In a matter of months, the Covid-19 pandemic catalyzed years of change in the way organizations operate. Faced with unprecedented disruption and urgent new demands, companies across all sectors and regions have accelerated their tech-driven transformations.
But not all of them approached this change in the same way. While most firms made new technology investments, a small minority went a step further. Recognizing that there can now be no leadership without technology leadership, they have compressed digital transformation with a more aggressive and progressive technology strategy—and reaped remarkable rewards by becoming “Masters of Change.”
Covid-19 Has Widened the Innovation Gap
That’s what we have found as we continue to analyze the technology decisions of companies worldwide. In our 2019 research on enterprise technology strategies and their impact on performance, it was clear that tech Leaders—the top 10% of companies we surveyed—were growing revenues at 2x the speed of tech Laggards—the bottom 25% of our sample.
Digging deeper, we discovered what sets those Leaders apart: At critical stages of systems evolution, these organizations choose the most challenging, but also most rewarding, of the technology options typically available. In contrast, Laggards fail to achieve full value from their technology investments because they make decisions that limit their ability to share and scale technology-driven innovation.
Curious about the effects of the pandemic on these companies’ technology strategies and performance, Accenture completed a second round of research in early 2021, surveying 4,300 executives around the world. We discovered that tech Leaders have moved even further ahead of the pack and are now growing at 5x the rate of Laggards on average in the past three years.
Our research also revealed a new category of companies—Leapfroggers—that initially struggled in achieving a desired return on their technology investments but have since made significant strides in a compressed timeframe. They have leapfrogged over their peers and are growing 4x faster than Laggards.
How Leaders Extended Their Advantage Over Laggards
When the pandemic began, Leaders doubled down and scaled their investments in key technologies such as cloud and artificial intelligence (AI). This helped them not only absorb impacts quickly but also refocus on growth. For example, 72% of Leaders increased investments in cloud security and 68% increased investments in hybrid cloud. Leaders also invested more in IoT technology (70%) and AI and machine learning (59%).
We saw Leaders across all industries step up during the pandemic to embrace new technologies and create meaningful experiences. Financial services institutions turbocharged efforts to enhance mobile banking, enabling customers to deposit checks, transfer funds or pay bills from their phone. Automotive companies began selling vehicles through online channels to avoid in-person spread of the virus. Brick-and-mortar retailers quickly implemented curbside pickup, blending the traditional in-store experience with a new digital experience.
In stark contrast, many Laggards invested in newer technologies for the first time just to keep their companies operational. This put these companies in a position where they are now playing catchup and taking longer to recover to pre-pandemic growth rates.
Our research also shows that Leaders distinguish themselves in another dimension: Creating new value for all stakeholders. This value is delivered by upskilling employees, promoting their well-being, ensuring data sovereignty and privacy for customers, leveraging ecosystem partners, democratizing innovation across the enterprise and designing human-centric technology.
For instance, during the pandemic, 70% of Leaders looked to aggressively increase funding on training to build an agile and collaborative organization as opposed to 52% of Laggards. More than 90% of Leaders focused on connecting with ecosystem partners and fueling innovation through platforms and crowdsourcing, compared to just over 65% of Laggards.
Leapfroggers Make Their Bold Move
Leaders are not the only group of organizations making strides despite the strong headwinds caused by Covid-19. In fact, a significant number of companies (18% of our sample) have fostered thoughtful organizational change to get more out of their tech investments and compress their transformations from years to months.
We call these companies Leapfroggers. Between 2018 and 2020, Leapfroggers grew at 4x the rate of Laggards. What’s more, their growth rate during the pandemic was even higher than the average Leader.
There are two main attributes that set Leapfroggers apart: First, their enterprise IT exhibits a requisite level of “Systems Strength,” affording them sufficient strategic agility and scalability. Second, they have a large “Flip Size”—that is, they are shifting their IT budget from operations to innovation-related activity. This includes speeding up software development cycles, changing business processes, and building new capabilities.
Focus on the Three Rs
In analyzing Leapfroggers, we identified three practices that are crucial to their success. By emulating these behaviors, other companies can take steps to shrink the innovation gap and catch up with competitors:
1. Replatform to the cloud to build Systems Strength. By doing so, Leapfroggers remove redundant technologies and disconnected data across the IT stack while gaining computing power and flexibility. For instance, 81% of Leapfroggers had adopted some form of cloud technology by 2017. That figure rose to 98% after the pandemic.
One such Leapfrogger bank consolidated all its digital services into one global unit in 2019, removing internal silos and duplication of systems. It followed up in 2020 by launching an AI-powered virtual banking agent to handle thousands of customer chats related to its products and services. Thanks to these replatforming efforts, the bank has been able to moderate the impact of COVID-19 disruptions. It has also won an award for its digital banking app, which has seen a 4x increase in user numbers in the last three years.
2. Reframe by adopting an innovation-led strategy. Leapfroggers have been able to shift their focus, change their mindset, and treat potential downturns as opportunities to innovate with new technology. Scaling new innovations became the #1 priority for Leapfroggers during the pandemic, and 89% of them believe in building partnerships across the ecosystem.
One supermarket giant is doing just that, overhauling its operations to boost sales and transform into a digitally savvy food retailer. The company has invested more than 2 billion euros in its digital transformation and has partnered with both tech giants and startups to foster innovation. The focus on digital helped the company drive growth of over 70% in food commerce in 2020, and it is well on target to meet its goal of increasing food e-commerce sales to over 4 billion euros by 2022.
3. Reach for non-traditional, non-financial business goals and create value for multiple stakeholders. This includes scaling tech across the enterprise and investing in the workforce by upskilling employees and providing the right work environment and culture.
A telecom giant we’ve analyzed embodies what it means to reach. After COVID-19 restrictions were put in place, its networks faced an onslaught of traffic: The number of digital conferences increased 322% and the number of people watching streaming services soared. Yet the company’s communications networks remained stable and secure, and it quickly moved 16,000 service and call-center staff into their home offices. The company was able to remain flexible and resilient thanks to its decision in 2016 to modernize its IT estate and invest in cultural and tech innovation, including improving employee skills and democratizing access to technology.
Embracing change to drive success
In times of turmoil, it’s tempting for companies to retreat to what they know. However, the events of 2020 have decisively demonstrated the value of reaching out to the new. Organizations that maintain the status quo with their technology investments, methods, and decisions, will only see the gap with peers widen. Those that make the leap to replatform their technologies and embrace new capabilities will be best placed to take the lead by becoming Masters of Change: speeding digital transformation, strengthening competitive advantage, and supercharging revenue growth.