At the Threshold of the Fourth Industrial Revolution

As digital technology continues to evolve, successful digital transformation will require careful collaboration, thoughtful planning, and the inclusion of every department.

Digital transformation reshapes every aspect of a business. India leads the world in the digital transformation business and firms are seeing the greatest business impact from their digital transformation investments. The findings were based on the Digital Transformation Business Impact Scorecard, a global ranking of countries and industries across 14 key performance indicators critical for digital transformation success, a survey conducted by CA Technologies with Coleman Parkes.

As digital technology continues to evolve, successful digital transformation will require careful collaboration, thoughtful planning, and the inclusion of every department.

Technology could be the major differentiator between companies operating in the same sector and having access to similar customer information. Tapan Singhel, MD and CEO, Bajaj Allianz General Insurance Co., in a recent panel discussion compared new technologies to a bullet train, ones that shake up the digital ecosystem every now and then. “And it is not just one bullet train. These bullet trains (new digital tools) keep coming one after the other, and the challenge before companies is to keep jumping from one train to the other rapidly,” he said. Citing the example of his own sector, Singhel added: “Although the general insurance industry has been around for over a hundred years, the 4G revolution is going to have an immense impact on our ability to reach a wider customer base across the country in a cost-effective manner.” No doubt, the message is yet to percolate down to the lower levels in the organization. While the top level management is quite composed and knows exactly how to deal with changes unfolding in the digital ecosystem, there is confusion at the lower managerial levels.

“Digital technologies create an impact on businesses in three ways. In fact, these three ways define the core pillars of digital transformation and its interaction with enterprises. The approach we use drives these key outcomes for customers. First, we have the generation of new and enhanced customer experiences, which often also develop competitive advantages for many organizations. It lets you deliver products and services swiftly and securely, with an exciting and innovative user experience. An around-the-clock agility, real-time fulfillment, global consistency, and zero errors give an edge to brands and let them exceed increasing customer expectations. Secondly, we have the creation of new product and service offerings – there are numerous products that are developed only because of the movement in digital and we are all surrounded by these. Digital transformation, inherently, leads organizations toward both technical and business innovation. Finally, there is an elemental operational efficiency.”

“Being digital introduces enhanced interactions amongst customers, suppliers, stakeholders, and employees. Digital workflows always tend to be faster, smoother, more secure, and cost effective. They also lead to better decision, product, and operations management,” said Som Satsangi, Managing Director, Hewlett Packard Enterprise, India, at HPE Digital Crest held recently at Jodhpur.

CIOs at a Turning Point

IT has to change significantly as well to support the digital business vision. As silos break down and the scopes of various roles widen and change, shifts take place in how traditional leadership roles operate. Digital transformation has morphed from a trend to a central component of modern business strategy.

Traditional firms are asking CIOs how they can change themselves by creating a new digital business and running their regular operations. For a CIO, this is a challenging but exciting phase where he needs to have a bi-model strategy. Evolving IT strategy is critical, because in the next 5–10 years, 80 percent of what an organization does will not happen within the walls of the enterprise.

CEOs want IT to move from the back-office to driving revenue. Aggressive digital business strategies are putting pressure on CIOs to have a direct impact in business outcomes like growth, customer experience and profitability.

Digital transformation is pushing the way a CIO is expected to work and align his priorities. There is a constant pressure on IT leaders to have a bi-model approach in the digital era and harness the power of hybrid IT and Internet of Things in their digital journey so that they can provide enhanced customer experience and streamline their operations.

“The biggest challenge (for a CIO) involves creating a vision for the digital transformation journey, including the reasons why a change is needed. The next challenge is to have the enterprise leaders share and buy into that vision, followed by the cultural transformation needed to get the entire enterprise focused around the execution of that common vision. In addition to all of these significant people and cultural transformation challenges, CEOs are also grappling with the need for new skills and competencies (such as data scientists and analytics professionals) that are in short supply.

“CIOs in asset-intensive industries like manufacturing are likely to start with an inside out, operational excellence-driven focus. This will likely take the form of initiatives around the integration of IT with operational technology, leading to an Internet of Things play as their early moves along the digital transformation journey.

“A CIO from a B2C enterprise (for example, in banking, retail or transportation) is more likely to focus on outside-in customer experience and external ecosystem-driven initiatives. Both of these approaches should ideally be coordinated with a strong focus on enhancing the digital capabilities within the enterprise as well – called the digital workplace – to create a digitally capable workforce,” says Partha Iyengar, VP, Gartner Fellow, Country Manager Research (India), Gartner.

