Becoming a digital leader in uncertain times

Halfway through 2024, forecasts are telling us that despite a strengthening economy we should brace for higher-for-longer interest rates and a stagnant growth outlook. 

We now appear to be firmly in an economic cycle with lower growth rates, higher inflation and higher interest rates, and with unprecedented levels of macro uncertainty stemming from geopolitical instability, workforce fragility, weak consumer demand, rising government debt and trade policy conflicts. 

All of this has created a challenging environment for business investment, and investment in digital innovation and transformation (with the exception of AI) is also being affected, showing stagnant growth outlooks. 

In this new normal, companies have to rethink how they set and execute on their technology strategies. With the pressure to boost profitability at the expense of growth in recent years, digital investments have predominantly focused on automation and cost savings. The success of digital leaders – who consistently outperform laggards in growth and shareholder return – reinforces the urgency for companies to embrace digital innovation and transformation. Yet the challenge remains: how can companies break free from inertia and achieve digital leadership?

There are 3 key organizational capabilities that companies must build in order to be able to thrive in this new normal:

• Resiliency – Companies typically are either playing offense or playing defense. By doing both simultaneously, companies build resiliency that leads to stronger recovery when economic growth rebounds. This means investing both in technology solutions that drive near-term cost optimization through digitalization and automation, and in digital innovation that can create new growth platforms by opening up new markets, customer bases and revenue streams.
• Agility – Strategy is a long game, but is often frozen into annual cycles with little room for adapting to changing realities. Embracing continuous recalibration and realignment of strategic direction and execution allows companies to thrive despite uncertainty. Technology-wise, adopting a composable architecture approach such as MACH can enable digital teams to adapt more quickly to a change in strategy. Building a ‘reinvention ecosystem’ can also provide cost agility by not over-investing in in-house capabilities.
• Experimentation – Committing large budgets, even to potentially high-impact programs, is a daunting leap during uncertain times. Now is the perfect time for corporations to embrace more of a venture model - place many smaller bets with clear strategic alignment and a strong business case, and take a data-driven stage-gate approach to identifying high-potential initiatives worth additional investment. Clever use of prototyping, market testing and POC development can also help make limited investment budgets run farther. 

I believe the next 24 months is one of the best windows of opportunity we’ve seen in the last decade for companies to leapfrog their competitors, simply by not letting low-growth outlooks and a sense of uncertainty hold them back on digital progress.