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Oct. 13

Why Digital Transformation is Relevant to Every Business

The integration of digital technologies into all areas of business and the changing business environment is already a natural phenomenon: companies are acquiring new devices, installing new platforms and new digital communication services. Recent studies indicate that expenditure on such technologies and services globally will reach nearly $2 trillion by 2022.

Dr. Shirish C. Srivastava is convinced that whatever the vision of the future of the company, it must include transformation in order for the company to develop. Professor at HEC Paris International Business School and BMI, chairman of the GS1 (a non-profit organization that develops and maintains global business communication standards) digital content Omni Channel, has repeatedly shared with high executives his experiences in the areas of technology and cross-border business relationships. He says that nowadays the biggest strategic challenge is to find and retain new, unexpected ways to create value, instead of just gaining and maintaining a competitive edge.

Why is it relevant to businesses?

According to Dr. S. C. Srivastava, the pace of change in digital transformation is exponential, and technologies are at the heart of everything. Every day, new ways of working with clients are emerging, more innovation is introduced in the labour market, and efforts are being made to use the obtained data more effectively. This includes not only the existing business processes, but also help to set up new ones. ‘Not only is it important to know the origin of the resources available, but also to use them in a way that maximizes results. And to aim for the business to derive maximum financial benefit and create value. Managing the totality of revenue and expenditure for sustainable economic growth is crucial in today’s world, both at the corporate and personal levels,’ said the professor.

There are endless ways to create value, but it is important to understand one’s business sources and how they can be used to achieve one’s goal. In other words, businesses must achieve their goals by allocating resources in a way that creates a unique value for the consumer or a regular value at the lowest cost.

Opportunities for new value creation

Every business has to do with value creation, but the process of creation and the end product changes day by day; the internet and other information technologies have had a major impact here. Looking back, the use of technologies has so far been focused on creating personal value; in other words, if information systems run smoothly, both customers and employees are satisfied.

We are now focusing on the outside to create external value, for example, by creating the Amazon platform that allows other businesses to connect and operate. In this way, the website which was originally created for selling books later created a whole other value and gained both a market position and a competitive advantage. Another example: Google is being creative and analytical in its use of data across all value creation and measurement processes, and is currently the market leader with products beyond the search engine. Every day more and more content and data are created in virtual space, and the enriched and relevant content in turn engages the users.

‘Another very important aspect is that value creation is the rearrangement of many existing elements with the use of additional resources. The latter help to make decisions faster and more efficiently. In the past, one would make a decision, learn from the outcome and then decide if the same path should be followed again or not. Nowadays everything is easier and is happening in real time. We make decisions based on risks that might not be internal to the company. We simply respond to similar situations and market events. Artificial Intelligence (AI) helps to process enormous amounts of information and assess risks. Only then the decision is made, the least painful one,’ said Dr. S. C. Srivastava.

Threats of digital transformation

It is clear that every industry will be affected by the digital transformation, but it is not known to what extent and how much time remains to prepare for it. According to Dr. Srivastava, transformation is not limited to AI and one should not to expect that new technologies will do all the work and make the miracle happen. Corporate executives need to develop a digital strategy and realize that it includes not just one area but an entire business model. Therefore, they must take into account the available resources, knowledge and experience. This phase should clarify the ways to create value for customers or consumers in a new environment by assessing revenue changes, operations and other critical factors such as the existing culture, risk and competitive environment.

Public authorities, transport, manufacturing, agriculture, energy and healthcare sectors have time to prepare for the digital transformation. Company employees, key suppliers, clients, business partners, industry experts and external experts should be involved in planning digitalisation programs and their execution – it is important to do it collectively, not individually.

It is important for everyone to be involved

‘I can see that managers are either not very aware of what this process is or their knowledge is very superficial. Everyone within the company should be involved in the process. You will be amazed at how much everyone can contribute and create value. Leadership at the C-level management is essential for the future of digital transformation. One should have a clear plan and vision and, if necessary, restructure or possibly hire additional capacity if expertise is scarce. There is no need to rush or propose a solution before a problem has arisen; it is crucial to educate people, because 80% of the time the productivity gap is there not due to technology but people and various processes that are poorly matched,’ said Dr. S. C. Srivastava.

According to the professor, there are several ways to carry out digital transformation in a company. There is a well-established tradition of setting up a department responsible for processes within a company. Of course, one can also hire an outside company. Dr. S. C. Srivastava emphasizes that this is one option, but, in this case, all employees must be made aware of the process, know that it is being carried out and contribute at their own level, in other words, they should be involved. For the process to be successful, a culture change must happen across the organization – from the CEO to ordinary staff – and across departments. Therefore, communication plays an important role.

