Digital Transformation – What To Expect in 2021

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Digital Transformation – What To Expect in 2021

Posted by Soumya Manikkath

If only I had a nickel for every time I’ve read or written the words “new normal”, “unprecedented” or “uncharted” in the past year! As a digital marketer working to transform how organizations engage with their customers, I think it’s safe to say that 2019 has been.. well.. different. It’s been a year where digital adoption rates have taken giant strides at the organizational and industry levels. For many businesses globally, COVID-19 meant that going digital was no longer a luxury or a nice-to-have. It moved up on to-do lists and priority charts. And how! 

According to a recent McKinsey & Company report, organizations’ strategic postures during the crisis have shown a break with the past. In 2017, nearly half of the executives surveyed ranked cost savings as one of the most important considerations in devising their digital strategies. Whereas now, more than half the respondents say that investing more in technology gives them a competitive advantage or refocusing their entire business around digital technologies.

How Did 2020 React?

Up until 2020, the success of many digital transformation initiatives depended on organizations who were early adopters. The ripples from the pandemic moved digital transformation from the role of a secondary channel to being a core channel for many businesses. Here are some of the key trends that made their mark in 2020.

1. Digital Transformation, But on Steroids

To state the obvious, the rate of digital innovation seen across industries has been faster than ever. In sectors such as education, the changes over the past year are perhaps more than what we saw over the past decade. Similarly, in industries like retail, brands that have been fearless to take calculated risks have emerged as pioneers. Retail giant Nordstrom had a rocky start to 2020 with the company closing down 16 of its full-line namesake stores last summer. But, they soon found the perfect combination of traditional models and new ideas which  led to digital sales making up 54% of their entire business in their third quarter earning call. In the words of Nordstrom CEO, “We are a majority digital business right now.”

The McKinsey report states that the region-wise rates of adoption are years ahead of when similar surveys were conducted previously – at least by 3 years globally and even more in the APAC region.

2. Crisis Related Changes Made For The Long Haul

Digital transformation was traditionally considered to be an investment that required strategic planning and long-term vision. The past year has shown that we may not always have that luxury at hand. Initially, many changes by businesses were band-aid solutions with varying doses of experimentation. But with time, they are being implemented with the long-term in mind. Many of these changes could very well be permanent fixtures with indelible effects to ways of business. Some examples of these are the rising investments in data security solutions and the accelerated migration from on-premise to cloud solutions like Salesforce. Take the case of the manufacturing industry – many supply chains are being affected by COVID generated erraticity in demand and supply levels. In the wake of this, consulting firm BDO USA projects that manufacturing players will fully adopt Supply Chain 4.0 – the digital transformation driven version of the industrial revolution – by 2025. Another projection for the real estate industry shows that constructions of multi-family homes in 2021 will include co-working spaces. 

3. Digital Workplaces are Here to Stay

Once COVID hit, companies took an average of 11 days to implement a workable solution for remote working as opposed to a year that it would have taken them pre-pandemic! And nearly all companies evolved a solution within a few months. We are now relying even more on technology to optimize individual and team productivity, collaboration, and the overall employee experience. In other words, digital transformation is no longer a long-term goal, it’s happening right here, right now. The prospects of companies rushing back to pre-COVID, on-premise work models appear to be very less. 

4. Say Yes to Contactless Solutions

COVID-19 has changed the future of consumer behavior. Industry business models such as travel, retail and food and beverage had been heavily impacted at the onset of the pandemic. Innovations such as visible sanitization of security trays, touch-free journeys and fully digital hotels have been put forward by airlines to assure passengers that travel is indeed safe. In retail, Amazon has turned heads with their Amazon Dash Cart that uses computer vision, sensor fusion, and advanced machine learning to allow shoppers to checkout without lines. Telehealth doctor visits have replaced onsite visits to the physician and may become a long-term phenomenon post-pandemic as well.

5. Automation Became the Need of the Hour

Organizations responding to COVID-19 challenges sought comfort in workflows, automations and integrations – with low-code platforms playing an important role in their rapid deployment. These platforms reduced the need of finding that elusive developer/ architect talent for getting the job done. Instead, they began relying on ‘citizen developers’ who can work with the low-code platforms. They also paved the way for moving from legacy systems to cloud solutions. The pandemic exposed the inefficiencies with legacy processes and their reliance on manual processing. Customer-facing automation became an immediate opportunity for providing a competitive advantage. Gartner predicts that by 2025, customers will be the first humans to touch more than 20% of all products and produce. By 2024, organizations will lower operational costs by 30% by combining hyperautomation technologies with redesigned operational processes.

