What's Next for the Digital Transformation & Services Industry

Given your experience in strategy, growth, and organizational consulting for Digital Transformation, IT and IT enabled services, we have to start with a question that is top of mind for our audience. What impact will the impending recession have on the industry?

I’ll break this into two things: one is the whole question of a recession in the first place. At this point, it feels like we’re talking about a recession more than we’re actually experiencing one. We’re yet to see when and how it’ll play out. The way I see it, there is a more fundamental set of shifts and changes in this industry that are playing out over the medium term. It started before the pandemic - digital transformation, movement to cloud and increased adoption of digital from end consumers. Some that were driven by shifts in technology, consumerization of tech and consequent changes in behaviors and some that were driven by shifts in geopolitics and others. COVID-19 accelerated some of that trend in cloud, digital, supply chain redesign, etc.. That said, many of these initiatives are still in flight.

From a medium to long term perspective, this space will continue to see buoyant demands. We may see short-term blips, and a recession may be one of them. What a recession does is that it eliminates frothy spends as the returns on such investments sharpens, but companies will continue to invest in their own digital transformation journeys. 

I find that our business, which is consulting, can be a lead indicator of the changes companies are going to execute over a period of time. We will see volatility, but I generally feel very confident about this space, this year and beyond. The downstream of our work often needs deep and long execution and this creates opportunity for the IT and related services players. I feel very bullish about this sector, I think it is an evergreen space. Services businesses will be resilient even in a downturn.

A follow-up question: Are you seeing a significant change in spending for Digital transformation initiatives? 

The pandemic boom led to some irrational spending and behaviors. People were less disciplined about where they were spending. Some of that is getting adjusted. One example: if you look at a bank as a spending entity, their spend and efforts are categorized into run-the-bank (operational) and change-the-bank (transformational). Change-the-bank is seeing relatively less pressure than run-the-bank. What’s gone out of change-the-bank is the ‘nice to have’ spend, on trendy or “cool” products that weren’t changing customer experience. Investments in what is required to enable better experience, interface, new ways of working, will endure. For example, data suggests that since the pandemic, the number of baby boomers that are comfortable digitally banking has increased dramatically. That won’t change, so it needs to be enabled and enhanced digitally. 

When there is “run” to maintain, enterprises will continue to drive more efficiency and automation. That needs to go through a process of transformation. There are still plenty of opportunities, things need to get done even if you net out to a lower rate of spend. Don’t get me wrong, we will see some pressure. The main worry is that talk of a recession can lead to some level of anxiety and can result in longer timelines of decision making. So far though, the economics of most businesses have not been adversely affected. 

What’s in store for mid-sized companies that have seen the highest levels of investment by Private Equity firms or have consolidated into larger companies over the last few years? 

We will see a separation between winners and losers. This year will require hard work to make things happen. The quality of your business, relationships, investments, go-to market execution will matter even more. There was a time where if you happened to be in the right place at the right time, work would come and you didn’t have to sell. 

Even though many mid-sized companies have consolidated, I think there is a clear role for smaller companies. Enterprise clients have a need for companies who can provide intimacy. They don’t want the big machine, they want a close partnership. There are great opportunities there for smaller companies, but the quality of business and quality of execution still matter. The interesting thing is that if you’re a $500 million company, you need not change the world to get to $600 million. You need a few good relationships and a few good wins. The macro at some point is not that big a deal. Of course the macro matters, but you are more susceptible to it if you are a $20,30,50 billion. There are consistent pockets of opportunity but the quality of business and the quality of execution still matter. Small to mid sized companies can partner with clients who are looking for agility and niche capabilities. 

Many of our readers are from sales and account management in this sector. They would love to hear from you how the go-to market has changed, if at all, over the last few years? What does it take for an upstart or a younger company to succeed in the marketplace? 

I don’t think there’s anything new and disruptive here. The change in the sales and go-to market has been an ongoing evolution. The balance between relationship and content skills has been changing more towards content. You need to be content-heavy to sell well - bringing in thought leadership, thinking, problem solving, shaping, and all of that. What changed during the pandemic is that some of this can be done remotely as well. Though I continue to believe that high quality, in-person interaction is significantly superior. The other part that has changed is the information availability and your ability to map out a strategy just by looking and mining at the information. This has the ability to make you more effective at every interaction and action.

