In just a few months’ time, the COVID-19 crisis has brought about years of change in the way companies in all sectors and regions do business. According to a new McKinsey Global Survey of executives,1 their companies have accelerated the digitization of their customer and supply-chain interactions and of their internal operations by three to four years. And the share of digital or digitally enabled products in their portfolios has accelerated by a shocking seven years.2 Nearly all respondents say that their companies have stood up at least temporary solutions to meet many of the new demands on them, and much more quickly than they had thought possible before the crisis. What’s more, respondents expect most of these changes to be long lasting and are already making the kinds of investments that all but ensure they will stick. In fact, when we asked executives about the impact of the crisis on a range of measures, they say that funding for digital initiatives has increased more than anything else—more than increases in costs, the number of people in technology roles, and the number of customers.
To stay competitive in this new business and economic environment requires new strategies and practices. Our findings suggest that executives are taking note: most respondents recognize technology’s strategic importance as a critical component of the business, not just a source of cost efficiencies. Respondents from the companies that have executed successful responses to the crisis report a range of technology capabilities that others don’t—most notably, filling gaps for technology talent during the crisis, the use of more advanced technologies, and speed in experimenting and innovating.3
Digital adoption has taken a quantum leap at both the organizational and industry levels
During the pandemic, consumers have moved dramatically toward online channels, and companies and industries have responded in turn. The survey results confirm the rapid shift toward interacting with customers through digital channels. They also show that rates of adoption are years ahead of where they were when previous surveys were conducted—and even more in developed Asia than in other regions (Exhibit 1). Respondents are three times likelier now than before the crisis to say that at least 80 percent of their customer interactions are digital in nature.
Perhaps more surprising is the speedup in creating digital or digitally enhanced offerings. Across regions, the results suggest a seven-year increase, on average, in the rate at which companies are developing these products and services. Once again, the leap is even greater—ten years—in developed Asia (Exhibit 2). Respondents also report a similar mix of types of digital products in their portfolios before and during the pandemic. This finding suggests that during the crisis, companies have probably refocused their offerings rather than made huge leaps in product development in the span of a few months.
Across sectors, the results suggest that rates for developing digital products during the pandemic differ. Given the time frames for making manufacturing changes, the differences, not surprisingly, are more apparent between sectors with and without physical products than between B2B and B2C companies. Respondents in consumer packaged goods (CPG) and automotive and assembly, for example, report relatively low levels of change in their digital-product portfolios. By contrast, the reported increases are much more significant in healthcare and pharma, financial services, and professional services, where executives report a jump nearly twice as large as those reported in CPG companies.
The customer-facing elements of organizational operating models are not the only ones that have been affected. Respondents report similar accelerations in the digitization of their core internal operations (such as back-office, production, and R&D processes) and of interactions in their supply chains. Unlike customer-facing changes, the rate of adoption is consistent across regions.
Yet the speed with which respondents say their companies have responded to a range of COVID-19-related changes is, remarkably, even greater than their digitization across the business (Exhibit 3). We asked about 12 potential changes in respondents’ organizations and industries. For those that respondents have seen, we asked how long it took to execute them and how long that would have taken before the crisis. For many of these changes, respondents say, their companies acted 20 to 25 times faster than expected. In the case of remote working, respondents actually say their companies moved 40 times more quickly than they thought possible before the pandemic. Before then, respondents say it would have taken more than a year to implement the level of remote working that took place during the crisis. In actuality, it took an average of 11 days to implement a workable solution, and nearly all of the companies have stood up workable solutions within a few months.
When respondents were asked why their organizations didn’t implement these changes before the crisis, just over half say that they weren’t a top business priority. The crisis removed this barrier: only 14 percent of all respondents say a lack of leadership alignment hindered the actual implementation of these changes. Respondents at both B2B and consumer-facing companies most often cite a failure to prioritize as a barrier, but the responses to other challenges differ. Nearly one-third of B2B respondents say that fear of customer resistance to changes was a barrier, but only 24 percent of those in consumer-facing industries say this. After these two challenges, B2B executives most often cite organizational and technology issues: the required changes represented too big a shock to established ways of working, IT infrastructure was insufficient, or organizational silos impeded commitment to and execution of the required changes.