The COVID-19 pandemic has brought many SMEs and big businesses across the world to a standstill. SMEs are possibly the most affected, with many not being able to resume operations until things settle into whatever will become the ‘new normal.
In such circumstances, people generally look to their governments to take necessary measures and help them resolve their immediate cash flow problems. But in a pandemic like this, many governments are struggling to balance immediate public healthcare needs and long-term economic concerns. The impact of COVID-19 on the service sector is even more pronounced as it includes mostly SMEs that rely heavily on the human touch approach.
One viable method to address this problem is adopting innovative tools and resources to improve operational productivity. In the wake of the pandemic, digital transformation, and innovation, involving multidimensional pivots, are expected to raise service productivity.
Major outcomes of digital transformation and innovation
In the current pandemic, many companies have managed to stay in business by adopting digital transformation and innovation. According to IDG Research, 32% of IT decision-makers noted that digital transformation had positively affected revenue, with a substantial rise of 23%. Moreover, with a high digital transformation level, revenue increased 1.5 times faster than the average, translating into lower costs and higher labor productivity.
This means that businesses could potentially enhance profit margins and increase productivity through digital innovation. Today, many companies are replacing manual processes with digital technologies for faster, smoother operations and expanding their markets to take advantage of the opportunities created by remote working. At the same time, a broader base of more satisfied customers, realised through digital innovation, can ultimately increase service productivity and long-term profitability.
In the ongoing pandemic, digital innovation is offering more flexibility and better staff engagement. Interestingly, it is also providing a greater range of business opportunities.
Raising productivity with digital transformation
During the pandemic, digital transformation has helped industries diversify, expand, and raise productivity levels. It has become a key driver of financial stability and efficiency for businesses. By 2030, the global GDP is expected to receive a contribution of USD13 trillion courtesy of AI, automation, and digitalisation. In fact, digitalisation has already profoundly impacted the pharmaceutical, media, food, and finance sectors as well as large industries, paving the way for new startups and expansion.
Impact of digitalisation on the food and beverages sector
During the waves of COVID-19, when the food and beverages sector faced severe challenges in terms of productivity and profitability, its saving grace was its rapid digitalisation which led to increased customer demand as people avoided visiting markets for daily necessities. To reduce touchpoints, more businesses now accept digital payments using QR codes and rely on food delivery platforms such as Zomato, Swiggy, GrabFood, Uber Eats, and Deliveroo, making it easier for customers to receive personalised orders quickly. With this development, food and beverage retailers can worry a little less about sales figures in the current struggling economy. The true potential of digitalisation is overwhelming in terms of revenue generation and will have similar positive effects on production processes and distribution channels.
Social media campaigns are also playing a vital role in the success of this sector. With only a little effort in establishing a social media presence and advertising services, food and beverage retailers can market themselves significantly. For example, a perfectly captured photo of a menu item with a compelling caption increases sales markedly – the proof is in the pudding. Numerous food businesses are promoting themselves on Facebook Live, Instagram, and other social media platforms as an innovative digital tactic. Follow-up in the form of reviews by customers adds to the transparency of the marketing process, attracts even more customers, and leads to higher profits.
There is also a vast range of suppliers in this sector, thus providing customers with several options to choose from. In addition, according to the latest trends, consumers are becoming even more attracted to online services. This shows the power of digitalisation today and bodes well for the future.
Online food delivery platforms and apps
Food-related businesses launching delivery apps are staying strong on the ground and even expanding in these difficult times. People are more likely to use such digital services as trust in electronic payment systems is building up. Some of the food chains such as KFC, McDonald’s, and Domino’s Pizza have their own online platforms such as GrabFood, Deliveroo, and Uber Eats. Other companies, both small startups and established food chains, depend on third-party platforms for delivery to meet increasing consumer demand. Those third-party platforms also handle deliveries from restaurants that do not offer delivery services themselves. This leads to increased sales and productivity. This is the most efficient method of ensuring revenue to everyone involved, from restaurant owners and chefs to portal operators, to delivery personnel.
Digitalisation in the retail sector
In the retail sector, digitalisation has freed store management from time-intensive manual inspection. Huge amounts of data can be collected and stored easily, requiring fewer employees. When it comes to customer behaviour, online retailers are at an advantage in terms of understanding their preferences due to the placement of cookies in personal accounts. There is now greater demand to digitalise physical devices in the retail sector to manage time better and increase efficiency. Automation of physical devices is also contributing to higher service levels.
As retailers continue to introduce new tools and learn to apply different technologies to keep up with market trends, they rely more heavily on various types of sensors. Sensor technology is improving rapidly, low-cost systems are becoming widely available, and new digital technologies are ensuring that they are easy to use even for those, not from programming backgrounds.
Gartner predicts a rise of 3.6% in tech retail spending worldwide, which could reach USD218.5 billion in 2021. Deloitte also predicts online retail spending in India to touch USD50 billion, with 70% of Indian customers preferring to use digital devices than taking help of human resources for various in-store activities. Digital portals or devices are now preferred to compare prices, know product specifications, check product availability, etc., which only goes to show the evolution of customer acceptance of digitalisation. Digitalisation in this sector helps create client-focused experiences as shoppers become more aware and vigilant in choosing products and services.
Digitalisation in the hospitality sector
Before COVID-19, the hospitality sector used to be conservative in its approach to digitalisation and modernisation. Today, the norms have changed as hotel staff is minimising face-to-face interactions with guests, by providing them assistance through digital modes. Guests can check hotel services via online portals without talking to the management or staff in person. Most services can be ordered via phone, avoiding physical contact. Digitalisation has made it possible for every hotel employee to stay in touch with the management. In addition, digitalisation of employee communication is playing a vital role in managing and saving time.
As in other service areas, digitalisation in the hospitality sector is allowing management to do more with less and continue business operations at high productivity levels even during the current pandemic.
Digital innovation: a critical success factor in the new normal
The e-commerce market has shown increased growth in productivity as consumers/customers shift to online services. Digital transformation, along with digital innovation and creativity, has changed the global business scenario. In particular, digital innovation has been a critical success factor for enterprises in every sector. It has also helped to lower market entry thresholds, leading to a more rapid spread of innovative ideas. Service-sector businesses that were early adopters of digital innovation can now analyse millions of data points every day to gain new insights into consumer behavior filtered through different engagement channels and act on those requiring immediate attention. When the COVID-19 pandemic eventually ends, these businesses will be the first to reap the rewards of enhanced service productivity.
By Joshua Boonwei Lau, Board Director, Red Dot Robotics