6. Data Became All the More Important

The pandemic has caused an explosion in the volume of data generated with organizations capturing, storing and processing data at an accelerated pace. This includes data from video conferencing and streaming solutions, IoT sensors and much more. The Worldwide Global DataSphere Forecast, 2020–2024 predicts that the world will create more data in the next three years than it has in the past 30 years. If left unmanaged, one can only imagine the amount of chaos such large volumes of unstructured data can create. Focused data collection, clear understanding of the use case, quality of data integrations and data management frameworks are all steps towards data innovation in the right direction.

What are the 2021 Digital Transformation Trends?

1. Hybrid and Multi Cloud for the Win

In 2021, companies are expected to make the move towards hybrid and multi clouds in order to diversify and reduce risk. As per a survey conducted by Database Trends & Applications and Aerospike Inc, 53% of those surveyed anticipate their organizations to primarily use hybrid clouds by 2025, 29% said multi cloud, 27% said public cloud only and 21% said private cloud only. While the debate of the clouds may never arrive at a real consensus, most organizations have come to terms with the fact that there is no one cloud solution that fits all enterprises. Cloud native technologies like Kubernetes (an open source platform to manage containerized applications across multiple hosts) and serverless computing may begin to play a more active role. 

2. Permanent Shift to Remote or Hybrid Working

Companies are increasingly inclined towards hybrid workplace models with team members coming in for a few days of the week and working from home for the remaining. This optimally combines the sociability of an office with the flexibility of remote working. However, a digital or hybrid workplace works well only when supported by the right technology to facilitate video conferencing, virtual onboarding, digital whiteboarding, or even augmented reality solutions that allow for virtual employee meetings, and product demos. While devising a hybrid workforce strategy, the question on every HR leader’s mind should be about which employee touch points require in-person interactions. The focus needs to move from co-locating employees in the same room to using technology to place them in the same virtual space. 

3. Build Digital Trust

Security, privacy and governance have become cornerstones of any IT strategy built by developers and tech teams today. And rightly so! Since the pandemic, cyber security threats including phishing and malware attacks have been at an all-time high. What makes it even worse is organizational vulnerability in the form of employees and stakeholders not knowing what an attack actually looks like! This has encouraged Chief Information Security Officers and IT teams to favor Zero Trust Models. The model treats all users as potential threats. Through it, all users, including those inside the organization’s network, are required to strictly and continuously verify their identity before accessing resources on the network. Many companies are also adopting new generation Artificial Intelligence tools to safeguard against active threats. 

The 2020 IBM Institute for Business Value survey showed that, overall, 76% of executives plan to prioritize cybersecurity over the next two years with 46% planning to use AI to enhance cybersecurity in the same timeframe. This is twice as many as those who deploy the technology today. 

Sectors such as insurance and financial services will see an increase in cyber security spending. Those hit hardest by the pandemic such as retail and energy are likely to see a drop in cybersecurity spending due to lost revenues and higher operational budgets.

4. 5G is Here, Finally

Trends and predictions over the past few years have seen 5G to be a regular fixture in the lists. This goes to show that digital marketers and businesses recognized its importance early on and had predicted its inevitable arrival. With more of the workforce going remote and collaborating through video conferencing and digital communication media, the need for ‘always up and running’ connectivity has become indispensable. The IEEE 2020 Global Survey of CIOs and CTOs done in September-October 2020 revealed that 52% of CIOs and CTOs have accelerated 5G adoption. Telecom giant Ericsson’s research showed that by the end of 2020, about 15% of the global population will have 5G coverage – a significant hike from the 5% global 5G population coverage at the end of 2019.

5. Machine Learning and Advanced Analytics

AI is becoming the tool of choice for businesses wanting to bring a layer of analytics and personalization to their processes. With digital transformation being a necessity now, it’s the right time for all sectors to start leveraging the data available through advanced analytics to gain a competitive edge. In the fashion industry, chatbots by Burberry and Levi’s are examples of fashion brands leveraging AI and machine learning for information gathering. Another example is Project Jacquard – Google’s smart fabric technology which adds touch sensitivity to fabrics. Available on Levi’s Jeans jacket and now on Samsonite backpacks, it uses gestures to trigger functions on your phone. It’s debatable as to how useful a backpack is in today’s pandemic times, but the technology and its uses are evolving and an interesting development to watch out for. In manufacturing, predictive and prescriptive analytics will help manufacturers make smart decisions based on insights from diverse data. This will be a welcome relief to supply chains that have been disrupted by COVID-19. 

What Next?

Experimenting and learning during a crisis is a totally different ball game and one that companies and leadership teams are becoming accustomed to. As the economic and humanitarian landscape changes over the course of 2021, learnings from steps taken during the past year will be key takeaways for businesses to implement digital transformation initiatives that can scale with time. The time for innovation and action is now.