Since the onset of the pandemic, founders and CEOs have been conserving investment capital and concentrating resources on business-critical operations to ensure survival in the midst of the worst financial upheaval the UK has seen in a long time. Naturally, under such caution, long-term planning has fallen by the wayside, with firms investing more in staying afloat and getting ahead today, than looking to acquire an enduring competitive edge.
This could present a problem for businesses in the future ‘ many will have a lot of catching up to do. This is particularly true given that the pandemic has accelerated overall trends towards digitalisation, including the huge market share gains of ecommerce over physical retail. More than ever, life is happening online ‘ and so businesses must be able to translate their operations and create substantive value on digital platforms, or risk losing their presence to digitally native enterprises.
It is challenging to say exactly when ‘post-pandemic’ will be ‘ particularly with the rise of the Omicron wave at the end of this year. However, from a business perspective, the UK was mostly recently estimated to be just 0.5% down on its pre-pandemic GDP, having fallen by close to 10% in 2020. With productivity on the brink of returning to prior levels ‘ albeit with significant displacements ‘ now appears a suitable moment to assess whether businesses are gaining an appetite for innovation as time passes, or sticking to conservative approaches to experimenting with their capital.
Risk and reward
To look into this, Studio Graphene recently commissioned an independent survey taking in the view of 752 UK business leaders, delving into their experiences with digital innovation, and their strategic plans for the coming year. Strikingly, more than two in five (42%) decision-makers reported having no plans to increase IT spending in the next year. Conversely, in the case of the largest businesses in the sample (those with 500+ employees) the vast majority (77%) say they will do so.
This contrary attitude between smaller business and more established enterprises holds throughout the survey. This is notable when exploring attitudes towards emergent areas of tech with untapped potential. Among the largest companies sampled, of 250-500 employees and 500+ employees, 76% and 72% respectively planned to invest in an area they had previously left unexplored, such as artificial intelligence (AI), cloud, or IoT (Internet of Things). Among the smallest businesses sampled, of 1-9 employees, only one third (32%) said they would do so in 2022.
Smaller businesses more risk-averse
Just one third (32%) of the respondents from the smallest businesses felt trialling new digital products would be a key strategic priority for 2022; while more than three quarters of the largest sampled considered it critical. This indicates something important about where businesses are today; smaller businesses, who naturally are likely to have less capital to waste, are still protecting their core operations from the looming threat of further disruption to the wider economy.
Larger businesses, however, are starting to flex their muscles, having survived through the worst of the upheaval ‘ and are now looking to invest in getting ahead tomorrow. This may surprise some; startups and SMEs are, in normal times, often typified by a ‘fail fast’ mentality when gaining a foothold in a market. Instead, SMEs now look to be trying out ‘succeed slow’. Tellingly, almost half of businesses (49%) felt that poor experiences with new tech had discouraged them making further investments, highlighting a reticence to engage with tech for reasons that may have nothing to do with the potential of the tech in question.
This is not to say large businesses will have it all their own way ‘ nor that smaller businesses are not demonstrating some agility despite the aggregate caution. For instance, among the largest businesses, seven in ten respondents feel the resources spent on troubleshooting simple tech issues dampened the possibility for big-picture digital innovation ‘ only 16% of smaller businesses felt this way. Similarly, just one in five small businesses felt hybrid and remote working had limited their plans to launch new digital products; compared with two thirds of the big businesses. To me, this indicates that while larger firms certainly enjoy the advantages of scale, economy, and access to expertise; these can in fact be obstructions when organising digital innovation. Anyone who has undergone a digital transformation project, for instance, will understand the crucial role of communication and full understanding across a team ‘ projects can fail simply due to lag in adoption or miscommunication around goals, even with ample investment at hand.
As business becomes an increasingly digital practice, risk-seeking behaviour can be its own reward. Companies can indulge or engage, depending on their scale, in value-adding experimentation. This may not have an immediate benefit in terms of ROI, but business leaders would be well-advised to look to examples of innovative companies who jumped ahead ‘ in almost all cases, the conditions were in place for a culture which rapidly identified opportunities and could seamlessly implement an innovation ‘ and communicate failures – across a team.
I would encourage business leaders to show a little more industry when it comes to emerging new digital products ‘ and not be discouraged by failure in a high-risk high-reward environment. In a global marketplace, late adoption will not work ‘ businesses seeking a competitive edge must be at the forefront of innovation. So, decision-makers should turn to refining their operational approach to new tech, and seek out opportunities to implement new technologies to strengthen their core operations where appropriate.