In spite of revolutionizing the IT industry worldwide, major areas such as government sector that serves as a custodian for information and communication technology (ICT) adoption in rural markets (around 67 percent of the total population in India as of 2015 is in rural markets, according to World Bank) are slow in the uptake of new advanced ICTs for improved efficiency in service delivery and monitoring.

With an objective to address this issue, Indian government in 2014 launched a comprehensive program called Digital India, which focuses on several aspects from building the backend technologies for effective connectivity in rural areas to digital empowerment of the citizens of the country and transforming government to e-government services. This initiative is not restricted only to the scope of the Digital India
campaign but also fuels innovations in other ICT areas to support the initiative.

There are several technology areas under ICT such as data acquisition, data analysis, and data distribution that are experiencing innovations in recent years in India, driven by government support. 2016 has been a year of digital disruption in India, experienced in all industries, from healthcare to manufacturing. It was also the year digital initiatives like Digital India and Make in India started to bear substantial fruit, and the year our mobile penetration passed the billion mark, further accelerating customer demand for digital services and accelerating competition for Indian businesses on both the global and domestic stages.

Challenges and Opportunities

By 2017, 60 percent of digital transformation initiatives will be unable to scale due to the lack of a strategic architecture, predicts IDC. Less-mature digital companies tend to take a tactical, piecemeal approach as they solve discrete business problems with individual digital technologies. As a result, they do not fully integrate digital technologies with their business operations.

Enterprises will realize that for application, compute, storage, and networking infrastructure to work optimally, these all must work together seamlessly as a system. Any point of weakness or failure anywhere in the infrastructure can make the whole system fail. Thus, a strategic architecture must extend across the enterprise and unite all the components into a seamless, software-defined system delivering high-performing applications, data, and services.

“New environments also require a new breed of employees. Is it enough to just hire a networking person to do the same old thing anymore? We expect to see a new breed of network engineers to help departments evaluate and solve their business needs. Ideally, the business should see them as strategic partners, and not just the IT guy.

“Companies will continue to struggle with digital transformation, but it is important to keep the end goal in mind – think beyond the what of digital innovation – the applications, and capabilities – to the so what – how you will harness emerging trends, innovation, and disruption to create real business value. Only with proper planning will we be able to reap the benefits of digital transformation to provide new and innovative services to our customers,” says Nagendra Venkaswamy, Managing Director-India and South Asia, Riverbed Technology.

A Survey in Mumbai by Dell. The rate of industry disruption led by digital transformation in India is faster than global counterparts. Nearly 78 percent of businesses believe digital start-ups will pose a threat to their organization, either now or in the future, according to recent research from Dell Technologies. Almost half (45 percent) of global businesses surveyed fear they may become obsolete in the next three to five years due to competition from digital-born start-ups.

The research finds that India has the potential to lead the world’s digital transformation. Only a small minority of surveyed companies have almost completed their digital transformation. While parts of many businesses are thinking and acting digitally, the vast majority
(73 percent) admits digital transformation could be more widespread throughout their organizations. Some companies are feeling badly bruised by the pace of change. More than half (52 percent) of business leaders have experienced significant disruption in their industries over the past three years as a result of digital technologies and the Internet of Everything, and 48 percent of global businesses do not know what their industry will look like in three years’ time.

Now is an exciting time where we are at the threshold of the fourth Industrial Revolution. Microsoft India’s President, Anant Maheshwari, does not see any headwinds coming in the way of growth and is betting on the growing need for digital transformation in the country. Says he, “If you look at macros globally, India is at a sweet spot. We are already among the top five economies of the world. That’s why you see a lot of global companies investing in India and we are too – we see a lot of opportunity from it.

“Digital India is such a unique opportunity for India to leapfrog areas which have not seen the third and second industrial revolution and go straight to the fourth industrial revolution. It’s a great enabler for India. But there will be pain, and it may not be an absolute smooth ride as we have seen in many of the big changes across the world.”

Current technology trends and developments transforming the market include mobile broadband, which could be the main catalyst behind binding rural and urban India, emphasizes a recent Frost & Sullivan research report, ICT Technologies Driving Digital India. Mobile app downloads in the country are expected to reach 10 billion by 2020. Key mobile-based industries such as mobile banking and e-governance would benefit as a result.

