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From crisis to catalyst: How three business segments are digitally transforming amid the pandemic

Analysts have identified three emerging business segments created as a result of the pandemic. Understanding where the organization fits among these segments can help it weather the crisis and beyond.

On the heels of past financial and social crises, digital transformation quickly followed. Disruptive shocks to markets are often trailed by a fundamental reshaping of digital strategies within affected organizations. But COVID-19 did not just cause the tech tides to shift. It created a tidal wave.

The pandemic catalyzed digital transformation efforts for some industries and organizations while shutting down others. It is now estimated that more than 100,000 small businesses in the U.S. have been permanently shuttered, and industries such as hospitality and travel still lack a clear path to normal operations.

However, companies are finding their footing. Analysts at Constellation Research and Lopez Research have identified three types of businesses that have emerged during the pandemic. Each group is defined by its digital capabilities, capacity to flex operations, and go-to-market strategy.

"All three segments have something to learn," says Holger Mueller, vice president and principal analyst at Constellation Research. "They're asking different questions about their transformations and have different expectations of their futures."

Here's a quick look at each segment and how to identify which one your business falls into to help inform its digital strategy now and prepare for what could be coming next.

Businesses that are accelerating digital

To meet increased demand, some businesses are leapfrogging their original digital strategies and doubling down on innovation. Businesses in this group are operating at an even greater capacity than before the pandemic.

This segment encompasses organizations largely deemed essential during the virus outbreak—hospitals, healthcare providers, grocery chains, and online retailers. Some corporate and tech-driven organizations also fall into this group—those that already had robust work-from-home policies and could pivot to a remote workforce with relative ease. The pandemic forced these businesses to expand their output, capacity, and productivity.

"This segment is completely focused on economies of scale," says Mueller. "They are considering things like, 'I'm still doing what I've been doing. I need to do more of it. I need to find more capacity in my existing business model.'"

These companies have not taken their foot off the digital transformation gas pedal. They need to continue investing in innovation while prioritizing efficiency to meet customer and market demand.

 

Businesses that are operating under significantly restricted measures

Businesses in this group stalled for a period of time as the pandemic began but are now seeking to make up ground, rebuild their businesses foundationally, and stay afloat in the new normal of their markets.

Restricted businesses face an extreme CapEx crunch—paying for office and retail space that is now sitting unused, for example. This segment includes many gyms, hotels, entertainment venues, and others in the hospitality and leisure industry. These companies are asking questions about when and how they can restart their operations and drive more effective solutions when they do. "Effectiveness is important to this segment," says Mueller. "If you're in this segment, money isn't coming in. You have maybe one or two shots to re-pivot your business, and then you're done."

The pivots can be major or minor, like entering a completely new industry or simply developing new tech capabilities during the downtime, says Mueller. A car manufacturer, for example, might see a severe reduction in business as its manufacturing stalled but uses this time to make its in-vehicle platform more efficient with edge computing and IoT capabilities. Or, a spin studio chain may rent its equipment for in-home use. Businesses in the restricted segment risk going out of business if they do not pivot.

 

Businesses that are adapting to the new normal

This segment is neither accelerating nor lagging. These businesses have seen parts of their business stall and other parts move forward. They are only partially operational due to regional regulations and workforce restrictions. Quickly evolving their technology and go-to-market strategies is a priority. Mueller believes that this segment thinks differently than its counterparts, asking questions like how to become more nimble and how to move away from one-size-fits-all thinking.

In some ways, says Maribel Lopez, industry analyst and strategic advisor at Lopez Research, many of these organizations had already begun digital transformation efforts pre-pandemic and now must reassess and shift strategies toward more flexible solutions. For example, some restaurants, retailers, and delivery services quickly updated their existing ordering platforms and apps to strategically deploy contactless delivery just days after the pandemic began.

"These [businesses] have had to consider how to do food delivery service in a way that is safe for employees and customers," says Lopez. "Some are doing better than others. It has to do with whether or not they already had capabilities like online ordering in place, rather than having to come up with those solutions as soon as COVID-19 hit."

CXOs rise to the occasion

Implementing digital transformation under normal circumstances is challenging enough, but during a pandemic, an elevated level of technical expertise is needed to maintain business continuity, keep data secure, and ensure employee safely. Suddenly, leaders must consider the medical, social, and technological implications associated with reopening their business, interacting with customers, bringing employees back into offices, or pivoting how they go to market. "The technological understanding of CXOs has been boosted to a level which I have never seen before," says Mueller.

Business decision-makers must now prioritize defining what makes their organization and go-to-market strategy truly unique. They should seek to double down in those efforts to emerge stronger post-pandemic.

"When people build technology, they sometimes reinvent the wheel," says Lopez. "They build every part of the car instead of just buying the car even though they really only want to customize the seats. You can move faster by taking a standardized application and customizing it. The only time you should think about building something from the ground up is if it's what truly differentiates your business."

For example, customers could choose to invest more heavily in their cloud capabilities, their go-to-market strategy, or even certain pieces of their digital customer experience. This kind of targeted application flexibility and customization allows for operational scale and has become critical for survival.

Preparing for what's ahead

Businesses in any of the three segments must proactively design a transformation strategy that will see them through this crisis and future ones, according to Rohit Dixit, senior vice president and general manager of HPE's advisory and professional services.

"Once you have recovered from the initial chaos, digital and business transformation isn't an option—it's a must in order to survive post-pandemic," says Dixit. "In order to get to the stage of reinvention, you have to stabilize and build that foundation that allows you to create for the long-term."

Dixit helped define "9 steps to the new normal" to guide business leaders to redefine and redeploy digital transformation strategies. Businesses must initially deal with immediate crisis management and triage, then adjust, stabilize, and sustain their operations while reducing costs. Next, they can begin to build a bridge to the new normal by assessing mid- and long-term impacts, align with key stakeholders, design a new IT infrastructure, and then transform and optimize that infrastructure to be more resilient to future threats.

Ultimately, this resilience is borne out of flexible technology solutions, says Lopez.

"People don't always seek binary choices, because they never like to go all-in on anything," says Lopez. "Frankly, [businesses] don't always know what they need." Therefore, as-a-Service solutions are becoming increasingly appealing as organizations design for an unknown future—providing the option to scale up or down based on changing circumstances.

Whether your organization falls into the accelerating, restricted, or adaptive segment—or is moving from one category to another—one thing that is certain is that a tech-based strategy will be core to resilience and survival. With uncertainty on the horizon for businesses in any segment, building a strong technology backbone, assessing and evolving existing infrastructure, and pursuing solutions that allow for scale and security will be the foundational elements of those that emerge as resilient winners once this crisis is over.

Related:

Embracing an uncertain future: From assessment to reinvention

Overnight, COVID-19 fundamentally disrupted how we live and work. It sent some organizations scrambling to maintain continuity while others seized the opportunity to transform. What set different organizations down different paths—and why is assessing the current state such an integral first step in recovery? Find out in this special two-part series.

Part 1: Hear how organizations can assess their current state and why it matters for recovery. This episode’s guests include Maribel Lopez and Rohit Dixit.

Part 2: Hear how companies can shift to resilience, keeping technology at the core of their long-term transformation strategy. This episode’s guests include Maribel Lopez, Rohit Dixit, and Jo Peterson.

This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.