Gartner Research

Japan Perspective: CIOs Must Help CEOs to Prepare for Post-COVID-19 Recovery

Published: 15 April 2020

ID: G00723246

Analyst(s): Tsuneo Fujiwara , Yuko Adachi

Summary

CIOs in Japan can help their organizations to prepare for post-COVID-19 recovery by showing CEOs a game plan that leverages technology for longer-term growth. Collaboration with CDOs and digital executives is key. This research is based on the current Japan context and the 2020 Gartner CEO Survey.

Overview

Key Challenges
  • Enterprises are struggling to establish and orchestrate the immediate actions to get through the COVID-19 pandemic.

  • Enterprises are focusing on short-term actions to get through the pandemic, and they are not balancing these actions with developing a game plan for the longer-term recovery and growth.

Recommendations

CIOs seeking to evolve their role to lead their organizations in getting through COVID-19 and driving longer-term restoration and growth should:

  • Prepare an adaptive information and technology (I&T) strategy, and adapt the operating model for the next “new normal.” Revisit the current plans with business stakeholders.

  • Prioritize IT cost optimization by identifying the initiatives to keep (to continue or accelerate) versus those to put on hold (to discontinue or slow down).

  • Focus on business model innovation (BMI) to accelerate digital business transformation.

Introduction

The 2020 Gartner CEO Survey was conducted prior to the global COVID-19 pandemic. However, it provides many important insights that CIOs and chief digital officers (CDOs) in Japan should study and respond to.

In response to the pandemic, most organizations across the globe have instituted working from home and restricted travel, and are now taking action to address lost revenue and reduce operating costs. Many factories, retail outlets and even entire businesses have closed or have suspended operations.

Japan was impacted early on with COVID-19, yet organizations have been able to operate more or less business as usual, to date. This provided Japan with a “grace period” for CIOs and CDOs to contemplate the next set of actions to take, depending on how the pandemic progresses at home and internationally.

The environment will continue to evolve. Therefore, a detailed scenario planning with additional granular scenarios, especially including extreme scenarios such as complete loss of revenue for an elongated duration or shutdown of operations longer term, would waste valuable time for improbable cases. A key point is to limit the scenarios to more probable ones somewhere in between, and construct adaptable, or quickly adjustable, strategies and models.

Two scenarios are possible. In the more optimistic scenario, COVID-19 infections grow incrementally, and businesses can continue to operate virtually and remotely. In this case, CIOs and CDOs should follow the recommendations in this research. On the other hand, in the more pessimistic scenario, COVID-19 infections grow explosively in Japan as they have in other nations. In this case, CIOs and CDOs must adopt a higher sense of urgency in progressing the recommended actions, as the “grace period” has disappeared.

In both scenarios, it is imperative that CIOs and CDOs be well-prepared. This research provides preparatory actions for CIOs and CDOs to get through the COVID-19 pandemic and get ready for the new normal after the pandemic, based on the CEO Survey results and what has occurred since the survey.

Analysis

The 2020 CEO Survey was conducted prior to the COVID-19 pandemic. Some CEOs expressed a sense of caution and negative impacts from tariffs and other trade controls, but only a few of them indicated strong concerns about the potential for economic slowdown. Much of the negative outlook has amplified due to the COVID-19 pandemic. Figure 1 compares the prepandemic outlook from the CEO Survey with the current outlook, with the pandemic in mind (qualitative research is based on Japanese secondary sources and Gartner client interactions during March 2020). Recommended actions for CIOs and CDOs in Japan are based on the current outlook, not the prepandemic outlook.

Figure 1: Recommended CIO and CDO Actions Based on the Current Outlook

Growth remained the CEOs’ top business priority. However, there was already a defensive business outlook globally prior to the pandemic, with an increasing focus on cost management and risk management (see Figure 2).

Figure 2: CEOs Signal a More Defensive Outlook

Japan, to date, has had one of the lowest per capita numbers of infections despite exposure at an early stage of the pandemic, and has remained relatively immune. Japan has not locked down, and organizations have operated more or less business as usual, to date, even though the global negative outlook also applies to Japan. Leaders have postponed the 2020 Tokyo Olympic Games by a year, and most recently a state of emergency has been declared, giving organizations much needed time to prepare for the future.

CIOs and CDOs should use this “grace period” to prepare actions in response to the pandemic, as well as to start creating the postpandemic game plan to help fuel longer-term recovery and growth for their organizations.

