Understanding Digital Transformation & Adapting to it

1.0 Introduction and some examples of Digital Transformation

Industry 4.0 and Digital Transformation (DX) are the buzz words in modern corporates of today.  Corporates are in race today to digitalise their operations to bring about a paradigm shift in their style of working leading to profitability and customer satisfaction.   Most corporates are using DX to achieve (among others)

Technical superiority, Research & Development, New product launch, Innovation in multifaceted areas viz: product, process & people, Customer satisfaction, Complaint Management, Product performance, Productivity, Preventive Maintenance, Logistics, Inventory Management, Cash Management, Seamless flow of process within the organization, Legal Compliance, Fraud avoidance & Optimal usage of all resources

Before we get into the nuances of DX let us understand why business need DX.  A business is driven mainly by (among other things)

Products, Technology (R&D, Manufacturing, Services), Marketing capabilities, Customer acceptance, Price points, Competition offers

To this we should add digital transformation as this is one of the catalyst for change in an organization.  In modern business changes are quite complex as it can cost a huge amount of resources both financial and non-financial.  DX provides vision, data, information, method, options, route, process, flexibility, efficiency, technique, speed, accuracy, precautions, safety, risk analysis & improved quality for bringing about this change at the same time optimizing usage of financial and non-financial resources

To bring in more clarity let us discuss some six examples of DX

Automation of Production Process – Distributed Control System (DCS) are used especially in large industries to automate production process.   This brings in efficiency, ease of operation, safety & fast processing.  DCS is in vogue for many decades now and their efficiency is being constantly improved by providers of DCS solutions depending on industry requirements.   

Product Life Span / Product Study – Chips / Microprocessors / components are being installed in commercial vehicles to study their tolerance limits to load, speed, road conditions, weather conditions etc.  This provides valuable data on utilization of these equipment’s, behavior of its components and provides vital information for future product innovations

Preventive Maintenance – Chips / microprocessors / components are installed into machineries even machineries like huge furnaces which operate on very high temperatures.  These chips provide vital data on the machines and its efficiency providing vital statistics on when the machine should be stopped for maintenance so as to enable the organisation to optimize stoppage time and plan well in advance for maintenance

Logistics – Bar Coding / RFID are used extensively for movement of materials internally and externally for an organisation.  This brings in accuracy, speed and efficient movement of materials with least efforts.   Techniques on RFID are getting advanced day by day bringing in more efficiencies

Distribution - Software like Sales Force help automating the entire supply chain.  Ordering online, checking product availability online, fixing prices online, tracking orders etc.  This links the entire supply chain of wholesalers, distributors, retailers, warehouse operators, truck operators and the organization in one straight line offering seamless flow of quick and accurate information

Finance – Connecting financial ERP of the organization to bank systems through automated programs automate the vast flow of customer inflow and vendor outflow of funds.  This brings in efficiency in accounting and also brings in an information flow which leads to large scale audit trail which brings in actions for mitigating risks and brings in controls to avoid frauds

2.0 Taming Digital Transformation (DX)

I am a firm believer that “DX should follow business” and not the other way round.  DX should be a well-trained “dog” (may be called “smart dog”!) who ensures that his master derives happiness in seeing him do things which the master would like and at the same time do not overshoot maintenance & operating costs making DX economically unviable. 

DX is definitely an enabler for growth.  DX will be expensive, calls for a paradigm shift and it involves major decisive decisions to be taken by senior management.  Once it is achieved it can bring in higher customer satisfaction, higher revenue, bigger savings in costs, improve processes, decrease times spent and more importantly brings down risk of fraud and thereby having a better internal control.

What needs to be done (Do’s) for a good DX

• Right, digital-savvy leaders
• Build capabilities for the workforce of the future
• Empower people to work in new ways (change management)
• Ensure IT processes are robust without any major issues that can cause disruptions or expensive replacements
• Ensure IT security is in place
• DX process should be reliable and sustainable.  This needs to be ensured
• Clear communication on changes across the organisation

What should be avoided (Dont’s) for a good DX

• Commencing without having a clear idea about benefits - Unclear benefits
• Excessive investments – too much than needed is burning of cash
• Unclear / lack of understanding of relevant legal issues
• Avoid areas where privacy breach possibilities are high

Mckinsey in its global survey on digital transformations finds that 80% of the organisations have taken a step towards DX, but only around 1/3^rd of these organisations succeed at improving a company’s performance and sustaining those gains.   So complicated is the move towards DX care should be taken not to lose vital resources.  The key to DX as per Mckinsey are categorised into 5 categories : Leadership, capacity building, empowering workers, upgrading tools and communication.   These 5 categories when successfully managed will lead to taming of DX successfully.

