Most businesses, and business leaders, are conditioned to think in cycles. During boom times, when the underlying economy is strong and secular growth acts as a tailwind, fortune favors aggressive investment. On the other hand, when a recession hits or looms, conventional wisdom says that firms should cut their cloth accordingly.
Given the potential severity of a global economic recession in the wake of COVID-19, the choice for companies would seem clear. However, this is no normal cycle and we cannot rely on traditional playbooks.
Instead, organisations need to recognize that there is not one overwhelming priority but two. The key is not to choose offense or defense, but to play both in parallel.
The first priority is an obvious one. The economic tide is going out, and companies need to reduce their costs.
Even before the pandemic struck, C-suite confidence was running low. According to a recent survey of Global CEOs by PwC, only 25% had high confidence in revenue growth for 2020 – the lowest proportion in the study’s 11-year history.
As finance departments weigh the medium-term business impacts of COVID-19, the need for efficiencies is greater than at any time since the last financial crisis. In some areas, the emphasis has already shifted from revenue growth to preservation, especially in sectors involving physical retail.
While all this appears to undermine the case for investment, today’s exceptional circumstances demand otherwise. In just a few months, customer and employee behaviors have changed beyond all recognition. People are working, shopping, and digitally engaging more than ever, catalyzing the growth of e-commerce, digital advertising and mobile. Across the world, the demand for seamless digital experiences is immense. Competitive advantage will increasingly rely on the ability to cater to the needs of virtual customers and/or employees.
Given neither investment nor the quest for efficiencies can be avoided, organizations need to find new ways of achieving cost-out and revenue-in together. One must feed the other. The right digital investments should not only act as foundations for revenue growth but also as levers for cost-reducing efficiencies.
Ultimately, truly effective digital transformation journeys should always be cross-functional and silo-busting in nature. Different departments must be encouraged to think beyond their traditional borders, interact with adjacent functions, and intimately understand how their work can both boost revenue and reduce cost.
For example, this would necessitate security professionals thinking about solution technicalities as well as how improved fraud detection can save money, or how data-driven insights can remove friction from, say, the marketing department. The onus is on leaders to reduce costs while also boosting profit and revenue. It is no longer enough to achieve only one or the other.
An obvious intersection of these two priorities is the security of our digital assets.
As online activity increases and digital footprints expand, so too does our overall attack surface. Even before the pandemic occurred, data from Experian showed that incidences of mobile account takeovers had doubled in the last four years. That issue is now compounded by soaring data breaches, leaks, new attack patterns and phishing scams related to COVID-19.
Clearly, improving detection is an important way to reduce the direct and indirect cost of fraud, which can easily run into millions of lost dollars. Done right, it can also stimulate revenue. According to Shape Security data analysis, around 10-15% of online consumers will fail when they attempt account logins. Improved user legitimization alone can reduce this figure and prevent significant customer losses. Even if just 5-7% of potentially lost users are retained, it can make a meaningful difference. This is what the cross-functional approach is all about. In this instance, an organization’s measure to prevent fraud has also become a customer retention tool. It is at these intersections that the greatest return-on-investment becomes possible.
Nowadays, a traditional cyclical approach to investment is unlikely to cut it on the digital transformation front. Instead, decision-makers need to ask more of themselves, their people, and their money. Most importantly, they need to connect priorities, teams, and budgets to achieve the greatest impact.
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