The digital economy: Trends, challenges and opportunities for the year ahead
By Stephanie Overby
Posted on 02-23-2021
Pivot. The Association of National Advertisers (ANA) crowned this the 2020 word of the year and few digital leaders would disagree. As the COVID-19 pandemic took hold, marketers made dramatic shifts from physical to digital, from products and services to experiences, from mass messaging to personalization, and face-to-face to Zoom. The circumstances of 2020 created a sense of urgency to accelerate digital transformation. Overnight, small-to-midsized businesses and Fortune 500 companies, consumer and B2B brands, and industries across the board had to shift every aspect of their customer relationships to survive and ultimately succeed.
“We’re all working in a virtual digital world. But thriving in this digital world versus merely surviving are two very different things,” says Elissa Fink, former Tableau Software CMO who now serves as advisor and board member for B2B startups. The most successful companies had already begun their digital shift.
Facing a new year in 2021, which will include the continuation of COVID-19 challenges along with preparations for a post-pandemic future, digital leaders must be agile, creative and continue adapting their business strategies. They will need to interpret, respond to, and even anticipate ongoing shifts in customer behavior and market conditions. And companies will spend more than $6.8 trillion on the necessary digital transformation between 2021 and 2023, according to IDC.
“Entire industries are shifting,” says Raja Rajamannar, Mastercard’s chief marketing and communications officer and World Federation of Advertisers president. “When customers’ lives change so dramatically, it is imperative that marketers meet them where they are. There have been tons of changes coming at us and there are dozens more coming.”
Coming off a year in which we saw a decade of digital change and transformation take place in just months, 2021 will be a “year of transition,” says McKinsey & Company senior partner Brian Gregg. Digital and marketing leaders can expect a number of trends to emerge.
Rethinking digital for scale
In 2020, organizations were forced to transition on a dime to entirely digital-first experiences for their customers, suppliers, employees, and partners. “They had to get there with speed and nimbleness,” says Stephen Frieder, president for Adobe Americas. “Now, we have to figure out how we make sure that’s working and start to scale that.” Frieder points to significant optimism for the latter half of 2021. “There will be a tremendous amount of pent-up demand in [certain] vertical industries,” Frieder says.
Casual restaurant chain Noodles and Company had invested heavily in digital pre-2020 with a new app, loyalty program, and marketing technology stack, which positioned it well for new customer demands. “We had to accelerate our 2020 strategic plan and launch some of the new digital capabilities, such as curbside pickup and delivery through owned channels, within a few weeks,” recalls CMO Stacey Pool who joined Noodles and Company early last year. The company spent the balance of the year optimizing the digital experience (60 percent of orders were placed digitally) and leveraging customer data for better targeting and personalization.
“Understanding our guests, predicting what will change their behavior, and influencing them to take action will be critical to our success in 2021,” Pool says. “At the core of these goals is data, whether that is first party data or insights garnered from research studies. We need to know as much as possible to deliver the most relevant information in the most cost-effective way.”
Evolving from silos to seamless
Heading into 2021, many businesses were still in early stages of collecting, aggregating, and reliably analyzing their data. More mature companies had begun producing useful insights, says Virgil Wong, chief data officer of customer experience business process management provider HGS. The most advanced are achieving true data-driven intelligence. “Given the uncertainties of how the pandemic will continue to unfold, no organization can afford to operate blindly without data-driven insights, intelligent automation, and smarter customer experience practices,” Wong says.
It will be a digital-led world, not a digital-only one, though, says Gregg of McKinsey. “So doing that seamlessly will be a big part of what 2021 looks like. If you’re late to that, you need to pour gas on the fire.”
Companies also need to dig deeper into their data. “Those who can predict what granular types of recovery we will see, will reach consumers at the right time,” Gregg says. That means finally busting the information and organizational barriers that have persisted for decades.
“We have so much data,” says Frieder. “It’s all about breaking down silos so data flows throughout the organization and using data analytics to provide customers with a seamless experience.”
Prioritizing quality data access
Digital and marketing leaders will play pivotal roles in automating and unifying analytics, assuring access to data and democratizing data and insight, says Sharmila Mulligan, chief strategy and marketing officer for Alteryx. It will not be just about easy-to-use analytics tools, but the quality of the data fed into them. “If data isn’t complete or accurate, it will be easy to overlook business critical insights,” says Carol McNerney, CMO at ibi. “Employees need to have confidence in their business decisions, especially during an important and ever-evolving business climate.”
