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Leverage Economic Turbulence as an Opportunity to accelerate Digital led Business Innovation

  Business   August 6, 2019

Economic turbulence & demand challenge call for the need to Spend Less, Do More with Less, Improve Efficiency, Productivity, ROI…….all of which can be achieved via Digital Transformation. There are many historical and research examples to prove that Innovation & Digital Transformation (if planned and executed well as a program) successfully enable business leaders to neutralize adverse effects of Economic slowdown, and sustain business growth in spite of market challenges. Read the attached blog “Leverage Economic Turbulence as an Opportunity to accelerate Digital led Business Innovation” written by Santanu Ganguly, Chief Customer Officer, StrategINK for a perspective on this topic.

Leverage Economic Turbulence as an Opportunity to accelerate Digital led Business Innovation

“Get Big Fast”- The Dot Com Bubble

1995-2000 saw a rapid rise in the US technology stock equity valuations, with robust investments in internet based companies that came to be known as the “Dot Com Bubble.” Around 2001, the bubble burst after half a decade of exponential growth of the equity markets. The crash invariably led to investors facing steep losses and internet companies declaring bankruptcy. Miscalculated speculation, market overconfidence, massive investments and entering market without a viable business model added to the dot com bust. Even the share prices of technology giants like Cisco, Intel, etc lost 80% of their value.

However, one cannot negate the dot com bubble as a complete loss to all. There are companies that emerged victorious. Even though these companies took a bust, their unique business models ensured a bounce back. Amazon, for instance, started as an online bookstore. The dot come bubble skyrocketed its share price from $18 during its IPO to $100, but, eventually, with the bubble burst, it came down to $10.

The NASDAQ Composite index spiked in the late 1990s and then fell sharply as a result of the dot-com bubble.

However, with a business model focusing more on brand recognition and diversification of services, Amazon bounced back. Another example is the Priceline Group Inc, a discount travel website. Despite its share price soaring from $16 to $86, on the first day, the dot com bust tumbled its share price to below $10. However, redefining the business model to focus on hotels over airfare helped the company bounce bank and stand at over $2000 per share today.

The current (2019-2020) Economic Challenge

The economic turbulence has become a norm in this era of uncertain market conditions. 2018 saw a 30% decline in the Chinese stock market with 82% US executives expecting a recession by the end of 2020. Invariably, these are subtle signals of an economic downturn and companies need to be prepared to face the economic challenge to avoid another ‘dot com bust.’ Economic challenges call for improved efficiency and a higher return on investment if an organization aims to survive.

To survive economic turbulence, companies need to have a contingency plan to produce marginal, short term profits despite revenue drops. A mere 10% decline has the ability to wipe out a company’s entire bottom line, therefore, a contingency plan for worst – case scenario is a must. Organizational agility, or the ability to identify and capture business opportunities, is an important element to improving processes and operations and building efficiency.

Digital Transformation during Economic Turbulence

Companies that survive economic turbulence identify and leverage innovation. In today’s era of technological competitiveness, digital led business innovation stands as the return on investment for surviving economic challenges.  Digital transformation, led by automation, instrumentation, a digital connected business ecosystem, etc., is revolutionizing the way businesses serve their customers, the way they are gaining competitive advantage and expanding their operations. In fact, according to a report 82% organizations are redefining their businesses with a digital approach. A strategic approach to digital transformation can directly translate to greater margins, which become they key to survival in a condition of economic turbulence. According to a research by Harvard Business review, “The most digitally advanced parts of the economy have increased their productivity and boosted profit margins by two to three times the average rate in other sectors over the past 20 years.” Consequently, those who lag behind in adopting digital led business innovation experience low rates of productivity and burn out during economic downturns.

The approach to leveraging digital transformation is to integrate digital transformation into the very DNA of the business. In fact, digital transformation can boost agility, productivity, speed, to augment business KPIs like revenue, customer lifetime value and profitability. Digital transformation needs to be a strategic priority. Low cost, higher convenience and better experiences is what defines digital innovation. Not only are these the demands of the customers today, but also an imperative in a condition of economic turbulence.

Digital Transformation in Action

Hasbro
A renowned toys and game company, Hasbro is no alien to the potential of digital transformation. Switching their target audience from kids to their parents, the company embarked on leveraging digital led business innovation. Focusing on the potential of data and analytics, the company focused on customer understanding and recommendations based on that. It also incorporated digital storytelling and push of social media to boost its revenue. From 2013 to now, the stock price has increased from $36 to $ 119.

Nike
A well-known giant in shoes and athletic clothing, Nike faced a growth slump few years ago. Digital transformation and chain in the mindset brought the brand out of a phase of uncertainty to greater profitability. Digital led business innovation, leveraging the power of data analytics, digital marketing and customer experience, gave Nike a faster product development cycle, rapid access to markets and responsiveness to market trends. Digital innovation boosted Nike’s stock price from $52 in 2017, to $88, adding almost $6 Billion to its revenue.

Research shows

  1. 40 percent of all technology spending will go toward digital transformations, with enterprises spending in excess of $2 trillion in 2019
  2. 70 percent of companies either have a digital transformation strategy in place or are working on one
  3. IoT and artificial intelligence are two key technologies to digital transformation, especially for the enterprise
  4. Six in 10 enterprise executives believe IoT technology will play an important role in their organization’s digital business strategy
  5. The top benefits of digital transformation are improve operational efficiency (40 percent), faster time to market (36 percent), and meet changing customer expectations (35 percent)
  6. 56% of CEOs said digital improvements have led to revenue growth

It goes without saying that digital led business innovation is the only chance for companies to survive and blossom in an era where economic turbulence and uncertainty is widespread. Organizations need to start looking at economic turbulence and challenges more as an opportunity than a threat to business growth. The uncertain market conditions stand as a boost to organizations that must undertake digital transformation. Leveraging the potential of digital disruption of AI, cloud computing, IoT, block chain, augmented reality, etc., companies can effectively translate periods of economic challenges to opportunities for growth.

Disclaimer: The views expressed in this feature article are of the author. This is not meant to be an advisory to purchase or invest in products, services or solutions of a particular type or, those promoted and sold by a particular company, their legal subsidiary in India or their channel partners. No warranty or any other liability is either expressed or implied.
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