The 2020 CEO Survey indicates that only 9% of respondents felt an economic slowdown would substantially impact business plans (see Figure 3). And about half expressed concern that an economic slowdown would impact the 2020 and 2021 business plans.

Figure 3: Half of CEOs Are Concerned That an Economic Slowdown Will Impact Business Plans for 2020 and 2021

Economic slowdown has been amplified and is now a certainty after the pandemic, substantially impacting business plans for 2020 and 2021. Thus, we recommend that CIOs and CDOs prepare a more adaptive I&T strategy (see ), as most organizations will face a high risk of disruption. An adaptive I&T strategy allows for more frequent and agile adjustments of the strategy in the future, shortening the planning horizon after the pandemic. To succeed during and after the pandemic, enterprises should match the speed of business change and take an adaptive I&T strategy approach.

CIOs should start by itemizing the currently active initiatives, and modify the I&T strategy to include accelerating working at home, enabling virtual collaborations, continuing digital transformation and stopping pandemic-impacted initiatives. CIOs should be sure to communicate to key stakeholders the modifications made. This list does not need to be comprehensive or perfect at this point.

CIOs can later add back key initiatives required to achieve the next “new normal” business and operating models that will be subsequently determined. They may include brand-new initiatives not previously envisioned. Adopting an adaptive I&T strategy will enable the organization to remain nimble amid the quickly changing business environment.

According to the 2020 CEO Survey, sustainability went from 1% last year to 5% this year, the fastest rising of the top five business priorities (see Table 1).

Sustainability should be at, or near, the top of the business priorities, given the rapidly changing environment.

To sustain business operations during the COVID-19 pandemic, most organizations globally are changing the operating model. For example, most are adopting, or have already adopted, the digital home office, working from home and virtual collaborations. Moreover, more merchandise is bought and sold online rather than at storefronts. Many schools are offering virtual classroom sessions, and some events are being held remotely and virtually rather than on-site. It is difficult to know at this point whether or not in the longer term the organizations will revert back to prepandemic business operations. The preferences could also differ locally versus enterprisewide, and by industry.

The operating model must be flexible and resilient. After everyone has worked from home during the pandemic, will they come back to the office or continue to work from home in the new normal after the pandemic? The postpandemic operating model could accommodate one operating model (which may be just the prepandemic operating model if the organization reverts back to it or the operating model adapted for the COVID-19 duration if that becomes the standard). The postpandemic operating model could also accommodate a mix of both, depending on various factors such as customer preferences, competitor actions or postpandemic business goals.

In Japan, given the continuous shortage of resources, some resources may be replaced or augmented with robots or artificial intelligence (AI) devices to free up resources. Separately, crowdsourcing and the sharing economy may be pursued as alternate ways of securing the required talent. So far, we observe the pandemic to be an accelerator of digital transformation, and some changes could end up permanent, becoming part of the “new normal” after the pandemic, while others could revert to the prepandemic ways.

Thus, CIOs should prepare to adapt their operating model now, keeping in mind the recovery and growth after the pandemic. Remain close to the business, governmental mandates and industry competitors’ actions, and be ready to support new operating models using technology and IT resources.

According to the 2020 CEO Survey, an economic slowdown will cause both a cost focus and digital acceleration (see Figure 4). The pandemic would amplify both initiatives as budgets become tighter. Moreover, overcoming the pandemic makes digital acceleration initiatives, such as building virtual collaboration capabilities, a necessity to continue operations.

Figure 4: Economic Slowdown Would Cause a Cost Focus as Well as Digital Acceleration

A slowdown initially would bring more cost management focus. This is certainly becoming amplified with the pandemic. So CIOs should start planning for IT cost optimization at once (see ).

On the other hand, certain digital business initiatives are critical to continue operations during the pandemic and must be accelerated as mentioned previously. CIOs must propose investing in the right digital transformation initiatives now to recover and grow the business, longer term. The Japanese government very recently announced it will make stimulus funds available to assist organizations needing to overcome the pandemic. The government could partially fund these digital transformation initiatives, if the organization could not fully fund itself to get through the pandemic.

CIOs and CDOs must have a longer-term game plan beyond the pandemic for the organization and not merely reduce cost. The new normal business landscape could end up being a fully digitally transformed environment. Organizations must be digitally transformed in order to compete in such an environment. It is more critical than ever before to have a healthy balance between reducing costs versus growing the business. CIOs can leverage a proven framework to start IT cost optimization (see ) while also making the right IT investments.

