may not be transparent about security breaches. Companies must, as a result, ensure suppliers’ cybersecurity is up to par.8
Security breaches and cyber-attacks also play a role in the hesitation to migrate to the cloud.
The COVID pandemic has altered the labor market with increased unemployment rates and job vacancies across every industry.9 A record number of US workers quit their jobs in 2021, 47.4 million.10 “Waves of employee resignation have hit the United Kingdom and European Union just as hard as U.S.”11 Globally, over 40 percent of the workforce is considering leaving their employer in 2022.12
Corporate employees are job-hopping in “the Great Re-Shuffle,” while service, manufacturing, shipping, and front- line workers are leaving the workforce or moving toward corporate positions in “the Great Resignation.” Workers are quitting their jobs due to “poor working conditions” and “existential epiphanies” among a variety of reasons.13 This massive shift is putting tremendous pressure on organizations to rethink the way they engage employees to retain the valuable talent they already have and attract prospects now available in droves.
Service, manufacturing, shipping, and blue-collar jobs have been hit harder than corporate jobs because they are riskier and less flexible. Because these jobs cannot be done from home, some workers contracted COVID at work – or weren’t willing to take the risk that they would. Others needed flexibility to care for their children or other dependents, also contributing to the mass exodus. The labor shortage has hit manufacturing particularly hard as wages have fallen below average, especially in nondurable manufacturing, such as food & beverage.14 Blue-collar workers “clocked hours in person — putting themselves and their loved ones at risk — while they watched their white-collar counterparts migrate to comfortable and safe remote setups, with their jobs and pay protected.”15
For corporate workers, the pandemic ushered in what was thought to be a temporary state of remote work. This shift has since changed the nature of white-collar work and the way companies seek corporate employees. Remote work has allowed companies to broaden their talent pool beyond their own location as they adopt policies like ‘work from anywhere’ and focus on facilitating productivity regardless of location.16
Resignations pose an enduring challenge. Broadly, workers are more likely to seek opportunities at companies that empower employees with the use of modern tools and technologies that allow them to be productive, and thus engaged and satisfied.
There are likely two broad categories of people participating in the Great Resignation: “One is people who are professionals, who are making a choice between ‘good’ and ‘better’. The other category is people who are making a choice between something that is really terrible, unhealthy and toxic, and survival. Those are two very different dynamics.”
The labor shortage is causing “a total rethink of how to incentivize employees and how to retain existing employees... We’ve seen a very rapid spike in the kinds of keywords in job postings that indicate that companies are prepared to offer very attractive incentives and much more flexibility.”
Business is digitizing. Companies are modernizing front and back-end operations, taking a holistic approach to systems and transformation. They are doing this to support growth, meet stakeholder expectations, respond to external forces, and alleviate internal pressures.
Companies are increasingly adopting cloud, which is a critical enabler of business transformation. To do so, requires culture change to overcome comfort with the status quo, reliance on “tribal knowledge,” and fear of professional obsolescence.
Cloud solutions address cyber security concerns. Cyber-attacks are accelerating across supply chains. Security must be baked-in to digital transformation plans for success.
Worker resignations in service, manufacturing, shipping, and front-line jobs, along with reshuffling in corporate jobs, are drastically altering the workforce. This is putting pressure on organizations to rethink the way they engage employees. Empowering employees with modern systems that enhance productivity increase employee satisfaction.