3.0 Some Statistics on Digital Transformation

In January 2020 International Data Group Inc. (IDG) a leading media, events and Research Company came out with a CIO’s 19^th annual “State of the CIO” survey.   Some of the major finding of this survey are

• CIO’s move towards a Strategic role (DX being one of their key objective)
• 89% of the CIO’s say that they are more involved in leading digital transformation initiatives
• The top 3 priorities of CIO’s are (a) Leading digital business / transformation initiatives (b) Data & IT security and (c) Strengthen IT and business collaboration skills
• 78% of head of IT’s say that they are communicating with the Board of Directors more than ever before
• Data / business Analytics remains on Centre Stage as Number 1 technology initiative for the coming year for CIO’s
• IT heads have confirmed that the growth of digital business initiatives is driving the need for Information Technology (IT) and Operational Technology (OT) convergence.  
• The drivers for this IT & OT convergence are (a) Digital Business initiatives (b) data analytics initiative (c) New Product Development (d) Need to accelerate time to market and (e) Industrial IoT.

These research finding (statistics) brings into focus the importance given by organisations to Digital Transformation and their keenness to adopt DX.   In 2018 IDG came out with another interesting finding that 47% of CIO’s report to the CEO compared to 41% in 2008.  CIO’s who are pivotal for digital transformation are getting a prime place in the organization to lead DX and bring about a change.

Research findings assert the fact that companies go in for Digital Transformation in a large scale and the CIO who is the technical leader for DX get more and more prominence in the hierarchy.  I have also found instance of large corporates Managing Directors personally supervising recruitments of CIO, so critical being this role perceived.

4.0 Technologies of Digital Transformation

The current wave of Digital transformation relies heavily on Cloud Computing, Artificial Intelligence, the Internet of Things (IoT), Mobile Internet Technologies, Robotics, Additive manufacturing, Big Data & Data Analytics and Cyber Security.     

Though Cloud computing is not a new technology it is quite a valuable tool for business considering it versatility, cost benefits and competitive advantage.  I am sure atleast 3/4^th of all businesses will be using cloud computing in one form or the other to meet their DX needs.  Cloud computing is an efficient tool for both small and big business house. 

Artificial Intelligence (AI) though an expensive tool compared to cloud computing its results have helped organisations cut down their costs and reap multiple benefits.  There are reports which suggest that around 30% of the business are adopting AI to some extent or the other in their day to day operations improving efficiency of operations. 

Internet of Things (IoT) talks about interconnecting devices to have a seamless flow of information and thereby improve / provide customer support.   In practical world multiple devices are installed and each capture certain specific information, IoT technology interconnects these devices to help provide a full service to customers.  

Mobile Internet Technologies are evolving rapidly over the years and its uses are varied & becoming quite diverse  Mobile technology has improved from a single devise used for phone call and messaging into a multi-tasking devised used for example for GPS navigation, internet browsing, gaming, instant communication tools, video conferencing etc.   With move towards 5G technology mobile internet will have a more prominent place in DX.  New technologies are rapidly being developed using mobile technologies and is being adopted by organisations in a big way.

Robotics as an expanding technology capable of improving business outcomes is highly popular. Robotic Process Automation (RPA) has the capacity to support digital transformation. Many businesses are looking for ways in which they can bring this kind of change to their business functions, particularly to ensure they are using cutting edge technology.  Robotics in science especially medicinal science is a very useful tool.  In commercial & legal parlance Robotics is used for example to process a vendor payment by capturing all details on an invoice automatically and processing this information for creating liability, processing payments, recording tax liability under GST, income tax and other relevant legislations in one simultaneous process thereby simplifying and improving speed of operations.  Robotics are game changers for DX if used effectively.  They can be quite complex to handle and process and are very expensive.  They consume high resources and if used judiciously will bring in huge returns for the organisations. 

