The COVID-19 pandemic has at least somewhat changed the lives of everyone in the world. It has been an entire year of the world turning upside down and life looking quite a bit different.
An aspect of life as we know it was forced to turn on its head and make a complete change. Working in an office is looking very different than it has in the past.
With the restrictions set forth in March 2020 limiting the number of employees who can work in non-essential offices, many businesses were forced to adopt some sort of work from home options and adapt their business practices to allow for better public safety.
Given this impressive switch to work from home and having a completely remote culture, it is inevitable that technology has advanced at an unprecedented amount and at an unprecedented pace.
At M Accelerator, we surveyed some industry executives and investors to see how the pandemic affected their startup and if they believe COVID has accelerated the rate of digital transformation across industries.
We found that overall, there are many changes that happened in the use of technology and advancement within companies and many executives believe these changes are around for the long haul.
We found that our responding executives all report that their startups or startups they had invested in were facing challenges but nonetheless adopting practices to conform to a digital transformation.
When looking at the pandemic, you not only have to wonder how you will keep up business and keep the money coming in, but how will you keep the customer experience positive and keep your startup business afloat?
Just How Much Have Startups Been Forced to Digitally Transform?
We know that COVID-19 has changed the way we live life, interact with friends and work, but just how much have startups actually been forced to change through a digital transformation?
In a study by Twilio highlighted in Forbes Magazine, they found that startups have changed their business methods and models a significant amount.
- 97% of executives surveyed say that the pandemic sped up their digital transformation
- 95% say they’re looking for new ways to engage customers and employees
- 79% say that COVID has increased budgets for digital transformations
Of course the digital transformation of a startup looks different depending on what industry it is operating in, but the study by Twilio shows that most companies are feeling pressure and taking an active role in adapting to the digital transformation that has inevitably arrived at the door.
For some businesses, the pandemic has pushed them to adopt contactless payment methods and digitizing menus and services. The digital transformation can look very differently depending on the industry.
For some, the digital transformation journey can look like moving communication to be completely virtual. For businesses, many had to completely transform to allow their employees to work from home.
Gil Makleff, co-founder of Powow AI has found that the digital transformation that the pandemic encouraged is intense and we have to think of it as more than just working through the computer rather than face to face.
Digital transformation is more than cloud computing, more than moving everything to edge devices with Internet of Things (IoT) protocols, and more than infusing your apps with machine learning. Digital transformation is about challenging the way we think about business. For a real transformation, we have to examine our core business processes and take a realistic look at the way we actually do business, not just what appears on org charts and process diagrams. Meetings are a bit part of this. Digital tools are a critical component of meeting productivity, especially during the pandemic.
Adapting to a digital transformation does not only mean working on a computer instead of in person or using your apps with machine learning, it is about adapting every aspect of your business to be compatible in a contactless economy.
Even as some workplaces return to normal, industries face unprecedented issues as children are still home from school and child care is expensive. With all these factors at play, it is likely that the implications left by the pandemic will have long lasting effects on the way businesses operate.
Kyle Asman, an executive from Backswing Ventures has found that we are in the midst of a complete digital transformation.
I believe we are in the midst of a contactless technology renaissance. After the economic turmoil of 2008-2011 we saved in the creation of the sharing economy, now we are seeing a contactless economy, with payments, learning, and the majority of communication moving online.
We continue to work with our portfolio companies to make sure they are playing an active role in developing contactless solutions. The entire world is transforming into a contactless economy, and companies who don’t have solutions are going to be left behind, and without investment.
Asman has seen the changes that are happening within digital transformation as ones that cannot be ignored. If startups ignore them and refuse to evolve their company into one that accommodates the contactless economy, they are going to be left behind with no investors.
COVID has pushed companies over the technological tipping point and has transformed them forever. A new study done by McKinsey & Company has found that responses to COVID-19 has increased the adoption of digital technology by several years.
They have estimated a 7 year increase in the United States and a 10 year increase in Asia.
Of course this differs among different industries, but the general consensus and observations show that a significant digital transformation that normally would take years and up to a decade to complete, occurred in one year thanks to the pandemic.
To stay competitive in this new business and economic environment requires new strategies and practices.
The reason that these changes normally take so long and were not done before the pandemic is simply because they were not a priority. McKinsey & Company found that:
- 33% of respondents in their study reported that fear of customer resistance to change was a barrier.
