Why invest in digital transformation and technology during a recession?


15th April 2020


7 min


Bethan Vincent

Recessions and market contractions are typically greeted by the cutting of operational budgets. Investment in new digital projects and R&D is often at best delayed‚ or completely scrapped due to aggressive cost-saving measures.

As we’ve written about previously‚ the businesses which have been successful post-recession have historically focused on operational efficiency alongside the development of new markets and assets. 

Protective short term measures come with trade-offs. Cost savings should never come at the expense of the ability to execute on long term strategic goals and maintain competitiveness. Cutting expenditure on digital assets and platforms can have a significant downstream impact‚ throttling growth just as conditions ease.

Technology expenditure is also sometimes seen as an exercise in sunken costs. However implemented correctly to solve the right problems‚ new digital products and platforms can both streamline processes and boost productivity leading to cost savings in both the medium and long term.

The key to digital transformation in a recession is knowing exactly where and when it’s worth investing in technology. 

Adapting To A Digital-First World

Digital transformation is fast becoming non-negotiable as social distancing measures forces employees to work remotely on a global scale.

Over a period of days‚ organisations have been forced to digitise every business process possible‚ from board meetings to team socials. 

Most of this virtualisation has been focused on moving resources and workspaces to shared cloud environments to enable continued collaboration. This transition has been relatively painless for those who had already invested in some or all of the digital infrastructure required.

From church services to healthcare‚ many areas which were traditionally resistant to the idea of going digital are now taking part in the globe’s largest digital transformation experiment.  It’s hard to see how this process will be reversed as consumer expectations will undoubtedly adjust to the new normal.

The new conditions surely make a strong case for an organisation to continue pushing forward with digital plans. Now more than ever‚ your existing and potential new customers are looking for new solutions and ways of working. Even if the move is to simply take a physical retail store online‚ the investment in digital operational capabilities is a case of‚ if not now‚ when? 

There is also another argument to be made that competitive advantages are formed when companies have to adapt or die to new market conditions. As while global trade may slow‚ innovation will still occur driven by new technologies and applications. 

For example advances such as 5G are already leading to massive opportunities for AR/AR/Mixed reality. Even Apple is even planning to launch a VR headset in the near future. 

Any organisation who ignores the future may find themselves in the past just as the world begins to recover.

Harnessing The Power Of Automation

One of the cornerstones of industry 4.0 is automation‚ which promises to free us of mundane and time-consuming tasks. 

In many organisations‚ the automation of simple processes has already been achieved. For example‚ many of us use Dropbox to share files‚ speak to chatbots as the first line of customer support and interact with smart home devices to order groceries.

While these advances are undoubtedly useful‚ they are just the tip of the technological iceberg. 

With advances in cloud computing‚ AI/ML and big data‚ there is now the clear opportunity to develop intelligent decisioning platforms that can handle complex interactions and information‚ not just simple “if this‚ then that” chains.

One industry that is already embracing this new wave of automation is Insurance‚ where there is increasing investment in cognitive systems which use digital agents to help human underwriters make better decisions about their customers. Fuelled by historic data and AI‚ the platform can also prevent claims leakage via early fraud detection and prevention.

While these systems do often require bespoke development and data integration‚ their benefits are immediately felt through both a reduction of labour costs and better risk management. 

The automation model is not limited to insurance and can be applied to most industries where time-intensive tasks are present. Automation in the legal sector is particularly fascinating‚ as it was previously thought to be impossible due to the complexity of information and decisioning required.

Times are changing though as technology races ahead in capability and capacity. The current mass-adoption of digital-first interaction will also undoubtedly further accelerate the acceptance of blended human/digital automation processes. Businesses who implement this effectively during a slowdown will emerge leaner and more efficient.

Ensuring Supply Chain Resilience

During a recession of any kind‚ supply chains generally become squeezed due to lower global output. In our current situation‚ this may be further compounded by on-going border and movement restrictions. 

Technology can be a vital key in ensuring resilience‚  as preventing or recovering from supply chain disruption requires solid data collection and analysis‚ instant communication and seamless supplier on-boarding.

The use of real-time data and capacity modelling can improve an organisation’s ability to identify potential problems in the supply chain as soon as possible. This can take the form of early detection systems‚ which involve the automation of trigger points and provisioning of instant alerts to specific teams or individuals. 

This is vital for example‚ in freight logistics‚ where the ability to track shipments as they move from mode to mode is key in closing the gaps most often found at freight transfer points. If delays occur at key points‚ the system might automatically trigger countermeasures‚ such as changing settings in planning systems‚ triggering re-orders or updating stock management systems.

Dashboarding and real-time data reporting can also empower teams across an organisation to understand current supply chain conditions and actively monitor for any risks‚ helping decision making at any level. 

This can be combined with improving the quantity‚ quality and speed of information passing through the supply chain. Physical technologies such as advanced robotics and IoT devices in a connected factory setting can further augment data collection to give a wider overview across multiple locations‚ processes and datasets.

If risks are identified and key materials become scarce‚ organisations must be able to react at speed. This can be assisted by the development of systems which allows for the quick integration of alternative suppliers. On-boarding and compliance checks can be digitised to speed up this process‚ especially when dealing with overseas suppliers while travel is still limited.

Opportunity In The New Normal

Alongside cutting costs where sensible‚ companies must consider making strategic investments that will improve their position when the recovery begins. Investment in digital transformation can also help improve short term performance by reducing costs and enabling better risk management. 

As the world increasingly moves to digital-first operations‚ the expectations of customers are also rapidly changing. Current conditions are further accelerating existing trends that push services and products to the cloud; immediately available via any device from any location. Companies must be led by this change in behaviour and meet customers where they are – online.

Now is also the arguably perfect time to develop new digital products and services‚ as a slowdown in the economy makes new digital platforms easier to rollout. Reduced demand means there will be less of an operational impact on both an organisation and its customers.

Looking for guidance on how technology can help your organisation adapt to new market conditions and customer expectations? Contact us today to speak to one of our digital transformation experts.