Additive manufacturing (AM) enables digital transformation.  The primary applications of additive fabrication are design, modeling, fit and function prototyping, and direct part production. Around the world, AM is changing the way organizations design and manufacture products. When used correctly, it can save impressive amounts of time and money. Companies maintain that AM has helped trim weeks, even months, of design, prototyping, and manufacturing time, while avoiding costly errors and enhancing product quality.  Additive Manufacturing significantly compresses this design cycle. For the time it takes to make one iteration using traditional practices, 19 iterations can be completed with 3D printing. That is a significant speed gain over traditional manufacturing methods and hence AM enables DX

In DX, extracting data is one challenge and equally important challenge is to channelize this data in a readable format and make effective usage of this data.  Big data & Data Analytics comes into play here.  Data is extremely useful for business but many do not know how to go about interpreting or analyzing such large amounts of information.  Today, there are plenty of digital tools businesses can use to analyze internal and external data to bring about meaningful results. 

Cyber Security is key to DX.  Data & IT Security are one of the prime functions of the CIO.  Cyber security breaches across organisations have become common place as our reliance on data and inter connectivity increases.  Developing strong resilience to withstand cyberattacks is very vital.  It is estimated that Indian cyber security market in India is $ 1.97 billion in 2019 and is expected to move to $ 3.05 billion in 2022 (CAGR 15.6%).   This significant growth in cyber security market is mainly driven by digital growth in India.  DX is driving cyber security market.

5.0 Innovation and Digital Transformation

Innovation is a key input for DX.   DX is all about moving from existing methods to a more innovative and progressive method to bring about more customer satisfaction and thereby more profits for the organisation.   DX is just not bringing about new technology it is about bringing in a change in the organization.  These changes are necessary for the organization to address the changing business environment.  Innovation helps to address & identify these changes.   

6.0 Leadership and Digital Transformation

Right & digitally savvy leaders are key for DX.   Leadership is very essential for DX.  DX needs support from top management as it brings in big changes in process, people and resources used.  Leaders implementing DX should have clear vision and thought about the project and should be forward-thinking and should be adept at risk taking.   Leaders implementing DX should have good people skills to bring the team around to accepting DX.   Leaders should have the Vision, Skills, resources, action plan to bring about DX, they should also be prepared to incentivize the team members who are part of DX so that DX can be implemented as per plan and within time schedules.

7.0 Process of Digital Transformation

For the DX process to be right Organisation’s need to have the below

Right Technology: DX will be successful only if the company identify and use the right technology.  Technology should be appropriate in technical, financial, size & requirement of the business.  

Right Plan: Organisation’s should know what to change and how to transform their business.  Vague ideas will lead to chaos

Right fix: Organisation’s at times go for quick fixes.  This will not work.  Leaders should step in and guide organisation towards a successful transformation

The following are the key steps for DX

1. Identify areas requiring change using DX. 
2. Align with top management and ensure support is 100% along with all resources
3. Draw up a detailed plan for DX in collaborating with the team identified to implement DX
4. Select the appropriate technology and vendor to implement DX
5. Communicate with the team members affected by the change and align them with the process of change
6. Discuss the outcome of DX in detail and how to handle data output and put it to effective use
7. Extensively test the change before adopting it
8.  Incentivise team involved in DX to ensure that they adopt its course after implementation
9. If this has a customer / vendor or a third part touch point please communicate well in advance and have their concurrence in place.
10. Training for team members to adopt DX is vital

8.0 CS Profession and DX

Our CS Profession is not immune to DX and is adopting DX in a big way both voluntarily and compulsion by legislation.   Latest change, government of India is looking to implement “SPICe+” form replacing the existing “SPICe” form.  DX changes will continue to come in from Government and from Business, we need to adopt quickly to these changes.  We CS profession should understand the fact that we are part of business enabling business to comply with regulations and at the same time ensuring that they have minimum hindrance in their objectives.  To meet this CS profession should adopt to technology quickly and help business meet its legal compliances with minimal effort and concentrate on their business objectives.

My advice to fellow CS professionals, be aware of DX changes happening around us.  Have regular interactions with industry to understand the dynamics of DX.  At times DX need to go in for legal compliance eg : Video Conferencing of meetings, digitalisation of records etc.  These legal compliances should be identified and complied with as per legislations.  

Conclusion

DX is a way of life forward for organisations.  Changes are rapid in modern business world adoption of DX is becoming almost mandatory.  Not only business, service providers also need to adopt DX to survive and carry on successful business models.  DX increase speed of business response, improves productivity, improves data security, increases decision making speed as data availability is more and more reliable.