- 24% of respondents in consumer-facing industries say that organizational and technical issues were a main reason to make the switch.
Before the pandemic, companies feared that technological advancements were much less likely to meet efficiency goals and customer satisfaction.
The customer experience is one of the most important factors when startups measure their success.
With the threat of the pandemic, companies found no alternative to adapting their approach. While measuring growth and success of your brand in times of COVID, it is impossible to ignore the impact of digital technologies and their advancement.
Jeff Ransdell, former Managing Director of Merrill Lynch Wealth Management and current Managing Director of Fuel Venture Capital told us that he has seen an extreme speed up of digital transformation within startups across various industries.
I believe that when COVID-19 mandated closures began in the U.S. in March and infections and deaths began to steadily rise, all companies found they were ill-equipped for crises, whether internally or externally. Those challenges will only continue, as we continue to anticipate a vaccine and the distribution of vaccines worldwide. Private technology companies will play the biggest role, even bigger than governments, in enabling our society to adequately adjust in a way that is both safe and financially sustainable.
Like all other executives, Ransdell and the leadership team at Fuel Venture Capital have worked hard every day since the start of the pandemic in the U.S. helping founders of more than a dozen companies in their portfolio to play an active and pivotal role in digitally transforming industries that were extremely vulnerable for disruption and in need of help when COVID hit and turned startups upside down.
The impact of a digital transformation can be great or tragic for a startup business, depending how your startup embraces these changes and transformation.
Is COVID-19 Creating an Opportunity for Startups? Or is it Their Downfall?
The Harvard Business Review wrote an article citing a study that showed a rapid spread of technology has been accelerated by the pandemic and has led to a pressing need for businesses and governments to adapt and to do so quickly.
If businesses run from this change instead of accepting and embracing it, it can be very harmful to their business. Being left behind in the digital age is a lethal mistake for startups, especially in the midst of the pandemic.
Hari Sood, founder of EdTech in the UK responded to our survey stating that he has seen a huge transformation and acceleration of digital transformation.
COVID-19 has seen a massive surge in online learning, with people using their time in lockdown to upskill and work on their personal development. We’ve found that whilst there’s a ton of great learning content and platforms out there, there’s also a lot of problematic platforms. There’s a huge focus in the eLearning world on commercialisation and UX but not so much on the genuine quality learning resources that are grounded in the research of how people learn.
We’ve created Pyxium to combat this, and provide free, high quality learning resources that focus on learning. By allowing users to earn a virtual currency through their learning, we’re hoping to refocus the online learning conversation on educational outcomes, over just ‘numbers enrolled’ or ‘number of courses.
Sood has found that the pandemic has brought an increase in the use of online learning technology and many companies have found that they need to embrace this change but do so while forgetting to focus on the real desired outcome of the services provided.
Technology has been evolving and progressing consistently, disrupting production processes through a rapid up-scale of digital platforms. There is a general fear surrounding the advancement of technology, but it opens many doors and opportunities for startups.
Technology has decreased the cost of doing business and has opened the door to a more open trade environment. Many companies are advancing in a somewhat of a panic state, trying to keep up with the trends the pandemic has brought on but this is not effective. Companies need to embrace technological advancement while continuing to embrace their mission and ideals.
Aside from advances in the traditional workplace, technology improvement has created and continuously improved the opportunity for “gig work”. Gig work consists of shorter contracts that make different kinds of work accessible and flexible.
The gig economy is growing and giving people the skills and opportunity to make money on their own without being employed through a company. Gig work usually consists of work such as writing, digital design or data entry.
Will These Changes Last After COVID?
The pandemic has sped up the digital transformation of generally every business in the world, but are these changes here to stay? The Harvard business review found that it is likely that the pandemic has created changes that will be reinforced forever.
There will likely be a large permanent shift to a more flexible work at home schedule, or even a completely work from home schedule.
Technology is an amazing tool for companies and for the world as long as businesses and governments are ready to prepare, adapt, and commit to these changes.
These changes were already happening; the pandemic just made them impossible to ignore. These changes are pivotal for your startup business’s success for the future, pandemic or not.
There is a lot we can learn from digital transformations and what we have found by surveying executives from the major leaders across industries and enterprises is that the integrity and success of the business depends on how well it accepts, adapts and succeeds in a digital transformation.
We can learn from the digital transformation that the pandemic has caused and use this to prepare for other crises in the future.