Covid-19 has widened the gap – Why the pandemic is driving digital transformation in companies

In an interview with Handelszeitung, Ivo Blohm, Assistant Professor of Data Science and Management at the University of St. Gallen, reveals what he has discovered as part of his current research project. This examines how digital transformation has progressed as a result of the global covid pandemic. He also addresses the challenges for employees and managers.

Prof. Blohm, in your research you have investigated how companies are dealing with the COVID-19 pandemic?

We are currently accompanying 13 companies to investigate how companies can emerge stronger from the COVID-19 pandemic and equip themselves for the "new normal". We have surveyed the state of digitization before the lockdown at the beginning of 2020 and are now looking at which change processes have been initiated in the companies to position themselves for the future.

What does the "new normal" look like?

The best metaphor we have found is the image of the "low touch economy". On the surface, it describes the redesign of services, products or business processes to reflect changes in the health environment, such as reducing direct interactions between customers and employees. However, it is becoming apparent that many of the constraints of recent months have changed the behaviors and attitudes of all of us in the long term. As a result, there are many downstream effects and implications for businesses that may not be so obvious at first glance. For example, we have seen that decentralization of work processes or customer interactions are a direct result. Companies need to maintain significantly more communication and interaction channels, both internally and externally, to integrate and reach employees or customers. Setting up such platforms is a major challenge for many companies and entails many downstream effects, e.g., setting up the corresponding IT infrastructure, integrating the various solutions, secure data storage, etc.

How do companies prepare for this?

COVID-19 and the lockdown have made many companies think for the first time about how they want to position themselves for a digital world. We have seen that the companies that have come through the pandemic better so far have started extensive transformation processes. Outdated structures, processes and decision-making paths - keyword: we've always done it this way - have been put to the test and questioned. Successful companies have begun to expand their digital competencies and systematically realign their companies structurally. These companies are now more agile and digital than they were before the pandemic - without productivity suffering. One of the CIOs surveyed even said that they had made more progress in three months of the pandemic than in three years of digital transformation before it. Companies that started this transformation process before the pandemic were often able to strengthen their positions in the market against their competitors. In a way, COVID-19 has widened the gap between digital pioneers and laggards.

What does this mean for companies?

I think the most important thing for companies is to continue the transformation process they have started now. We've seen some companies that, after the lockdown in the spring of 2020, have simply switched back to the same mode they were in before the pandemic. We see that these companies are increasingly falling behind and are in danger of being left behind. The new wave of digitization offers companies the opportunity to make many business and work processes much leaner. Currently, we see that after streamlining and digitizing their processes and ways of working, they are increasingly turning to automation. Digital solutions can generate data on a large scale which can then be harnessed with technologies such as Artificial Intelligence and Robotic Process Automation.

We have seen that the knowledge and skills of employees are essential in these processes. Companies that have managed to quickly make their employees fit for the new digital world have come through the pandemic particularly well. In an MBA program, specialists and managers can learn the necessary skills to manage change. Completing more specific programs is also an important component here, enabling executives to drive the digital transformation of their companies. For example, the CAS Big Data and AI for Managers, where we enable executives to go one step further and build data-driven organizations.

Ivo Blohm - the researcher on digitization

Name: Ivo Blohm
Function: Assistant Professor for Data Science and Management, HSG, Lecturer EMBA HSG in Business Engineering and CAS Big Data & AI
Age: 38
Place of residence: St. Gallen
Family: married, two children
Education: Studies and PhD, TU Munich, Habilitation at the University of St. Gallen