July 13, 2022
Contributors: Sanil Solanki and Alexander Bant
Accelerating the right digital initiatives lies at the core of must-take actions in today’s economy.
Speculators, analysts and even central banks remain split on the likelihood of a global recession, but lessons learned from prior downturns show that industry leaders accelerate in downturns by boldly investing in initiatives that matter. Right now, those investment decisions are all about digital.
See Playbooks: Recession Advice for Executives and their Teams
Today’s economic pressures are further complicated by a unique “triple squeeze” on performance — inflation, scarce/costly talent and disrupted/constrained global supplies — that represents a new combination of variables for business leaders. Furthermore, we would be wrong to think that our pandemic-forced digitalization has prepared us for the digital decisions we need to make now.
In tackling the triple squeeze head-on, it is key to identify actions that will drive your competitive position. For example, you can:
Automate processes to permanently reduce the cost of doing business.
Augment and automate activities with technology such as artificial intelligence or robotics to reduce labor costs, shore up production and free up scarce, high-cost talent to focus on value-creating activities.
Produce more relevant digital products and services that will improve customer and employee experience.
In short, it’s about focusing digitalization on differentiating your organization’s cost and capital structure, as well as its products, pricing, employee value proposition (EVP) and risk profile.
Attend webinar: The Gartner CFO Playbook for Inflation, Recession, and a Tight Labor Market
At Gartner, we see opportunity with nine key actions across three main areas. You could call it a recession playbook — though successful digital leaders won’t wait to see whether recession is officially confirmed before they act.
Trade-offs. Create a prioritized list of the resource trade-offs you will make in cost management and budgeting. Develop a clear narrative that explains your thinking and that you can communicate to stakeholders to build buy-in.
Cloud migration. Accelerate movement to the cloud as part of purposeful digitalization of critical business needs. This creates the potential to reduce the impact of rising energy costs and supports the movement to a more nimble adaptive organization.
Workflows. Radically challenge collaboration approaches, workflows and processes to make them faster, simpler, and more agile.
Example: Using a shared framework to evaluate cost initiatives ensures that resources are traded and cut for the greater good of the business — in this case, to capture efficiencies while preserving funding for critical digital initiatives. Strategic cost optimization that moves conversations from cost to value helps ensure resource decisions are strategic, not tactical.
Listen now: Inflation! Looming Recession! Businesses Need a Plan.
Work models. Fundamentally rethink the way your organization leverages its people. Consider flexibility, location, hours, part vs full time, and in-house vs. outsourced.
Employee value proposition. Clarify your EVP so you are positioned to attract and retain the right digital talent.
Digital talent. Aggressively seek to secure the right digital talent needed to help you accelerate your digital plans. Snap up talent cut loose from digitally native companies that retrench.
Example: Of candidates who accepted a job offer in 2021, 49% considered at least two other offers concurrently. Using a data-driven approach helps you unravel the real competition for skills and hone your search for digital talent accordingly. Labor market and skills analysis tools like Gartner TalentNeuron™ use large data sets to identify unseen sources of digital talent — from those with the appropriate skills in adjacent roles and functions to emerging talent pools that represent untapped locations for new IT operations.
Learn more: The Future of Work Reinvented Resource Center
Customer and employee vision. Reimagine your customer and employee value propositions to accelerate the requisite digital investments.
Predictive and autonomous. Invest in predictive and autonomous digital projects that make your organization faster and leaner, including in its decision making.
Digital metrics. Narrow the metrics you use to measure digital initiatives and monitor their progress to ensure you focus on the few that align to outcomes.
Example: Sixty-two percent of boards say improved customer loyalty is the top expected outcome of becoming more digital. To build a clear digital roadmap today, you need a hypothesis of customer needs in 2-4 years time. Once you have that, prepare to leverage emerging technologies to meet known and projected customer needs. This applies equally to employee needs. You might, for example, ask if your tech roadmap should include the metaverse so you can provide immersive corporate learning experiences for employee onboarding, continuing education and sales enablement.
Download now: 2021-2023 Emerging Technology Roadmap
The specific pressures that business leaders face today vary by sector, industry and region — and the depth of impact from the triple squeeze and a possible recession. It might seem prudent to wait and see the full impact of these headwinds, but worsening economic conditions will make the actions we are surfacing more important, not less.
Among the steps to start taking now:
Benchmark your current spend so you can prepare for strategic resource decisions.
Surface cost inefficiencies, and identify and pursue strategic cost optimization opportunities using digital.
Start to prioritize your digital bets by focusing on those with the largest impact on high-value business outcomes.
Last but not least, fortify the relationship between your CFO and CIO. Results from the 2022 Gartner Funding Digital Initiative Survey show that organizations with CFO-CIO partnerships that are collegial and focused on enterprise wide outcomes are significantly more likely to find funding for digital initiatives, keep digital spending in line with the budget plan and achieve intended digital business outcomes. But these two key executives don’t always speak the same language.
While 94% of CIOs believe they understand how technology impacts corporate financials, only 62% of CFOs agree that’s the case. Collaborative CFOs and CIOs are not only aligned on the financial impact of technology, but they’re also on the same page about how financial management needs to adapt to support enterprise digitalization. Your organization can’t respond to the triple squeeze and lead with digital if this relationship falters.
Inflation, scarce talent and constrained global supplies are already squeezing corporate performance — and a recession could well lie ahead.
Investing in the right digital initiatives at the right cost can blunt the negative effects of economic pressures in the short term and build long-term competitive advantage.
If you want to get and stay ahead, it’s time to go on the offensive with digital.
Sanil Solanki is Managing Vice President at Gartner. He engages with clients around topics such as digital economics, digital KPIs, IT financial management, IT cost optimization and business value of IT.
Alex Bant is CFO Practice Vice President at Gartner. His research teams quantify and share what top companies and their leaders do differently to maximize the impact of their people, processes, and technology.
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Recommended resources for Gartner clients*:
Digital Business Ambition: Transform or Optimize?
Quick Answer: Adapt Supply Plans in Response to High Inflation and Recession Risk
CFOs’ Digital Investment Plans Remain Ambitious for 2022 and 2023
Lead Through Uncertainty: Offset Inflation and Economic Shock With 4 Tech CEO Actions
The CIO’s Response to Inflation
CFO-CIO Partnership Actions for Unlocking Digital Investment Success
Toolkit: Cost Allocation Mapping for IT Cost Transparency
*Note that some documents may not be available to all Gartner clients.
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©2022 Gartner, Inc. and/or its affiliates. All rights reserved.