Digital Transformation is Now Imperative

On Intel’s Q2 2020 earnings call, CEO Intel CEO Bob Swan cited a quote from former CEO Andy Grove that I think is particularly apt for our times. In the call with analysts, Swan noted that Grove once said, “Bad companies are destroyed by crises; good companies survive them; great companies are improved by them.”

During Tuesdays opening keynote of the IBM THINK 2020 customer conference held virtually, IBM CEO Arvind Krishna made a comment I have heard from other CEO’s in tech in the last few weeks.

He pointed out that “Digital transformation has gone from years-long projects to ones that are now being completed in months or even weeks.”

This sentiment was reinforced in an Axios Post from my friend Ina Fried. In her daily Axios newsletter called Login:

She recounts notes from her Axios colleagues Sara Fisher and Kim Hart and relays the following:

“A slew of old-line industries that once hesitated to embrace digital technologies are now being forced to do so for the sake of survival, as Axios’ Sara Fischer and Kim Hart report.

Why it matters: Once consumers get used to accessing services digitally — from older restaurants finally embracing online ordering, or newspapers finally going all-digital — these industries may find it hard to go back to traditional operations.

Media and entertainment: Venerable mediums like television, newspapers, and movies are all quickly moving their content over to digital formats and online delivery as they struggle to adapt.

Newspapers are being forced to shut down print editions and ramp up digital operations. “We will look back on these events as a moment at which the newspaper industry’s transition from print to digital accelerated meaningfully,” says Jim Friedlich, executive director of the Lenfest Institute for Journalism, a nonprofit that supports local news and is the owner of the Philadelphia Inquirer. But, with ads down, many won’t be able to stay open in any form.

Television interviews are overwhelmingly being conducted via Skype or other digital channels.

Some movie studios, like Universal Pictures, have said that they will — for the first time — roll out movies to digital audiences at the same time that they make them available in theaters due to the crisis. There’s been a major uptick in internet video and streaming consumption, per Nielsen. More than a quarter of Americans (26%) are using video streaming services, like Netflix, for the first time, per the Consumer Technology Association.

Retail: Brick-and-mortar shops that never sold goods online are shifting to that mode at a moment when stores nationwide have shut their doors and customers aren’t leaving their homes.

Sellers who had offered a limited selection of their wares online are now shifting to full-catalog service.

Powell’s Books, an iconic Portland independent bookstore, was able to rehire 100 laid-off store employees after a surge of online orders from devoted customers.

By contrast, offline-only retailers, including big names like Marshall’s and TJ Maxx, are basically out of business until in-person shopping returns.

Food and beverage: Restaurants that previously chose not to adopt online ordering or delivery services are suddenly finding that to be their lifeline now that many parts of the country have banned on-location dining.

Topo Gigio, a small mom-and-pop Italian restaurant in Chicago, is using delivery services for the first time in its more-than-30-year history. It sees delivery and takeout as a better option than shutting down entirely, its owners tell CBS Chicago.

Uber Eats, the food delivery service from Uber, announced two weeks ago that it would waive all delivery fees for local restaurants.

Workouts and fitness: Everything from ballet lessons and karate classes to physical therapy sessions and yoga instruction has gone virtual.

In Houston alone, more than a dozen fitness and yoga operations have taken their services online.

Some people like to work out with other people for social motivation. Those people may still prefer to go to group fitness classes, but may choose ones that are smaller or in spaces where they can maintain more distance from others, Yelp data science editor Carl Bialik said. “But for business owners that get really comfortable with that, they will probably continue to see that as a much bigger channel than they had before,” he said.”

My neighbor, who owns a breakfast and lunch diner in Morgan Hill, just south of San Jose, has a very successful eat-in only restaurant and was one of the highest-trafficked eating establishments in this bedroom community. When the shelter-in-place order was issued, his business went to zero customers. However, he very quickly pivoted to a take out model and now serves about 200+ meals a day and over 500+ on weekends.

While his profit margins have been minimal, he has been able to retain much of his staff and keep the lights on during this Quarantine. More importantly for him, he now has a significant new take out service he will add to his business model, something he resisted for years. He added online ordering, pick-up, and delivery and was able to customize his computing system quickly to accommodate this change. In his case, his digital transformation took only about a week.

My nephew in Seattle, who is a physical therapist and had just opened an extreme fitness center, was forced to close down when the Quarantine went into effect in Washington State. He, too, embraced digital technology quickly and created a particular set of virtual workouts and physical therapy sessions for his customers, in order to keep his business going during the Quarantine.

One example in Ina’s story is a favorite. Powell Books in Portland is one of my most favorite books stores. I have spent untold hours in this store, and when the Quarantine hit, they too had zero customers. This store had resisted selling all of their books online, but as the Axios story points out, they embraced the digital world and hired back 100 laid-off employees to handle a “surge of online orders from loyal customers.”

The examples I gave you here are mostly small businesses. But the media examples in Ina’s column are some giant publishers where digital has not been embraced fully in the past and is moving them in that direction quickly.

IBMs CEO’s comments are most interesting in that he is saying that medium and large businesses are moving just as fast as a small business. Their challenges are greater, but their need is just as critical to their survival.

In their case, they are embracing hybrid clouds, AI, and solutions that allow computing to the edge to drive their digital transformations. At its heart is the Work from Home movement. Almost every company to date has had to embrace this in some form or another.

That means that their workers must be connected to corporate clouds and apps on disparate servers that now must communicate with each other in ways not possible even three years ago.

IBM, Dell, Lenovo, HP, and others are creating the tools to make it possible for this digital transformation to accelerate for their customers, and these companies IT consulting services are now in great demand.

At the end of last year, some of the big tech companies I talked to felt that it would take at least another two-to-three years for most big and medium-sized companies to complete a full digital transformation. I went back to those who I spoke with in December, and they have been surprised and pleased to see that our current situation has caused their customers to move much faster to make this digital transformation in record time.

However, they pointed out that even with this urgency, it will take time, especially for the big companies to make this digital transition completely. But they are now more optimistic that they don’t have to spend much time and resources selling the idea of digital transformation. Instead, they can now concentrate on creating the infrastructure, apps, and services that make it possible for their customers to make this digital transformation and prepare for anything they may have to deal with in the future.