BackPaul Gosling, Sanjay Dawar | Digital premium will be the future differentiator
Companies will not have a choice but to interact with their young customers on a digital platform
Premium
Adopting digital strategies for business gains is the next big challenge for Indian companies, said Paul Gosling, senior managing director (strategy) for Asia-Pacific, and Sanjay Dawar, managing director for India at Accenture Management Consulting in an interview. It’s a huge opportunity and no company can afford to miss it, they said. Edited excerpts:
Are Indian companies seriously embracing digital strategies?
Dawar: There clearly is a focus on digital. The reasons in India are slightly different. If you look at demography, India has a very large young population. And you look at the way the young population has taken to mobility and this entire digital phenomenon. The consumer today is digitally enabled, so the companies will not have a choice but to interact with their young customers in a digital manner.
Gosling: The good news is, more and more companies are seeing the digital challenge and opportunity as a CEO (chief executive officer) item, rather than a CIO (chief information officer) or CTO (chief technology officer) item. I think that is an important shift, because it demonstrates that those companies get it that digital is not just about technology. And it will be the CEOs who are bold enough to see the transformative effect on their existing business and who see the opportunities beyond their existing businesses that will really reap the opportunities. I think India is one of the locations where the CEOs or the promoters are seen as the ones who are supposed to drive this.
Have public sector units (PSUs) been slow in embracing this?
Dawar: You can’t just say that PSUs are going to be slower compared with private companies. One of the leading banks in India has engaged us to deliver a digital branch. When you digitalize your branch, you are making your branch interface consistent with the other device interfaces that you are providing. It could be a mobile phone, it could be a tablet, it could be over the Internet. The consumer doesn’t necessarily need to go to the branch, the digital branch for that particular consumer could become sitting at home on a device. Generally, I would imagine that business-to-consumer (B2C) business would adopt digital faster than a business-to-business (B2B) model because the consumers will force it. But I don’t think there will be a choice; even a B2B company ultimately serves the consumer.
Which are the industries that would be the early adaptors?
Gosling: All industries are going to be affected. As you move to other more traditional industries that are building power plants, transmission and distribution networks, those businesses and assets have completely changed with smart meters and smart grids on the transmission and distribution side. You can optimize and manage power plants with digital technology. And you can manage consumption patterns too. So, when you see that there are more mobile phones than bank accounts, you start to see the opportunity for what really is the way to get the accounts up is not going out and setting up another bricks-and-mortar branch.
Dawar: Look at other B2B companies like GE, which is doing a lot of remote diagnostics today. Things like turbine engines and healthcare. Putting sensors on a turbine engine and providing inputs to your customers about potential failures much before it even becomes a reality. It’s an example of Big Data analytics. So, B2B is also adopting digital in a big way and we shouldn’t assume that it is only going to be B2C companies.
What are the hurdles in going digital?
Dawar: The first thing is education. We need to have a common definition of what is digital. Often, what happens is that it is confused with technology—its social, mobility, analytics, cloud—but digital is more than the technology itself. Technology only enables it. It’s the business model that makes it possible.
The second thing is that it needs to start at the top. Gone are the days where you had business strategy influencing what your IT requirement was and then leveraging IT to enable the business. Today, digital has an influence on your business strategy and there are so many examples where digital has driven a new business model. A global example would be iTunes by Apple. So, in essence, today you don’t have to go to a store to pick up a movie DVD.
Any Indian examples?
Dawar: One of our Indian clients who is into heavy fabrication equipment used in power plants and other industries is globalizing and as they are going into Africa and Middle East, one of the things they are thinking about is a service which will involve remote diagnosis. As they build out their business model, they won’t need service engineers in every country trying to service those particular customers. They can do this in a remote place, outside India and you send your service people only when it is required. This helps by reducing your overheads. You can create hubs in Africa and Middle East. It also helps you to build the cost of the remote diagnosis as a service offering in the price of the product itself. So, you also get an advantage of top line growth. So, you get a price advantage; you get a cost advantage. It’s helping you maximize your margins.
What will happen if Indian companies miss the digital strategy space?
Dawar: I think what will happen is that you will no longer be a high-performing company. You will lose out in terms of your return to shareholders. Your peers, who are actually differentiating by getting into different business models based on digital, will perform better, will return better to shareholders and as a consequence, you will lose out. I don’t think you can miss this bus.
Gosling: Over time, you will end up with a stranded business, stranded assets, stranded physical network, stranded business model. Now, that’s not going to happen overnight for everyone. Different industries will feel the pinch at different paces, but ultimately, you will be stranded or parts of your business model will be stranded, which will lead to the economic consequences.