If I were to pick a few messages for current sales professionals to navigate the coming year and beyond:

1. The quality of sales execution will matter now more than ever. This means deepening and strengthening relationships and bringing your clients the right thought leadership and right capabilities.
2. It’s important to be visible in front of your clients right now as they start to make new decisions and navigate a new climate. On a zoom call, it’s still distant. 
3. Making sure you're investing in the right clients and the right relationships. This is not a world of spray and pray- it's a world of being focused and intentional. This includes supporting your clients through tough times as a true partner. 

These messages are golden at any time but especially in this climate. As demand tightens, relative to last year, what you do in the front end will be more important than ever.

What kind of talent do you think it takes to succeed in this sector in go-to market roles?

In today's world you need to have a good combination of consultative thinking, problem solving, and relationship skills. At the same time, some old things don't go away. A good sales or account manager is always someone who hustles. Quick to move, quick to respond, connect the dots, make things happen, be ready, willing and available in front of the client. All the good things from classic selling skills are still very relevant today. The second most important thing is just the ability to orchestrate your firm’s capabilities for your clients. That means building internal networks and relationships to be able to tap into the right people, the right capabilities, the right IP. So hustle in the market and hustle internally. It always comes down to who you know, what you know, where it is, and being able to connect those dots. 

Lastly, we are moving to a world where the more you can help solve problems and be seen as a problem solver, the better off you are in terms of sales. You need to position yourself as a partner who is going to help solve problems and genuinely work in your clients interest. It’s an adjustment of the tonality of what you’re trying to do. Rather than trying to sell something to a client, understanding how you can be helpful and be of service to them. That includes understanding that sometimes you’re not the person to help and being honest about that. It builds more trust.

Do you think 2023 will be the decline of remote work? 

From the highs of 2020, 2021, I think remote work will decline. Are we going to go back to the world it was? No. I do, however, believe that we may have pushed remote work farther than what is good for everyone in the industry. That’s a personal view. I believe there is value in meeting each other and clients. My most difficult projects have been trying to do a strategy project on zoom (mighty hard!). Being able to whiteboard with a team in the room is far easier. I don't think tools have evolved to a point (yet) to make virtual work quite as effective. I think there is a lot of value in physical presence and being able to connect and talk things out. I think this issue starts to intersect with the question of what an organization is going to be in the future. Will we be individual, independent workers working remotely? That's a different construct. It might focus on employee flexibility but it doesn’t build other important things. 

That said, what has changed is acceptance of the fact that things can be done remotely. All sales people have traveled huge distances for that one meeting. Today, if you don’t make that, clients are okay with it. That is a huge shift. Even the senior-most client will accept the fact that a zoom meeting can be effective as well. On the topic of travel, sensitivity around carbon footprint across organizations is going up. There is a growing conversation here about climate impact and willingness to do certain things remotely. This dialogue is productive and healthy. Ultimately, I think it’ll come down to balance.

How do you hire for your team? 

There are some basic skills I look at, problem solving capabilities, tenacity, analytical skills, good communication, and ability to work on a team. You can’t be a lone warrior in this sector. You need to be able to both collaborate and ask for help. Additionally, we’re looking for that spark of brilliance. That could mean anything, you could be a musician, an artist, a sports-fan, but something that shows that you have the ability and tenacity to pursue something very deeply and strongly. From a personality standpoint, someone who pursues excellence. In our business, the world is changing very dramatically as well. So we’re also starting to look for deep industry expertise, especially in senior talent.

And we can’t help but ask this question - what do you think will be the implications of AI technology like ChatGPT for the services industry?

One of the big questions in terms of impact on this industry is on coding because Chat GPT can generate low-level code. When automation came in, everyone thought it would kill everything else, but that hasn't come to pass. Nothing has been eliminated, the services industry has continued to grow at a healthy pace. I see this as a technology that will amplify what we do but will never be able to replace the work itself. Generative AI could potentially help with lower level coding, early plan drafting, and improving productivity. It won't replace the top of the pyramid, it won’t replace value added work. For example, one question is what it will do to the customer service industry. How can this technology be used to make customer experience on a call far superior? My sense is that it will lead to a redesign of processes and how things get done, but in general it will be an augmentation and amplification of human capabilities versus a replacement. It’s not something to ignore, it’ll still be meaningful and material and has the potential to change many things we do.

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