Companies must look for opportunities to go from market leaders to market makers.
Investors are looking for purpose and long-term value creation
In the past, value was defined by profit and loss through consistent quarterly earnings and stock valuations, short-term profit goals, market-share growth and stock repurchases. More recently, corporations have been questioning value definition, as well as the overall purpose of a business. They’ve been shifting from being focused purely on shareholders and toward a broader focus on stakeholders.
The Embankment Project for Inclusive Capitalism (EPIC) brought leaders from across businesses, including asset creators, asset managers and asset owners together to define how to better measure long-term performance for customers, employees, society and financial stakeholders. Notably, environmental, social and governance (ESG)-focused investors are seeing greater returns with the S&P 500 ESG index outperforming the non-ESG index by 3% in the last-twelve months.1
The pandemic has begun to catalyze the reshaping of businesses and how they are valued. Investors are looking not only for companies that have demonstrated resilience and are disruption-ready, but also to those that have aligned their purpose to long-term value creation.
This was the future — a “beyond” that has exponentially hurtled to now.
In reframing their future, companies should anchor on new transformative drivers
Achieving these objectives requires companies to transform using three new drivers that put humans at center, deploy technology at speed and innovate at scale. Research in EY’s 2020 Tech Horizon survey indicates transformational leaders are 45% more likely to unlock annual revenue growth of more than 10% and are 50% more likely to see EBITDA increase annually by more than 15%.
Six habits of digital transformation leaders45%
of transformational leaders are more likely to unlock annual revenue growth of more than 10%.
Six habits of digital transformation leaders50%
of transformational leaders are more likely to see EBITDA increase annually by more than 15%.
The 2022 Tech Horizon survey uncovered new insights into technology transformation and investment strategies.
In an EY article and in EYQ’s recent Megatrends 2020 report, our analysis highlights the importance of taking a future-back approach when embarking upon — or accelerating — a transformation journey. It’s a process that involves looking ahead and envisioning multiple future scenarios, and then creating a multi-horizon strategic map that walks the future back to today.
These future scenarios present the opportunity for organizations to reframe their future to capture new growth and establish new business models that can deliver short-term and long-term value. Below are four questions every organization should ask itself to spur transformation and reinvention.
1. How do companies create customer intimacy without proximity?
Although consumer responses in the EY Future Consumer Index suggest substantial behavioral shifts, it’s more likely what we’re seeing is the acceleration of a trend at least two decades in the making. Pre-pandemic, many companies weren’t meeting rising customer expectations because they were competing against the small minority of companies who redefined the customer experience and continue to evolve their product or service offerings to personalize, predict and adapt. For those who have fallen behind, the pandemic — and the market shifts it has accelerated — has leveled the playing field.
As people adapt to the realities of the pandemic, companies setting a new benchmark are creating customer intimacy through hyper-personalization, predicting what customers want and adapting products or services based on their specific environment without a single face-to-face. EY survey results in the 2020 Tech Horizon survey suggest leaders who are laser-focused on their customers do a better job at meeting customer demands and meeting profitability goals.
But this requires trust. While customers are increasingly signaling they are willing to provide more data, they need faith in the organization — or government — they are giving it to. Nearly three-quarters of UK consumers and two-thirds of US consumers in a global ESOMAR and HERE Technologies study indicate a willingness to share personal data, provided companies are transparent about their data collection practices.
Read more about “How do you create customer intimacy without proximity?”
2. Where does employee centricity meet the future of work?
One of the lessons companies have learned from the pandemic crisis is how central employees are to every dimension of the enterprise. They activate the assets, tools and technologies, and serve and delight customers.
Our experience suggests companies that keep employees at the center of their resiliency efforts, purpose and decision-making are better-positioned to accelerate their recovery. It also helps them to find opportunities as they consider what lies beyond the pandemic. For many companies, it’s time to reimagine the workforce experience — some companies are making the transition back into the physical workspace, while others plan to keep remote working in place at least until the end of the year. For all companies, the transformation journey to the workplace of the future has begun. In the physical work environment, a new world awaits as organizations consider real-estate decisions in the context of employee safety and wellbeing. For companies struggling with either too much or too little capacity in their talent pools, future opportunities may include talent sharing across the organization’s broader ecosystem. Emerging technologies can play a key role in filling the skills gap companies were experiencing even before the pandemic, from gamification to on-demand learning.
