6 May 2020

After the crisis: Automate to accelerate

After an eleven year run of economic growth, the events of the past three months have triggered a period of monumental uncertainty, simultaneously forcing paralysis in businesses across the globe.

Throughout the economy, companies have had to make impossible choices in order to keep their lights on, and governments have stepped in to back them up with previously unimaginable sums of money in support.

What happens following a crisis?

Gartner: Four Phases for Leading in a Disruptive Crisis

Gartner proposes a framework for the journey a business goes through post a disruptive crisis.

First there are a few weeks of fast decision making and initial actions, the “react and respond” phase. This is followed by “redirect to new realities” — the phase most would consider we are currently in — where each organisation must continuously assess how the rapidly changing situation is likely to impact them.

Eventually a company moves into “rebound to the future”, putting in place plans for recovery, and prioritising the investments that enable this. Finally they see the benefit of their planning and investment as they “accelerate opportunities”.

Acceleration is the key idea to consider here. Climbing out from a recession requires more energy to increase velocity and regain momentum than in the fast paced ‘cruising’ phase that preceded it. Companies that show leading growth as the economy recovers must generate that additional energy through new initiatives.

How to generate the momentum to exit recession.

In their 2009 HBR article “Seize Advantage in a Downturn” and 2010 book on a similar theme, BCG partners David Rhodes and Daniel Stelter looked at the strategies of the most successful companies emerging from previous recessions.

They describe two phases not dissimilar to Gartner: “Defence First” where a company is focussed on protecting it’s financial and business fundamentals and revenue; and “Go on the offensive,” where the strongest companies take action to accelerate out of the recession. In “Go on the offensive” they outline six strategies that can affect this acceleration:

  1. Focus on innovation.
  2. Capitalize on changes in the external environment.
  3. Unleash marketing and advertising power.
  4. Take the fight to your competitors.
  5. Invest in the future through M&A and divestments.
  6. Employ game-changing strategies.

Rhodes and Stelter raise examples from previous recessions to show these in practise. GM focussed on innovation and unleashing advertising power coming out of the great depression of the 1930s by expanding aggressively into the low-priced car market. IBM capitalised on changes in the market coming out of the recession of the early 1990s by shifting its business model from hardware to services and solutions. Apple focussed on innovation coming out of dot-com crash of 2000 by doubling down on R&D spend and launching the iTunes store, iPod Mini and iPod photo in the following years.

Digital Automation. The boost to power acceleration now.

Coming out of the crisis we find ourselves in in 2020, the ‘game-changing strategy’ of digital Automation can provide the boost required for companies to accelerate effectively.

While investing more in marketing, changing business models or upgrading equipment can help companies grow faster, dollar for dollar, investment in digital Automation creates a far greater advantage through the ability of these technologies to act as a magnifier of effort.

How digital Automation works to magnify effort in practice depends on the complexity and frequency of a task.

A high complexity, high frequency task such as assessing insurance claims may be automated such that the assessors only need to review unusual claims or verify an initial digital assessment, allowing them to review many more claims for the same effort and thereby increasing processing speed.

Alternatively for a high complexity, low frequency task such as designing a physical component for production, digital Automation may lead to a higher quality solution that requires less scrap material or can be machined faster, eventually magnifying the effort of all those involved in the production process through the ability to produce more or at lower cost.

Finally in any area, Automation may allow a company to address talent shortages or hiring challenges, and as such reduce bottlenecks, enabling higher throughput across a process.

In each example, it’s easy to see that the technology investment has an impact beyond the specific problem it is solving, and as such creates a significant positive return.

Addressing the jobs question.

It is important in this context to talk about replacing jobs, which is not what we want as we endeavour to bring our workforce back from record unemployment. As a society we will need to address this and ensure that our populations have the skills for the modern economy and our social systems are appropriately set up to support this transition.

The positives of enhanced economic productivity and a faster return to growth should, however, provide sufficient benefit to prove that the navigation of this transition is worthwhile. It’s also worth considering that often augmentation is a more accurate label than automation in describing these technologies, which many times support people in doing their jobs more efficiently or effectively.

As lockdowns and shelter in place orders begin to relax, and companies start to plan for the future, they will need to consider the investments that will allow them to go on the offensive, accelerate, and become leaders in the recovery.

Through an ability to magnify effort, digital Automation has the potential to be a growth accelerator for many businesses, and to be a key driver of the recovery to come.