That the Covid pandemic has resulted in a surge in digital investment is widely reported, but the nature of that investment is harder to ascertain.  Were companies simply bringing forward investments they previously had planned, for instance?  Were they investing in technologies to help keep the lights on during the pandemic or were the investments truly transformative?

A recent study from LSE’s Centre for Economic Performance aimed to find out by delving into the digital investments of 425 UK firms during the pandemic.  The analysis revealed that around 75% of firms had introduced some form of productivity-boosting technology during the pandemic.  Perhaps unsurprisingly, many of these investments centered around things such as remote working technology and associated technologies, such as cybersecurity and cloud.  The study also revealed innovations in non-technical fields, such as the introduction of new management practices and business models.

Early adoption

The urgency invoked by the pandemic is reflected in the speed with which many of these changes occurred.  Despite this, the study found that companies continued to innovate beyond the initial lockdown period, especially in areas such as product innovation as companies adapted to the “new normal”.

While for many, the pandemic forced them to bring forward innovation plans that were already in place, up to 34% of firms said that they innovated in ways that were not pre-planned.  While these innovations could be regarded as reactionary and short-term, the firms themselves believe they will endure post-pandemic.

What’s more, many firms reported that the Covid experience will enable them to significantly accelerate future plans, which reaffirms the impact the pandemic has had on organization’s innovation capabilities.

Return on investment

The survey also found that most investments delivered a fairly modest return in terms of productivity improvements, but firms were more bullish about the impact of the investment on their finances, which the authors believe indicates that many of the investments were made with cost-cutting in mind.

While this general picture is quite positive, as you can perhaps imagine, there was an uneven distribution across the economy.  Indeed, the most enthusiastic adopters of new technology during the pandemic were largely the same larger firms that were enthusiastic adopters before the pandemic.

Similarly, those same firms were often found to have secured a better return on the investments they did make, suggesting that they had better internal processes for both adopting new technologies and capitalizing on the benefits they offer.  These findings remind us of the importance of process innovation alongside technological innovation.