Five ways born-digital companies can accelerate their post-COVID recovery

Born-digital companies face additional challenges, owing to their unique operating models and lesser maturity.  At the same time, many aspects of operating models commonly deployed by born-digital enterprises—such as capabilities, systems, and processes centering on direct-to-consumer and direct-to-home services—may open important opportunities for these businesses.

This article is part of our Born-digital study, where AlixPartners set out to research born-digital companies' unique blend of strengths and challenges and identify the most pressing needs and areas of focus needed to sustain their success.

To overcome the challenges and seize the opportunities arising during this complex and confusing time, we recommend that executives at born-digital enterprises focus on the five priorities defined below.

Five ways to accelerate post-COVID recovery

All businesses recovering from the COVID-19 crisis have their work cut out for them. Managing the worst of the pandemic’s impacts on employees, business partners, and customers will prove especially daunting.

It’s been hard enough for long-established, born-traditional businesses to weather the COVID-19 storm. Born-digital companies face additional challenges, owing to their unique operating models and lesser maturity. Take retailers with online-only operating models. Some of these companies were caught off guard by the surge in demand for their products arising with consumers sheltering-in-place during the pandemic. As a result, they have experienced difficulty scaling to meet the escalating, expectations-exceeding demand. Struggling to build inventory fast enough to fulfill orders, some online retailers had to notify customers of significant delays in shipping times or ask them to keep orders under certain volumes.

At the same time, many aspects of operating models commonly deployed by born-digital enterprises—such as capabilities, systems, and processes centering on direct-to-consumer and direct-to-home services—may open important opportunities for these businesses. What’s more, born-digital companies’ renowned agility may position them to pivot more quickly as needed in the post-pandemic era. To illustrate, some companies providing direct-to-home services have been able to use their technology expertise to quickly introduce contactless pay options and new product features aimed at making delivery windows more flexible for shoppers.

To overcome the challenges and seize the opportunities arising during this complex and confusing time, we recommend that executives at born-digital enterprises focus on the five priorities defined below. (Hint: born-traditional executives can benefit from doing the same.)

1. Leadership: Communicating values, demonstrating authenticity

Creating and leading a born-digital company was difficult for founders even before the COVID-19 crisis erupted and responses to it escalated. Amid the profound uncertainties and damage inflicted by the pandemic, these leaders face an even tougher path ahead. Under these conditions, it’s more important than ever for leaders to communicate a sense of values and purpose, helping employees see how their work brings the company’s values to life and enables it to serve all of its stakeholders. Demonstrating authenticity by being truthful, honoring commitments, and acknowledging that they don’t always have all the answers is also critical during times of uncertainty.

Born-digital boards must play a role, too. In particular, they need to proactively help leadership teams assess the new realities affecting their business. Boards should then help leaders make the right decisions to safeguard employees’ and customers’ well-being while also securing their company’s future. For instance, directors can encourage proactive thinking about new risks and potential regulatory changes.

2. Talent: Navigating an unfamiliar and fast-changing landscape

Even before the pandemic struck, born-digital and born-traditional companies alike had, at times, faced difficulties acquiring and retaining the best talent. COVID-19 has significantly transformed the talent landscape. In some industries, many companies have had no choice but to furlough employees or eliminate roles. But in other industries, numerous businesses have stepped up hiring to meet increased demand for specific products and services. Examples of such offerings include groceries and other staples delivered to consumers’ homes, as well as tele-health services and fitness activities provided through videoconferencing platforms.

In some cases, companies seeking to accelerate hiring are bringing in job seekers who were laid off during cuts in other industries and who bring much-needed transferable skills to the table. For instance, an online grocer striving to expand its customer care team recruits new hires who previously worked as customer support agents in the hospitality and travel industries.

While talent management strategies and tactics will likely vary depending on companies’ unique situations, born-digital businesses may encounter new opportunities to fill important open roles with the right talent. How? Savvy leaders will take time to anticipate possible shifts in what job seekers value most as they weigh the trade-offs of working at a start-up versus an established company. To illustrate, organizations that support remote work may prove more attractive to job seekers. Why? Depending on the circumstances and company policies, remote work may present opportunities for employees to strike a better balance between their work and personal lives.

Additionally, the pandemic has made remote work a necessity. Given this change, smart leaders will also rethink old notions of where employees must be located to deliver the most value for the organization, and where companies can source the best talent.

3. Customer engagement: Anticipating and shaping future behaviors

Many born-digital companies, especially direct-to-consumer brands, started their lives laser-focused on a specific customer need. Examples include desires for better sleep, fashionable eyewear at affordable prices, and luggage that has smart features such as USB charging ports and the ability to transmit location data via GPS and cellular. To satisfy these and other niche needs, companies forged strong connections with their customers. For instance, they appealed to consumers’ sense of style, made products easy to use, emphasized the “coolness factor” of their product designs, and promoted the notion of affordable luxury.

We can’t yet know how the pandemic may affect consumers’ purchasing behaviors and choices in the longer run. But we can be sure of one thing: Our longest-held and supposedly tried-and-true assumptions about these behaviors aren’t gospel. born-digital (as well as born-traditional) companies will need to determine how customers’ needs are shifting—whether those customers are existing, new, lapsed, or yet to be acquired. Enterprises that excel at identifying these factors will stand the best chance of anticipating, adapting to, and even shaping the behaviors resulting from those shifts. As a result, they’ll position themselves to win—and keep—the most profitable customers.

4. Operational scale and profitability: Distinguishing between must-haves and nice-to-haves

The COVID-19 crisis has forced companies to review and revise their capabilities and partnerships. The goal? To strengthen their operations to boost resilience in the face of shifting markets, customer needs, and competitor moves. Born-digital enterprises will need to keep up this effort long after the worst impacts of the pandemic have eased.

Indeed, some capabilities will prove to be must-haves for scaling up operations and boosting profitability, rather than just being nice-to-haves. Examples include digital supply chains, enterprise reporting automation, and customer self-checkout—to name just a few.

5. Data ethics and privacy: Moving these even higher on the priority list

The immense increase in remote work driven by the pandemic has had employees and customers interacting across an unprecedented number of locations and networks. This has highlighted cybersecurity risks and raised pressing questions about how companies can best meet data ethics and privacy imperatives. Those questions will persist and intensify, especially given that for some businesses, remote work may become a permanent part of their operating model and talent-management practices.

What happens now?

Forward thinking born-digital leaders will proactively monitor potential cybersecurity threats coming from increased remote work. They’ll also set up clear policies and procedures to help ward off intrusions and privacy violations. Respecting the privacy of individuals and businesses from whom companies are collecting and using data, and embedding privacy protections into product and service design, will be more vital than ever for born-digital as well as born-traditional companies striving to manage these risks.

It’s too early still for anyone to know which born-digital and born-traditional companies will emerge as the most robust, resilient, and successful once the COVID-based confusion and chaos have cleared. To sweeten their odds of not just surviving, but also thriving, these companies must tackle the challenges unique to this period in time head on, rather than shying away from the effort. Those that embrace the work will stand the best chance of accelerating their recovery in the next normal. Perhaps even more important, they’ll sustain their success long into the future. Understanding and meeting the imperatives described here can help them excel on both fronts.