Crises always bring opportunities, and the Covid-19 pandemic, despite its terrible human and economic costs, is no exception to this. According to a recent study from IBM’s Institute of Business Value (IBV), the pandemic has led firms worldwide to significantly accelerate their rates of digital transformation, creating opportunities for nimble and innovative vendors of B2B technology solutions.
The study also notes that company leaders are prioritizing cost management and enterprise agility over product development and entering new markets. As I discuss later, it’s uncertain if this is something new or simply a continuation of pre-pandemic trends. Regardless, the salient point is that most cutting-edge technology solutions offer benefits such as greater efficiency and flexibility, reinforcing the case that Covid has created enormous opportunities for vendors positioned to take advantage of them.
Pushing on an open door
It’s always easier to sell something if market conditions favor your solution — if you’re “pushing on an open door”. The IBV’s survey of almost 3,500 company managers globally shows that this is the case for sellers of technology solutions, with strong majorities of managers reporting significant increases in their firms’ openness to cloud-based computing, an accelerated pace of process automation, and shifts in how they handle change management (Figure 1).
Figure 1: Percent of company managers changing practices in response to the pandemic
A clear implication of these responses is that internal resistance to new ideas, all too common in big companies and the bane of vendors everywhere, has been greatly reduced. This is of prime importance: it means that vendor sales professionals will have an easier time getting target markets to focus on their solutions. It also makes it more likely that budget will be available to purchase them.
Company executives are looking inward – but is this new?
A second finding from the IBV study is that business leaders are more interested in cost containment and enterprise performance than in product development and entering new markets (Figure 2), something that the authors attribute to an increased focus on internal issues. Indeed, at first blush the bottom rankings of “New product development” and “New market entry” are surprising, given the emphasis that most managers – not to mention equity markets – place on growing sales and earnings per share.
Figure 2: Percent of company managers prioritizing different investment areas over the next two years
The study did not provide data on any shifts in the rank order of priorities over time, so we can’t tell what, if anything, has been changed by the pandemic — although it’s safe to assume that Covid has bumped “Enterprise agility” and “IT resiliency” up the list.
My guess is that there’s not much new in the priorities shown in Figure 2: despite the customary homage that company managers pay to maximizing growth, “Cost management” has always ranked high on their lists.
One reason is that expense reduction exercises are almost entirely within a company’s control, which is a comforting thought for people who control companies. By contrast, increasing sales involves a host of external factors, ranging from whether customers will buy more of a product (or accept a price increase) to the reactions of competitors.
There’s also the issue of operating leverage.
In most cases boosting revenues means taking on more expenses. If, for example, a firm incurs seventy-five cents in incremental expenses for every dollar in added revenue, then gaining that dollar at the top line means adding only twenty-five cents to operating income. By contrast, cutting a dollar in expenses means adding a dollar to operating income.
Of course, things are rarely as straightforward as this. Expense reduction exercises usually come with costs in the form of spending on technology or consulting fees, not to mention redundancy payments. But these are often one-off items that can be accounted for as such, making them attractive to decision-makers.
One downside to spending less is that it often means a lower level of sales growth in future years. But it’s hard, if not impossible, to ascribe a dollar figure to foregone revenue, making it easier for senior managers to soft pedal this “cost”.
A happy alignment of company priorities for vendors of B2B technology solutions
To return to a point I made earlier, even if cost reduction has always been a top priority for company managers, B2B technology solutions offer benefits that frequently align with newer, Covid-driven priorities such as a shift to cloud-based solutions and an accelerated pace of process automation. Add to this organizations’ greater openness to new solutions and you have a serendipitous alignment of sales drivers for vendors leveraging the latest technology advances to deliver a new generation of products and services.