Online retail is also projected to be one of the fastest growing industries, with a market potential of USD 35.08 billion by 2025, accounting for nearly 4 percent of total retail. Meanwhile, smartphone applications are encouraging the use of applications such as mobile payment, m-health, m-governance, and m-commerce.

Lastly, information technology (IT), primarily driven by IT services, is becoming one of the major contributors of gross domestic product (GDP). Due to strong adoption among small and medium organizations, cloud computing through Infrastructure-as-a-Service (IaaS) will increase.

“Digitization can only be realized through proper implementation of strategies backed by the government and technology developers. Revamping and restructuring policies, as well as skill-set development, are crucial to facilitate the adoption of new services,” noted Swapnadeep Nayak, Industry Analyst, TechVision.

As EU and India intensify cooperation on ICT standardization, they provide support to crucial digital initiatives of the Government of India such as Make in India, Digital India, and Smart Cities, while adding additional weight to both European and Indian ICT standardization efforts at a global level.

“Digital technologies will continue to have an enormous impact on our lives through their impact on governance, banking, and industry, and infrastructure both economic and social,” said H.E. Mr. Tomasz Kozlowski, Ambassador of the European Union to India, “and it is important for us to work together to ensure that common standards allow data, knowledge and communication to flow across these channels in the future.”

A three-year project until October 31, 2019, will now support joint initiatives in the priority fields – 5G, intelligent transport systems/machine to machine (M2M) communications, network functions virtualization/software defined networks (NFV/SDN), and security  – as a cross-cutting issue. For statistical cooperation, it shall focus on the implementation of the SDMX standard for national accounts.

Enabling Indian Telcos’ Digital Transformation Journey

The telecom landscape too is reorganizing itself as data continues to be a key driver of growth. A decade ago, the telcos were busy scaling up as they expanded into new markets and garnered new customers. Today, it is about creating differentiators for heterogeneous environments.

Data services are more diverse than voice and need players to leverage a larger ecosystem while performing new roles – that of being an enabler, a partner, or a provider. So in this era, besides looking for reliability, scalability, and flexible platforms to drive innovation, telcos need to focus on leveraging digital technologies that offer differentiated customer services underpinned by security.

Vanitha Narayanan, Managing Director, IBM India, elucidates, “We are working with the top 4-5 Indian telcos, enabling their digital transformation journey. Vodafone partnered with us as they continue to see value, growth, flexibility, and security in our offerings, providing them a huge opportunity to harness the next phase of telecom growth.

“The key imperative is to upgrade technology, which will help drive revenue from ongoing service improvements and technological advancements rather than raw traffic volume. Cloud provides an opportunity for business expansion in the telecom industry. The industry’s established asset base puts it in a prime position to deliver cloud-based services and applications to business and consumers, generating significant and ongoing streams of new revenue in the process. This model is beginning to emerge in mature and developed markets, but has yet to be fully embraced in emerging markets.”

Road Ahead

To remain competitive, businesses will need to invest in a strategy of renew-new that revamps legacy infrastructure while simultaneously creating new technologies to keep pace with digital acceleration and consumer demand.

The vast impact of the digital transformation will include the emergence of new funding models, acceleration in industry disruption and business innovation, data becoming the new capital, and rapid increase in worldwide demand for digital workers. The end result will be the transformation of organizations into digital native enterprises!

‘And it is not just one bullet train. These bullet trains (new digital tools) keep coming one after the other, and the challenge before companies is to keep jumping from one train to the other rapidly.’

Tapan Singhel
MD and CEO,
Bajaj Allianz General Insurance Co.

‘Being digital introduces enhanced interactions amongst customers, suppliers, stakeholders, and employees. Digital workflows always tend to be faster, smoother, more secure, and cost effective. They also lead to better decision, product, and operations management.’

Som Satsangi
Managing Director,
Hewlett Packard Enterprise, India

‘The biggest challenge (for a CIO) involves creating a vision for the digital transformation journey. The next challenge is to have the enterprise leaders share and buy into that vision, followed by the cultural transformation needed to get the entire enterprise focused around the execution of that common vision.’

Partha Iyengar
VP, Gartner Fellow, Country Manager Research (India),
Gartner

‘Companies will continue to struggle with digital transformation, but it is important to keep the end goal in mind – how to harness emerging trends, innovation, and disruption to create real business value. Only with proper planning will we be able to reap the benefits of digital transformation to provide new and innovative services to our customers.’

Nagendra Venkaswamy
Managing Director-India and South Asia,
Riverbed Technology