Article
Agile, digital businesses are best-positioned to handle a scarcity of resources
These four strategies demonstrate how digital businesses use their agility when responding to—and staying ahead of—supply shortages
August 23, 2021
Article
These four strategies demonstrate how digital businesses use their agility when responding to—and staying ahead of—supply shortages
August 23, 2021
Since the earliest days of the pandemic, many organizations have shared a common goal: getting back to normal. But let’s face it: There is no “normal.” There never has been. There is only now.
That may sound like armchair philosophy. But this mentality is the difference between businesses focused on the future and those stuck in the past. Why? Because organizations that can effectively operate within the present moment—whatever that happens to look like—while preparing for what’s next are the ones primed to succeed.
That concept likely sounds familiar. That’s because there’s a word for it: agility. Agile companies thrive in the moment. But they also respond to change faster and more strategically—during the good times as well as the not-so-good—by anticipating an always-uncertain future and being prepared to pivot.
Right now, businesses are dealing with shortages and scarcities of all kinds: raw materials and supplies, modes of transporting products, even employees. The status quo has been disrupted, and things won’t go back to the way they were.
That’s where agility comes in—and true agility comes with being a digital business. Leaders of digital businesses are able to adjust their strategies on the fly, as conditions change. This allows organizations to achieve high-value outcomes—even during tough times—without spreading themselves too thin or focusing on the wrong priorities.
Here are four ways a digital approach boosts business agility—during times of scarcity as well as times of abundance:
Even digital businesses must exist in—and manage the challenges of—the physical world. Consider some current realities:
The costs of raw materials and commodities like plastic, corn, aluminum, and palm oil are rapidly rising, while building-block products like semiconductors remain scarce.
Lingering supply chain disruptions as a result of pandemic-related factory closures—coupled with new shipping and distribution backlogs as retailers and manufacturers rush to restock inventories—are dragging out lead times.
Many manufacturers are struggling to find enough workers to meet pent-up consumer demand. West Monroe’s July 2021 report on the sector found the majority (62%) of manufacturers consider hiring skilled talent to be their biggest challenge.
When supply chains break down, materials grow scarce, and workforce shortages appear, organizations can’t meet their buyers’ needs. An August 2021 Gallup poll found 60% of U.S. adults were unable to get a product they wanted due to shortages in the prior two months.
These are complex issues. They impact multiple functions: procurement, finance, inventory management, distribution, production, sales, marketing, and more. Addressing them requires multidisciplinary teams.
This approach brings together not just people from different departments, but also people with complementary skill sets who share a common goal: delivering multifaceted solutions.
This supply-chain scenario requires, among other actions, balancing warehousing costs against the potential for lost sales by more accurately forecasting demand. A multidisciplinary team therefore should include experts on supply chain management, operations, inventory optimization, organizational resilience, data analytics, software development, risk management, and others.
With a universal digital mindset, digital businesses unify disparate roles under a common vision to design and implement—and then continue refining—a solution that actually works. The end result? An organization that is better able to serve customers, grow revenue, and shift strategies as circumstances change.
Focus on the end-user. Drive loyalty, connection, and speed to value. What organization doesn’t consider these top priorities? But setting these goals is the easy part. The hard part? Achieving them—especially as customers’ own needs change alongside external circumstances.
Digital businesses are better able to refocus strategies so they continue driving toward their goals, even during times of upheaval. Think of how the pandemic impacted digital sales: U.S. ecommerce sales exploded in 2020, growing 31.7% year over year. Retailers that could quickly shift resources to support their digital storefront and optimize their ecommerce order fulfilment processes saw measurable results.
By evolving an entire organization to be digital—and focusing on the end-user—leaders can see how to pivot to achieve the highest value. During times of supply shortages and rising costs, that could mean zeroing in on the best customers, realigning product mixes, exiting a market—or something else entirely, depending on the data.
Many companies right now are pondering the same question: If rising prices in the United States are driving buyers toward cheaper goods, should an organization reduce costs by discontinuing less popular products, instead of increasing prices?
Maybe not. If advanced analytics show the strongest customers prize variety and quality over cost, and artificial intelligence (AI) predicts they won’t run to a competitor over a few cents, a price hike might be the way to go. Either way, this kind of decision shouldn’t be made without data-driven insights.
Becoming agile takes more than buying new solutions. That’s just the beginning. For digital businesses, technology is a means to an end, not something to have just for the sake of saying so. They start by understanding core business challenges, and then working backward to find the right technologies to address them.
Let’s look at an almost-ubiquitous challenge for organizations right now: the shortage of skilled workers. While 77% of leaders surveyed in West Monroe’s 2021 Q3 executive poll said they planned to hire more people in Q3, almost half (49%) also cited hiring and retaining talent as a top threat to business.
More than 6.5 million Americans were unemployed and looking for work in July 2021, according to the latest Bureau of Labor Statistics data. That same month, job openings hit a series high of 10.1 million. Statistically, there’s an open job for anyone looking for one. Realistically, organizations from Wall Street banks to factories are struggling to attract and retain skilled workers.
There’s a digital solution to this problem—actually, there are lots of them. Finding the right solution requires understanding how this issue is impacting an organization and what, specifically, it needs to solve for.
Some ways an organization might work backward from need to tech:
Research on scarcity has found having too little of something can lead to an obsessive focus on what’s missing. But with a digital-first mindset, scarcity isn’t a roadblock. It’s an opportunity to innovate.
Access to clean, plentiful water is an existing issue that soon may escalate to a global problem. It’s becoming clearer just how urgent it is to solve water scarcity—and not just so we have something to drink. The World Bank released a report in 2016 that detailed the potential economic and geopolitical side effects of the issue: Exacerbated by climate change, water scarcity could cost some regions as much as 6% GDP, force mass migration, and ignite conflict between nations.
Yet the growing threat of water scarcity also has spurred action. Organizations, including startups, are designing digital solutions to address this challenge:
Capabilities like automation and AI aren’t new. What’s new is how they’re being deployed, with the threat of water scarcity serving as the forcing function for this innovation.
Scarcity shouldn’t be the only thing that pushes organizations to come up with creative solutions. But it also shouldn’t be seen as a hindrance to innovation. With a digital mindset, businesses can reframe scarcity-related challenges as an opportunity to take risks, made bold choices, and drive ongoing progress.
The world will never stop changing. Business challenges will never go away. And normal is whatever the present day looks like.
In good times and bad—and during shortages and surpluses alike—agility must be the name of the game. And businesses simply can’t be agile without being digital.
With digital strategies and data-driven insights, organizations can link impacts to actions, react to whatever comes their way—and meet the future head on.