Has digital tech always existed as a disruption?
Digital is no longer just a buzzword for technology companies. It now resides at the heart of a company’s business model irrespective of the industry it belongs to. Digital technology has transformed the way business is conducted and customers are engaged. Companies today are using digital technology to remain relevant and stay ahead of the market. The cost-benefit ratio of implementing digital technology in business has so far been positive due to low costs, easy availability and several alternative technologies. However, there are also uncertainties around the magnitude of the impact digital can have on a business.
Digital technology can help a business disrupt an entire market, but it can also topple the company from its current market position owing to numerous external and internal factors. A business might not be able to reap the true transformative benefits of a digital overhaul because the internal processes needed to support the transformation were not made compatible. This uncertainty gives rise to a very important question: is digital really a disruptive force or merely one of the many levers that can facilitate transformation over time?
To gain a perspective into digital and its true role in the process of disruption, we need to look at some of the advancements in the industry.
The cost of technology has declined, while its reach has increased significantly: The declining costs of core technologies, including computing, networking resources and equipment, has made tech products easy to acquire and cheaper to implement. Advances in mobile and cloud technology have enabled widespread deployment of existing infrastructure, and integration of additional products and services at marginal or no costs. Businesses today are constantly looking out to automate their processes to achieve greater efficiencies.
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The role of C-level executives is evolving: Formulating and implementing digital strategy in an organization is not confined to the job profile of a specialist in the form of a chief technology officer (CTO) or a chief innovation officer (CIO). Digital implementation is no longer based only on prior experiences and obsolete models; it is constantly challenged by the availability of mounting data. Technologies like big data, machine learning and artificial intelligence are involving all C-level executives to provide a more personalized customer experience.
The customer has the steering wheel: In the past, enterprises kept consumers mostly at the periphery and implemented technology primarily for isolated, basic and back-end operations.
However, with the proliferation of mobile and the Internet, customers are driving the services companies provide. Digital advancements have changed consumer behaviour in terms of purchasing and consumption patterns. Satisfying consumer expectations and preferences has become the top priority for firms.
Disruption is not a new phenomenon—companies have been disrupting markets and industries whenever they face stagnation. To a fair extent, the desire to disrupt occurs mainly because of the need to reduce costs and increase efficiency, the need to differentiate, or the need to create a non-existent consumer class—like mobile users before the iPhone or users of electricity before the light bulb, etc.
One might argue that these were technological breakthroughs, but it was technology that facilitated disruption back then—just as digital is facilitating it today. Hence, we can see that disruption has always been preceded and succeeded by an inflection point.
Today, we see tech giants diverging from their core businesses and using their expertise in digital technology to transform industries such as automotive, logistics, space travel and retail, among others. The bottom line is that most disruptions on their own are mainstream and technologies such as automation, digital, augmented reality or others are just levers facilitating them.
Yes, digital can disrupt a business, but companies should evaluate their digital maturity and ask questions such as what type of digital strategies do they need. Do they really need them? How complex will the implementation be? Will the new technology result in positive results? What will be the cost-benefit ratio?
Different regions in the world vary in their digital readiness index. While Japan fares well above the global average, Europe, Middle East, India and Africa (EMEIA) has the lowest score. One of the reasons is that in Japan, digital-enabled innovation resides at the heart of business strategy. Companies in Japan have pertinent data capturing and analysing tools, which helps them in making decisions in real time, providing visibility to all users across various functions of supply chain and operations. Therefore, it becomes pivotal for organizations to assess their digital readiness and the industry that they operate in before formulating a ‘digital’ strategy.
Guru Malladi is digital advisory leader at EY India.