New challenges for a connected world
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The world we live in has evolved over the last few years due to the rapid advancement of technology in various fields. Technology-led change is, in fact, driving the next industrial revolution. Now christened Industry 4.0, the phenomenon is more than just a flashy catchphrase: it is a confluence of trends and technologies that promises to reshape the way things are made. The coming together of cyberphysical systems, the internet of things (IoT), cloud computing and cognitive computing has led to the emergence of the ‘smart factory’ in this fourth industrial revolution. Integrating all these together is data, which is the key force enabling remote decision-making.
While Industry 3.0 focused on the automation of industrial machines and the processes, Industry 4.0 focuses on the end-to-end digitization of all physical assets and integration into digital ecosystems. In this new digital and interconnected world, the data that companies generate or have access to is not only increasing enormously but also helping organizations by creating new offerings for customers according to their needs. Such initiatives are being used by organizations to improve customer experience and use it as a differentiating factor. Organizations are also evolving from being product companies to technology companies and, eventually, to service organizations of the future.
The boundaries differentiating organizations and sectors are blurring as technology becomes the key enabler and driver.
Traditional business models have given way to new ways of working in the digital world. For example, light equipment manufacturing companies are now offering lighting as a solution to city municipal corporations.
The operating model is shifting from capital expenditure-based to operating expenditure-based. And what is making this change possible? Data. Generating, analysing and communicating data seamlessly underpins the gains promised by Industry 4.0, which networks a wide range of new technologies to create value.
Deloitte predicts that in 2018 and beyond, most enterprises in India would embark on digital transformation programmes to hone existing business and operational efficiencies, improve productivity and performance, and enhance reliability. The new digital business environment comes with unprecedented risks that go beyond information technology (IT) operations, encompassing the enterprise, its partners and, in fact, the whole ecosystem. More and more organizations are now using or offering technological services through means beyond their control (for example, use of public cloud).
As organizations grow while embarking upon their digital journey, adequate security measures need to be put in place to prevent any damage—not just in the organization under question but across all entities which form part of the value chain. The digital infrastructure thus secured should be reviewed and upgraded regularly to ensure protection against newer threats.
Risks faced by digital organizations today
In the Industry 4.0 era, software enables machines to communicate and make decisions, whereas artificial intelligence, robotics, and 3D printing transform the way products are made and how people perform their tasks. But Industry 4.0 also creates new risks and requires companies to integrate security safeguards not only into their businesses but also throughout their ecosystem.
Among the key risks and challenges an organization might face: lack of an appropriate digital strategy and supporting architecture; non-usability of the existing application stack and infrastructure to enable the digital journey to Industrial 4.0; a piecemeal approach or staggered deployment of digital initiatives across the organization leading to issues in the interworking between digital and legacy systems; unfamiliarity and reluctance towards the use of digital technologies by employees and partners; evolving regulatory and compliance requirements (requiring organizations to adopt newer controls and systems to support the digital ecosystem); usage of newer and shared technologies (like cloud, software-as-a-service, etc.) means limited controls available with the organization, necessitating more secure systems to be put in place. In addition, quite often, organizational processes are not aligned to support the digital ecosystem or there could be insufficient budgets to support digital transformation and associated risk mitigation plans.
Managing risks in the digital journey
Coming up with a comprehensive approach to counter the risks associated with a digital ecosystem is of utmost importance: organizations need to look beyond the conventional risks they have been used to so far in the digital world. For example, as organizations and business models become more and more dependent upon data—along with rising data volumes—the need for resilient systems and technologies than can support faster processing of data also increases. So they need to factor in the associated risks in such scenarios.
Another requirement is to constantly look at the regulatory environment. As cyber threats increase with rising digitization, regulators of various sectors also are coming up with stringent norms to ensure that customer data is secure. Organizations are struggling to keep pace with all the changing vectors of this dynamic digital environment. While deploying the right technological solution to meet the requirements is the need of the hour, the multitude of changes has increased the budgets required to meet these threats and mitigate the risks. Organizations now have to choose between the risks and their impacts they can live with and the ones that need to be addressed on priority.
One of the measures they can take is to implement a risk framework to build a secure organization with the right people, processes and technologies. Such a risk framework shall include not just the organization but all the other relevant stakeholders which have a bearing on the value chain and which can impact the ecosystem.
This new digitally converged world requires skill sets specific to the ecosystem.
Shree Parthasarathy is a partner with Deloitte India.