Tariffs and trade controls were already disrupting the supply chains of close to half the businesses, prior to the COVID-19 pandemic. Moreover, business confidence was already fragile, according to the CEO Survey results (see Figure 5).

Figure 5: Business Confidence Was Already Fragile … Further Supply Chain Disruption Might Crack It

The pandemic just provided further supply chain disruptions to amplify cracking of business confidence. The pandemic could likely trigger a movement toward an even more localized or regionalized supply chain model, instead of expanding the current global model. It could also trigger a movement toward more digital revenues versus brick-and-mortar revenues.

Changing to a new business model involves a combination of new products, new channels, new financial model or new technology. The pandemic has had an irreversible, long-term impact on the business model of an organization. BMI will become a key activity after the pandemic (see ). A workshop can jump-start such an initiative, and can be conducted virtually, remotely and physically (see ).

CIOs and CDOs should start preparing now for initiating an enterprise wide BMI effort. So when the business units become ready and available, the enterprise will be ready to execute at once. CIOs should make certain to keep the CEOs and other key business stakeholders informed of the preparations being made. These preparations could include planning for an enterprisewide ideation kickoff workshop, creation of an overall roadmap for BMI activities, identifying partnerships and having initial discussions with potential ecosystem partners.

In the CEO Survey, CEOs globally put digital transformation and technology innovation in the top business challenge categories (see Figure 6).

Figure 6: CEOs’ Strategic Business Priorities Remain Digital and Technology in 2020

In light of the current outlook, digital transformation is likely to accelerate, shortening the planning horizon, to achieve the next new normal. Due to the COVID-19 pandemic, business performance, corporate and social responsibilities, shareholder value, and so on may temporarily become sacrificed to sustain business operations. The immediate priority is to survive and then to restore, rather than increase profit.

CIOs and CDOs should take this time to start imagining what the next new normal for the organization and industry would look like. Digital home offices may become part of the new normal. Moreover, given the shortage of resources in Japan and its strength in robotics, robots could replace or augment the human resources for certain business operations in the new normal.

Classrooms and events could more permanently go from face to face to remote and virtual. Brick-and-mortar businesses could be replaced with digital businesses. Supply chains may end up becoming more localized versus globalized. Other changes that would make up the new normal will become visible as time goes by. All of these will have an impact on technology.

CIOs and CDOs should list out what technologies and capabilities they need to build out to achieve the new normal, based on the imagining they did earlier. This will provide a list of proposed initiatives for the game plan (see Table 2).

It should be noted that this is assuming the more optimistic scenario takes place that the Japanese government is hoping for — identifying each COVID-19 cluster and handling it on a case-by-case basis, which is a time-consuming and arduous activity. In the more pessimistic scenario, Japan would not have the luxury of a grace period, because it will experience an explosive growth of COVID-19 infections. In which case, everyone in the enterprise must plan and execute the recommended actions provided in this research at once.

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Evidence

Gartner conducted this research September through December 2019 to examine CEO and senior business executive views on current business issues, as well as some areas of technology agenda impact. A total of 444 business leaders were qualified and surveyed. The research was conducted via an online survey (362); an additional 70 surveys were conducted via telephone interviews; and 12 were conducted via self- administered paper surveys. All respondents were screened for active employment in organizations with greater than $50 million in annual revenue.

The sample mix is as follows:

  • CEOs = 265 responses

  • CFOs = 89 responses

  • COOs = 19 responses

  • Chair, president, board directoror other C-level executive = 71 responses

By region:

  • North America = 176 responses

  • APAC = 107 responses

  • Europe = 106 responses

  • Latin America = 35 responses

  • Middle East = 13 responses

  • South Africa = 7 responses

By size:

  • $50 million to less than $250 million = 54 responses

  • $250 million to less than $500 million = 60 responses

  • $500 million to less than $1 billion = 57 responses

  • $1 billion to less than $10 billion = 188 responses

  • $10 billion or more = 85 responses

The survey was developed collaboratively by a team of Gartner analysts who examine IT’s role in business and was reviewed, tested and administered by Gartner’s Research and Data Analytics (RDA) team. The results of this study are representative of the respondent base and not necessarily business as a whole.

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