After the COVID-19 Recession: Are Canadian Organizations Ready for the Digital Future?Posted on May 11, 2020
During the last 18 months, we asked senior executives in Canada about their preparations for digital disruption and transformation. We did not know that a global pandemic and deep economic recession would hit just as we were finishing our research.
By Ron Babin and Shane Saunderson
Canadian organizations do not have a clear digital strategy and have a fuzzy view of the challenges ahead. They typically have a planning horizon of two to five years, which now seems laughable as most organizations struggle to adapt their operations to the realities of working remotely. Shockingly, 20% of Canadian firms are looking at a five to ten year planning horizon for their digital strategy. By comparison, global competitors look at a digital planning horizon that is one to two years and rapidly shrinking. Canadian organizations are less willing to invest in new digital technologies, compared to global competitors. Research from International Data Corporation shows that many large organizations are planning to increase their digital spending to take advantage of the opportunities during and after the recession.
Ironically, Canadians have a very strong anticipation (at 69%) that digital technologies will disrupt their industry, to a “great extent”, but they are unwilling or unable to do anything about it. COVID-19 has magnified this gap as the recession grips the economy in 2020. While we all hunker down in self- isolation, we have become attached to online shopping, news, entertainment, and business. Compare your experience of receiving the online purchase delivered to your door by an overnight courier, versus a local curbside pick-up of an order that may or may not be what you ordered. In the space of one month, the lack of digital planning and capability for many Canadian organizations has become glaringly obvious.
How should organizations prepare for the digital future after the recession? They should start by focusing on the four foundational digital technologies identified by our survey respondents: mobile, cloud, analytics, and cybersecurity. The survey also identified Artificial Intelligence as one of the most promising technologies for the future. During the economic boom of the last ten years, we’ve heard a lot about Social Media, Blockchain, 3D printing, Virtual Reality and other technologies. However, our survey suggests that these are less important compared to the foundational technologies. To prepare for a digital future after the recession, organizations should focus on a small set of core technologies, and avoid or reduce spending on interesting technologies that lack a very clear business case.
Canadian organizations told us that they expect an increase in demand for their core products and services (63%) because of digital trends, and we expect that this demand has only grown because of the pandemic. At the same time, 74% expect to develop new core business lines in response to digital trends. The challenge will be delivering those new business lines much sooner than the two to five year timeline envisioned before the recession. Canadian organizations do not expect their digital capabilities to differentiate them from competitors. Now that a digital capability has become table stakes, many are trying to catch up to the new expectations. Compared to 68% of global survey respondents who expect digital capabilities to differentiate, only 32% of Canadian survey respondents have that expectation.
Why is this important?
Canadian organizations are not immune to digital disruption, especially during a global recession. Some industry sectors such as banking, education, and healthcare may be protected by government regulations. However, even these stoic sectors are feeling the demand for digital transformation during the pandemic. For US and global competitors Canada can be an attractive market. Competition and disruption via digital technologies seems inevitable for most Canadian industry sectors, but our survey suggests that there is complacency and a lack of clear readiness in the near-term for most organizations. In a global recession this lack of digital preparedness can be devastating.
Canadian organizations must be willing to experiment more with digital technologies. Given the somewhat cautious culture that we have observed with this survey, organization-wide change will be difficult. However, small, separated working teams (skunkworks), can be low-risk ways to trial new digital innovations, build momentum and obtain employee buy-in before broader roll-out. Moreover, as a global leader in research on emerging technologies such as AI, Canada has no excuse to be a laggard on the global stage. Digital disruption has become an inevitable reality of modern business.
Canadian organizations must prepare to disrupt with digital technologies, or they will be disrupted.
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The authors extend a thank you to the 92 individuals who participated in the survey, through the Schulich ExecEd at York University. We will revisit these issues in future discussion papers at the Centre of Excellence in Disruption and Transformation, where a copy of the full discussion paper is available.
We also welcome you to join our upcoming September program at Schulich ExecEd to explore how your organization can prepare for digital disruption. For more information or to register visit: Strategies for Managing Disruptive Digital Change. Our next class will focus on digital strategies to get through the recession.