Business preparedness for future challenges has increased despite two years of COVID-19 pandemic-related disruption, according to a major new study from Vodafone Business. The global report, which was analyzed by the London School of Economics (LSE), found the percentage of US businesses that are ‘Fit for the Future (FFTF) rose from 17% in 2019 to 27% today, a 10-point increase and the largest increase among countries surveyed (tied with Germany 18% to 28%). Globally, FFTF businesses rose three percentage points from 19% to 22%.
The growth is propelled by investment in digital services as the willingness to be the first to try new technologies has nearly doubled within US companies since the start of the COVID-19 pandemic (24% in 2019 to 42% in 2021).
The “New Digital Normal” is here to stay
Over the last two years, US companies adopted new characteristics or double-downed on existing organization transformation efforts to usher in the “New Digital Normal”. Today, half of US companies view the digitalization of their business processes, products, and services as over-performing (only 39% in 2019). Meanwhile, the use of new technologies like virtual and augmented reality products and services rose 9 percentage points since 2019 (22% to 31%).
The report found the digital-driven characteristics and operational changes made throughout the pandemic are now the new normal for organizations.
- 45% of companies in the US expect to continue with changes that were made due to the pandemic (such as contactless fulfillment).
- 44% of US companies now view their online presence (i.e. website) as the most important destination for new customers.
Growing customer power and societal expectations
The report also found customer digital expectations evolved and became more paramount over the last two years. In fact:
- 67% of all US businesses stated customers are becoming more powerful.
- 71% reported customers are demanding better products and services.
- 66% said consumers expect to interact with brands anytime, anywhere via digital services.
While consumer expectations on digital experiences grew throughout the pandemic, so did the expectation that organizations help address societal issues.
- In the US, 65% of companies said their customers have demanded they have a stance on important social issues.
- 20% of US companies say being sustainable is necessary for their organization to operate (up from 11% in 2019).
- Few organizations are simply trying to appear sustainable without it being a core priority (only 21% today compared to 31% pre-pandemic).
Unfortunately, not all companies are equipped to take advantage of these shifts. The research found that FFTF businesses are those best placed to improve their digital services, increasing their likelihood to win and retain new customers.
Increased employee expectations
It isn’t just customers that have increased expectations, with employees also expecting more from their employers. In the US, companies report employees demand:
- Freedom and autonomy to work in the way that best suits them (44%).
- Flexibility in where they work (43%).
- Flexible working hours (40%).
This increase in expectation is particularly acute amongst Gen-Z employees globally.
- 56% of businesses said this generation has a greater expectation of flexibility in terms of where they work.
- 61% highlighted Gen-Z as having a greater expectation to work with the freedom and autonomy that best suits them.
This growing need for flexibility is causing challenges and uncertainty for businesses. Over 86% of US companies have some concern about remote working, with maintaining productivity and managing the security and protection of data the top two concerns.
However, overcoming these challenges is critical to the future success of businesses.
Additional analysis of the research conducted by the London School of Economics has found a link between companies being ‘fit for the future and business performance. The study found that businesses who scored a 10-point increase in their FFTF score increased the likelihood of outperforming their competitors by 36%1. Additionally, if a business increased their FFTF score by 10 points they would likely see their ESG commitment2 improve by 6 points.
David Joosten, CEO, Vodafone US Inc said: “The COVID-19 pandemic has forced organizations to think about their future and the role digital investments play. In the US, we’ve seen organizations be aggressive in trying new technologies to meet customer expectations that rapidly shifted. Meanwhile, the demand for more flexibility and autonomy is reshaping the employee experience as organizations focus on these new expectations to retain critical talent. We expect the momentum shown by the 27% of US companies found in this report who are ‘fit for the future to continue as more organizations work toward the ‘New Digital Normal’.”
Saul Estrin, Emeritus Professor of Management Economics and Strategy, and Christine Cote, Associate Professorial Lecturer, from the Department of Management at the London School of Economics, said: “At the LSE, we have worked with Vodafone Business to develop a rigorous methodology to discover whether ‘Fit for the Future’ businesses are more likely to thrive commercially in the face of the current business trends, as well as make a greater contribution to social good. From the report, it is clear that FFTF businesses’ financial performance and ESG score are significantly better than competitors. Businesses that prepare for the future now will pay twin dividends: for their profits and their social impact”.
*Notes to editor:
‘Fit for the future businesses were identified by using a regression model to show what behaviors and attitudes were most closely linked with confidence in future financial performance and being well prepared for what the future holds. Twelve criteria were identified, which make up six characteristics:
- Has a positive attitude to change. They embrace change and are excited by the future.
- Is open to new technology. They acknowledge the power of technology to solve business challenges.
- Takes clear steps towards business transformation. They have a roadmap in place for how technology can transform their business.
- Sets a detailed strategy. They have a wider business strategy for the future that is documented, specific, funded, and measured.
- Keeps up-to-date with emerging trends. They have identified the forces shaping their business & referred to key thought leaders to help.
- Is adaptable. They can react quickly to new trends or challenges and is quicker to market than their competitors.
The LSE’s robust analysis states that businesses currently reporting average financial performance (compared to their competitors) that increasing their fit for the future’ score by ten points will increase the likelihood of outperforming the competition by 36%. Meanwhile looking at all companies’ Environment, Social and Governance (ESG) measures, organizations increasing their FFTF index by ten points can expect their ESG commitment to improving by six points; increasingly, requests for tender include ESG criteria.
- A deep and wide program of secondary research. Vodafone Business’ Insights team analyzed many sources, drawing and extrapolating themes and business needs.
- Qualitative and quantitative primary research*. Building on the research conducted in 2020 where we identified the key characteristics of businesses that were ‘fit for the future, we conducted qualitative research (partnering with Jigsaw Research February 2021) and quantitative research (partnering with B2B International July 2021). Key businesses challenges were explored both amongst businesses generally and through the lens of ‘fit for the future businesses.
- Using the data from our primary research we partnered with the London School of Economics (LSE) to conduct a statistical analysis that examined the link between being ‘fit for the future and business performance
*We surveyed 2,526 decision-makers from businesses of all shapes and sizes, across 11 different markets. We did 25 in-depth interviews with business leaders, three with investors, and three with journalists