Soon enough, everyone will need to become a data worker. “To achieve successful digital transformation, making data-driven decisions cannot just be the responsibility of one person or one department,” Mulligan says. “Data roles [will collide] with the traditional roles.”
One of the upsides of 2020 for B2B organizations was the realization that perceived barriers to digital were just that. Many B2B organizations have quickly — and broadly — expanded their customer channels, according to McKinsey partner Jennifer Stanley. “A lot of B2B firms now realize they can move faster and create new ways of working and engaging with customers,” Stanley says “We’ve been saying for a while that the whole trend of B2B consumerization is happening. Now, it has happened.” B2B organizations now have the opportunity to apply what they have learned and speed up their innovation cycles.
Navigating the dark funnel
B2B firms, nonetheless, will still face significant challenges. “The way that buyers evaluate service providers changed dramatically in 2020,” says Shade Vaughn, CMO at Capgemini North America. “They want to remain anonymous much longer in the buying process, avoid unsolicited outreach, and are tired of being invited to webinars and virtual meetings.”
As a result, B2B marketers must learn to excel at navigating the “dark funnel,” according to Vaughn. At Capgemini that means adopting marketing tech to predict which messages will resonate, deploying greater volumes of more targeted content, and rapidly mobilizing around the best prospects. The marketing organization has had to up its skills and partner with organizations experienced in buyer intent, propensity-to-buy, account intelligence, social selling, and content, and Vaughn expects these shifts to be permanent. “We’re looking at customer insight dashboards daily to identify areas where we’re seeing an increase in interest, or shifts in demand for specific services, or even the market positioning of specific solutions,” he says, “so that we’re anticipating where to invest in new capabilities and offers.”
Grabbing market share and predicting demand
Grocery stores were once the most loyalty-driven purchase in the personal commerce space. Then came COVID-19. A June 2020 McKinsey survey of shoppers found that nearly 15 percent of shoppers had switched to a new primary grocer and nearly half said they intended to continue doing so after the pandemic was over. More than three quarters (76 percent) of consumers surveyed by McKinsey in December 2020 said they had changed retail stores, brands, or the way they shop. Everything, it seems, is up for grabs. “A large amount of market share will continue to change hands in 2021,” McKinsey’s Gregg predicts. Buyers are increasingly digital-first at every stage of the customer lifecycle, says Wong of HGS. “The resulting influx of information can sometimes delay purchase decisions as customers continually assess their options and evaluate the trustworthiness of different sources.”
“Uncertainty is the new certainty,” says Gregg. “Getting the analytics wired to deliver a granular view that’s actionable is not that simple — especially being able to read and react to data based on a health crisis.” However, those organizations that can predict demand and quickly allocate or re-allocate resources to capitalize on surges will win. “Given how quickly circumstances can change,” says Wong of HGS, “immediate data-driven insights and predictions are critical for organizational adaptability and resilience.”
Whether 2020 was boom or bust, the direction is the same. “[Everyone is] trying to automate the analysis of data for financial planning, predictive inventory, supply chain, patient care and more,” says Mulligan of Alteryx. “[They need] to speed analytics and drive faster answers for their businesses in a very dynamic business environment.” One U.S. airline, for example, is using analytics to optimize compensation and staffing, to understand the implications of new regulations, and identify cost savings. At the other end of the spectrum, athletic apparel maker Gymshark, is expecting 40 percent revenue growth this year thanks to its demand-driven decisions regarding promotions, suppliers, and inventory.
There were incredible accomplishments by organizations in 2020. The healthcare industry produced vaccines in record time. Retailers went from nearly zero to 95 percent curbside pick-up capabilities in just weeks. “The big question is how do we continue that in 2021,” says Frieder.
Maintaining speed and agility will be a challenge. “Everyone was huffing and puffing at the finish line of 2020,” says Gregg. “Now we have to figure out how to sustain that in a way that is sustainable.” At Noodles and Company, Pool’s team is planning for a fluid future. “We have an exceptional operations team which enabled our success. Our leaders are extremely agile. But we all have gone through a lot,” says Pool. “So we need to continue to prioritize our well-being.”
Topics: Trends & Research, Digital Transformation, B2B, Retail, COVID-19,