CIOs: Apply These Lessons From The Pandemic To Win The Recovery

The Bureau of Economic Analysis announced on July 29, 2021 that real economic output of the US grew at an annual rate of 6.5% in the second quarter. Following on the heels of a strong first quarter, US GDP has exceeded its pre-pandemic levels in remarkably short order. Economic growth has been driven by solid improvements in labor productivity since the second quarter of 2020, rising at an annualized rate of 3.8%.

Source: Original Postress-this.php?">CIOs: Apply These Lessons From The Pandemic To Win The Recovery

These numbers stand in stark contrast to the low rate of productivity improvements that were typical in the years 2005-2019, when they averaged just 1.4%. As The Economist has noted, “America is producing more output than it managed just a year and a half ago, with roughly 6m fewer workers.”

The challenge now is to sustain that impressive increase. To do so, companies will need to take advantage of some of the key lessons that have come out of their response to the pandemic, many of which are tech-related. While multiple factors fueled recent productivity growth, digital technologies are a key element in its resurgence. CIOs, in particular, will have a huge influence on whether the productivity miracle continues.

The productivity paradox

The improvement in productivity growth was by no means a foregone conclusion. For many years, we’ve predicted a large productivity payoff from digital technologies. Instead, we experienced low rates of productivity growth in spite of massive technology investments, a phenomenon that came to be known as the productivity paradox.

Research has shown that for technology investments to truly pay off, they must be accompanied by complementary investments in organizational capital: innovative business models, redesigned processes, new management practices including performance measurement and incentive systems, and upgraded or new employee skills. Put differently, companies must reconceptualize their businesses, going far beyond simple automation, to achieve high returns. This has proved to be very challenging to accomplish.

In normal times, it was only the companies with vision, the capacity to make sizable investments, significant technology capabilities and the fortitude to make the necessary large-scale organizational changes that achieved high returns. Now, with their very existence at stake, other businesses had no choice but to embrace ambitious digital solutions too. Our collective experience during the pandemic demonstrates that the envisioned gains from digital investments are not a mirage, but rather are attainable with focused effort.

What lessons can we learn from our recent accomplishments?

In an annual survey of senior executives conducted by the Center for Digital Transformation at the University of California, Irvine (disclosure: I am Faculty Director there), 75% of the 185 companies responding this year reported accelerating their digital transformation initiatives during the pandemic. Importantly, they made the necessary investments in organizational capital: Close to three-quarters of companies said they were redesigning their business models, with more than a third describing their responses as a reinvention—investing in processes, people, and technology to focus on the future.

Many companies focused on the market demands of the pandemic, accelerating the ongoing shift in how products and services are delivered, migrating from in-person to online approaches and adopting new digital solutions to facilitate this. Internal efforts, initially motivated by work-from-home, focused on the digitization of employee interaction and collaboration, with a hefty 86% of companies accelerating efforts on this key dimension.

New technology adoption also increased, with 45% of companies deploying at least one technology they had not used before the pandemic. This concerted effort across all sectors of the economy was a key factor in the high payoffs in productivity.

CIOs now have the opportunity to keep delivering on the promise of technology and lead their organizations to success. As one respondent emphasized, now is the time to focus on “winning the recovery.”

Here are six lessons for CIOs that emerged from the research (company names are not provided, as the respondents were granted anonymity):

1.    Accelerate investment in new business models.

Recent digital initiatives have not only provided proof-of-concept, but they have also done so at scale. Capture value from digitized business processes with the new models.

A financial services company began to offer its technology platform to other institutions, adding a B2B offering to a previously B2C business. A bank changed its operating model to derive more value from its existing investments in digitized business processes.

2.    Enhance the focus on initiatives that encourage workforce collaboration and productivity.

Companies have realized substantial value from their investments in employee collaboration and productivity tools, suggesting that more could have been done earlier.

An energy company that responded to the survey accelerated remote services to proceed with customer projects with far fewer employees on the ground. Many respondents implemented new collaboration software.

3.    Exercise financial discipline.

Technology investments have often failed to deliver on their promised benefits, and marginal initiatives are often green-lighted. The pandemic showcased the value of unrelenting focus on customer value and employee productivity. Prioritize digital initiatives that do both.

A transportation company focused its digital roadmap, cutting non-critical projects, adding a few new initiatives and accelerating the delivery timeline for the remaining projects. A media company raised the ROI threshold for digital investments.

4.    Embrace emerging technologies.

Today, AI is a key technology, with uses throughout the value chain, leading to potentially massive payoffs. It is, however, challenging to deploy at scale. Lead with humans, enabled by AI tools, and invest in training.

A retailer is focusing on its most valuable customer segments deploying an augmentation strategy, empowering its sales associates with AI and offering training in the tools to their workforce.

5.    Acquire digital capabilities, including analytics.

The make-versus-buy decision for software has never been more important. Still, with the war for digital talent in full swing, few can go it alone. You will need to simultaneously acquire and develop in-house talent, while also engaging in strategic partnerships with technology providers.

More than half of the companies in our survey sought new assistance from third parties to implement digital initiatives.

6.    Build a coalition of core influencers to maintain your momentum.

Organizational culture is a pervasive barrier to transformation. With digital efforts during the pandemic reducing the reluctance at many companies to embrace digital transformation, CIOs have had a better hand than before. Still, even with CEO support, you will need enthusiastic partners to drive meaningful change.

A fashion company executive carefully chose five peers to socialize the digital transformation strategy, promote its value, listen to counterpoints, and help to build support.

One respondent neatly summarized the overarching lesson from all of the above as: “We are being bolder, faster!” That’s the only way to lay the productivity paradox to rest for good.