It’s not a fad; it’s not even a trend. This is the foundation of future business models, changing shapes and being put in place. So it’s not really optional. It’s a question of pace, it’s a question of vision. It’s not a question of everybody jumping from A to B. It’s a question of CEOs knowing where B is for their industry and then deciding how and when they are going to jump from A to B. These are the challenges of being a CEO today.
What are the opportunities in this?
Gosling: If you are a CEO, I don’t think you should be worrying about, will mobility, will Big Data analytics, will new consumer preferences, particularly young consumers, and how they want to engage with each other and my product and me, will that affect me? That’s not the discussion you should be having. The discussion is what I should do about it, how quickly I need to move, and what do I need to do.
Dawar: It’s a huge opportunity. So, you should treat it like the ability to distinguish yourself from competition, not that I will ignore it and life will still be the same. I like to use the term digital premium. If you can leverage the digital premium in your business model, then you will differentiate yourself as a business. And if you differentiate, then you will have higher market shares, higher growth, better returns to shareholders, ability to attract talent and to retain talent. It’s a huge opportunity and you can’t afford to miss it.
Hypothetically, what would be a future debate in the boardrooms of Indian companies?
Gosling: There will come a time, not too distant, when people will stop talking about this, because it will become so pervasive. People will not be describing digital versus non-digital. The conversation then will move on and people will be talking about the challenges and opportunities assuming a digital base.
Dawar: It’s going to become a way of life. It’s like every business is a digital business. So, you should not kid yourself that it’s not going to influence you. It’s better to adopt it and use it to your advantage.
Which companies do you think are getting their digital strategy right?
Dawar: Look at what Nestlé has been able to do with Maggi. They have been using ideas from their existing customer base of Maggi to get ideas about new flavours they should be launching. It’s a way of crowd-sourcing new ideas for product development and then feeding that back in the market as a new product. Café Coffee Day has done the same thing. They have created communities where they brainstorm these ideas and they have been able to launch new products.
Even a company like Maruti Suzuki, they are significantly online today. A large part of their lead generation is taking place through their presence on the Internet. For some of their more recent models, they have been using the Internet a lot for generating leads. Companies like Tata Motors are leveraging analytics for the front-end in terms of lead generation.
Gosling: In Singapore, we have a lot of exciting things under way with the government in the digital space. Singapore is a good example because it’s an activist government that likes to invest in the next wave to make Singapore more liveable and effective city.
What can go wrong?
Dawar: I can think of two challenges. First is availability of talent. Look at our education system. We are not training people to become digitally savvy. So, we need to go back and change the curriculum to ensure that people are digitally savvy so they can be leveraged in companies to make this digital premium a reality. The second is a function of education. What is digital? Within the corporate, you need to run communications. The CEO needs to take the lead, make sure there is an understanding within the organization of what is digital, what is the advantage of the digital business model.
Gosling: There are going to be regulatory issues. There are going to be challenges and probably failures around security and privacy, with all the information that different companies hold about us as individuals, the threat to the security of that data.
What is the distinction between digitization and digitalization?
Dawar: I want to draw a distinction and bring a new concept to light. There are two parts to digital. One is about digitizing, so you take any process, say sourcing, and you can make it digital. So you have digitized the sourcing process like, say, e-auction. That a lot of companies are already doing. A lot of companies are going online by having an alternate channel which is the online channel. That’s again digitizing.
Digitization is taking a process and making it digital operationally. So, it could be sourcing, it could be manufacturing, you can use manufacturing execution systems. You can have sensors so the data goes directly to your ERP (enterprise resource planning). This is an example of digitizing. Digitalization is what is going to give you the digital premium. Digitalization is where you are changing your business model.
Digitization, a lot of Indian companies are doing that, but digitalization, very few are doing that. For example, a company like Philips is doing a lot of work in digitalization. If you have got a medical equipment, that medical equipment is nothing but a server at the end of the day, because you have got all the data about the patient, the scans and whatever it might be. So, they are now trying to create something they call the remote ICU, which can then be leveraged to monitor what’s in villages where these machines are installed, how’s the patient in that particular village doing, you can remotely diagnose that and you can then give advice to the doctors in those villages, because that is rare commodity—doctors in villages.
What are the kind of costs attached to this strategy?
Dawar: The business case is paying for itself. If you go for e-sourcing, you get five to 10 times the return. Cost is cost. You have to look at the value of the outcomes at the end of it. If there is a return, cost doesn’t matter.
Gosling: As with many other technologies over time, the cost of these technologies is coming down and will continue to come down. They will become cheaper, more available, and more powerful and more flexible. The early adopters might pay more than the ones who exploit the technology later. That’s the CEO’s challenge. When do I jump, which direction do I jump, how do I ensure that I don’t make the miss-steps? But it can’t be too late.
pr.sanjai@livemint.com
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