Read more about “Where does employee centricity meet the future of work?”
3. How can technology at speed create competitive advantage?
The pandemic has highlighted many organizations were overestimating their digital maturity, while underestimating the critical and urgent need for digital transformation. In EY’s 2020 Tech Horizons survey, we determined almost every company was already on a journey to digitally transform its business; however, only 4% said transformation was fully embedded and optimized across their operations. As companies adapt to the realities of the pandemic, those wanting to be digital transformation leaders will need to exhibit six habits: put customers first, accelerate AI to drive growth, promote innovation through ecosystems and partnerships, nurture talent with new incentives and strategies, activate governance plans for emerging technology, and use data and agility to power innovation.
At the same time, with a much larger workforce at home, companies are having to contend with an exponential rise in cybersecurity risks. Even before the pandemic, 59% of executives in EY’s Global Information Security Survey (pdf) said their organization had faced a material or significant incident in the past 12 months. During the pandemic, the media has reported an escalation in incidents as hackers take advantage of organizations focused on addressing the crisis — from hospitals and health care providers, to law firms. Looking beyond, cybersecurity will have to be embedded into every transformation journey — as will privacy protections, for customers and employees.
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4. Where does innovation at scale meet the new “S-curve” of growth?
Since World War II, the global economy has been following an extended S-curve of growth — a pattern of growth in which a disruptive concept, technology or market starts with low adoption initially, followed by dramatic growth before slowing again as the model matures. Following the S-curve, global companies used the traditional value drivers of scope, scale and efficiency to measure performance and value. Companies that accelerated out of previous global shifts — US auto manufacturers post-World War II and hypergrowth “unicorn” companies post-financial crisis — have shaped the world we live in today.
Now, a new generation of leaders is emerging, operating by the rules of a new non-linear S-curve, where innovation timelines compress and ideation, prototyping, piloting and commercialization happen on parallel tracks. Examples of companies who experimented early with the new S-curve include a household appliance maker developing and commercializing a new ventilator in 30 days, distillers shifting from making spirits to making hand sanitizer, and pharmaceutical companies going directly from COVID-19 vaccine research to human clinical trials. Innovating at scale along this new growth trajectory requires companies reinvent their operations to be data-driven, support hyper personalization, rapidly orchestrate ecosystems of value and address the reshaping of globalization.
Read more about “Where does innovation at scale meet the new S-curve of growth?”
To innovate at scale, companies will have to reinvent their operations to be data-driven, support hyper personalization, rapidly orchestrate ecosystems of value and address the reshaping of globalization.
For transformative leaders, the pandemic is a significant accelerator to long-term value creation
If there is anything this pandemic has taught us, it’s how important humans are to businesses and the economy. Without humans, everything comes to a grinding halt. It’s why long-term value performance increasingly needs to be predicated beyond the financials to incorporate the human factors — customers, employees, society.
Companies effectively anchoring their transformation approach to long-term value and propelling it with the three transformative drivers – humans, technology and innovation – have an opportunity to accelerate growth in a post-pandemic world, regardless of which shape it takes. Those failing to embrace the need to rapidly transform will likely accelerate into obscurity.
Show article references#Hide article references
- Gilchrist, Karen, “The coronavirus downturn has highlighted a growing investment opportunity — and millennials love it,” CNBC, cnbc.com, 14 April 2020, https://www.cnbc.com/2020/04/15/investing-advice-coronavirus-downturn-shows-esg-investment-opportunity.html, accessed on 28 May 2020.
As companies adapt to the realities of a pandemic world, they will need to transform their future around creating customer intimacy without proximity, making employee centricity the future of work, leveraging technology at speed to create competitive advantage, and discovering where innovation at scale meets the new “S-curve” of growth.