Progressive investments that bring the highest returns

Changing the business model of companies, organizations and public authorities using the possibilities presented by information technology takes place at different individual stages. At this stage, it is important to thoroughly check and evaluate market developments. One should not get lost in the idea of changing and looking for ways to improve the user experience; one should take action in a structured way. This requires having a plan, and the starting point is self-assessment of how advanced the company is with technology.

‘There are various methodologies for making this assessment, but I would like to focus on something else. The digital transformation does not necessarily have to be a carried out step by step, i. e. step one, step two and so on until you reach your goal. One can omit some steps and possibly start from step five without necessarily having all the necessary resources: one can hire external resources or collaborate with other companies. For example, Microsoft has bought the GitHub platform, which brings together the world’s largest developer community to help discover, share and build better software. The platform is functioning independently after the acquisition, but the two companies are working together to create more opportunities for developers. GitHub developers use Microsoft tools at various stages of the development cycle, and new products and services will be introduced to the users of the latter company,’ said the professor.

Another example that perfectly illustrates the fact that you can jump over several stages is Orange Money. Launched by Orange December 2008, this is a mobile money service, which is available at most of the group’s African branches. Its users can transfer money to an account linked to their mobile phone number and then use a variety of services: transfer money domestically and internationally, and pay their bills.

‘In the Western world, we cannot imagine living without ATMs because we constantly need cash. The situation is different in Africa where the political and economic situation is often changing and rarely ever stable. It was decided not to invest in ATMs but to introduce a mobile money service. Orange Money is the main billing tool in the Ivory Coast at the moment, not cash. They omitted several stages of digital transformation, and the service was developed with the help of French specialists, i.e. external resources,’ said Dr. S. C. Srivastava.

Technology brought chaos to some markets

However, all that glitters is not gold. Some modern examples show that the application of new technologies disrupts the traditional way of doing business. One example is the automotive industry. Companies were able to compete each year by improving on one parameter or another, but Google shook the market by introducing a driverless car, then, several years later, Tesla and other companies contributed by presenting their inventions. The automotive industry suffered a blow – small changes were no longer enough, something revolutionary was needed to help companies compete. According to the professor, this industry was shaken by technology the most.

The professor also identifies threats to personal data when AI is used and continuous attempts are made to get to know the user in every way. Almost all customer information is currently available in the insurance market through various information systems, so the risk factor is calculated very accurately – the higher the risk, the higher the premium. Technologies help insurance companies to increase their profits, but do they create any added value for the customer? Definitely not.

Modern life is like a traffic jam

AI based innovation is in demand all around the world, but the dark side of the matter should also be addresses alongside its benefits. AI and rapid robotization allow to perform analysis and obtain insights faster and more accurately than humanly possible, which often speaks volumes to the traditional business that can’t compete with technologies. According to Dr. S. C. Srivastava, there are two sides to the coin, because the public is not threatened by AI but rather by the improper and irresponsible use of AI. Naturally, companies with very narrow skill levels fear that AI will steal their place, but it should be emphasized that the loss of certain jobs is characteristic all industrial revolutions. Digital transformation is inevitable, but it requires preparation. How painful it will be and how it will affect the population is a matter that should be addressed by public authorities in each country.

‘People who lived in caves or in the jungle had a stable life, but everything turned upside down with the beginning of industrialisation. This is the cost of progress. Technologies entering our lives are inevitable, and with them come the changes that we will have to adapt to. It should not frighten us, on the contrary, we should try to anticipate how this will affect our daily lives and have a plan for how we will overcome it. Imagine, you are driving down a street and you see a traffic jam in front of you. What do you do? You try to manoeuvre. You do things differently than when you are driving down an empty road. At the moment, our life is like a traffic jam in which we have to manoeuvre,’ said Dr. S. C. Srivastava.

The future holds change

As for the future, the professor says that change is inevitable. Mobility has a huge impact: in the future, more and more employees will become mobile and able to work from anywhere. It will also be possible to do one’s work remotely, without physically travelling to a certain building or location.

Other issues include data and access to information. AI allows a large amount of information to be interpreted through algorithms, so we are likely to manage without help centres in the future, instead we will have virtual customer service assistants available to answer all of your questions. Chat robots of this type are becoming more intelligent every day.

Published: 26.08.2019

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