‘Today Digital Transformation is the buzzword in the industry’
Amit Bakhle, Manufacturing GM and Domain Expert, Consultant and Digital Transformation, Industry 4.0 and IIoT Enthusiast.
While most companies are today talking of Digital Transformation, do all of them have effective strategies in place for implementation?
Today ‘Digital Transformation’ is the buzzword in the industry. Everybody is talking about it. In developed economies, Digital Transformation (DX) is disrupting the whole value chain and compelling companies to rethink everything they do; with labour becoming very expensive, digital transformation was the only solution. Companies like Siemens, Rockwell Automation and Schneider Electric, to name a few, started their own journey of DX and have since become the strongest solution providers today. In India although there is tremendous potential for the Industry 4.0 and DX, we have a long way to go. Here, the labour being still comparatively cheaper, DX has not been at the forefront of many industries since many people think that it will impact the jobs.
However, it is very important to realise that it will impact on the skills of the workers and will create different kind of skilled workforce. According to a research by Microsoft in partnership with International Data Corporation (IDC), DX will add US$154 Bn to India’s GDP and increase the growth rate by 1%. According to the study, 90% of the organisations have started digital journeys, but only 7% can be classified as leaders and 48% of these leaders have full strategy in place. Which means only about 3% of the organisations have a clear strategy in place. Many are foreign conglomerates that are doing DX across their global companies. Many are at POC stage and many are still evaluating whether to go for DX now or later. Probably most of them know that DX will transform their business, but are mulling over the cost to benefits ratio. Many have security concerns because of which they are not willing to go in fully for the DX.
With tech-savvy consumers looking for brands for enhanced and interactive experiences, innovative solutions are expected to address the growing need for convenience and more rapid “anytime anywhere’” solutions. These consumers are driving companies to digitally transform themselves and to step up innovation across products, services, pricing and user experience.
What are the impediments in the process of Digital Transformation in the Indian context? Is RoI the key concern?
India is at the helm of the 4th Industrial Revolution. Be it large industries or SMEs or startups, everyone has some knowledge or progress towards Digital Transformation. The digital era has arrived and it is shaping the way we do things. Organisations across India are thinking not only how they can improve the whole supply chain for faster deliveries but also better user experience. With consumers becoming very demanding, organisations have started relooking at every area the way things are done. DX is bringing in more innovation and disruption in the way we do things. However there are many impediments in implementation of digital transformation. Some of them are enumerated below from a manufacturer’s perspective:
1. Mindset: Most organisations need to understand that DX is a must in today’s world. The mindset plays a major role in any change. DX is a big change. For large companies the mindset needs to change like a startup if they want to transform. For smaller companies they need to change their mindset to be more innovative and willing to invest in the digital transformation. In India we have many traditional organisations and they have their own mindset for DX as they might have low employee turnover. Some of these organisations continue to employ people even after many years of retirement. With people being used to doing the good old way of doing things and being successful, the digital transformation becomes exceedingly difficult. Humans are always wary of change and this is a major impediment for DX. Inertia needs to be addressed by leaders of the organisation. They need to tell the employees that what is successful today cannot be the same tomorrow. An effective change management program is essential for the people in the company.
2. Lack of clear strategy for DX: Although DX is taking place at a very rapid pace, most predictions made initially haven’t happened as expected. Many organisations began their journey with lots of enthusiasm without actually defining the key areas for DX. As a result, lots of investments were made without the desired results. To transform the organisation digitally is a big change for any company and without clearly defined vision and strategy, the process mostly fails.
3. Return on Investment (RoI): Change is not easy, it is also expensive. DX involves considerable costs. As in any capital investment, RoI is essential for taking decision for DX. Since the costs are high, many companies do not have the funds to do the end-to-end transformation. Doing micro projects can be a solution in moving step by step in that direction.
4. Lack of in-house skill set: Any new technology or disruption is looked at cynically more because of the fear or lack of knowledge about it. To adopt any new technology or change requires knowledge. Implementing DX without proper developed skills for the in-house personnel can be one of the major barriers.
As one of the main drivers of the economy, is the SME sector ready for this transformation?
Small and Medium Enterprises (SMEs) account for about 45% of the total manufacturing output and employ around 40% of its workforce. As per Ernst & Young (EY) study, DX is the next big thing for the SMEs. In fact out of 51mn SMEs in India only 5-6% have online presence. This offers a tremendous potential for DX. With Internet growing at 55%, most SMEs will have to be online very soon. Digitally transformed SMEs can be very competitive with cutting edge technologies, faster time to market the products and greater presence globally. Following are the factors that would drive them for digital transformation:
1. Government initiatives: Indian economy is expected to be a US$5 trillion by 2025. The Government has recognised SMEs as the backbone of our economy. There has been introduction of many schemes to improve SME lending and has resulted into growth in FinTech firms. Many of the government initiatives like ‘Digital India’, ‘Skill India’, and ‘National Manufacturing Competitiveness Programme’ encourage SMEs to adopt Information & Communications Technologies (ICT), be competitive and have global presence.
2. Competition: Due to advent of technology more and more customers are digital savvy and more demanding. SMEs who are faster to respond to these challenges have an edge on the competition. Competition drives the technology adoption.
3. Second Generation of Entrepreneurs: Most SMEs are family owned businesses. Many of such businesses are joined by their second generation who are much more tech savvy. These new age young entrepreneurs have better understanding of technology and realise the benefits of DX. They are more hungry and sometimes more ambitious. As a result such SMEs are more likely to be in the forefront for adopting technology.
4. Development of Digital skills in the organisation: Most of the SMEs have always faced the challenges of recruiting and retaining skilled manpower because of the lack of funds. Innovation is mostly missing in these companies. SMEs who foster innovation, take their business online, accept e-payments, and will be in much better position to compete globally. Providing adequate and relevant training to their employees will help the SMEs to accept DX.
Most of the SMEs are now embracing digital technologies and are going on the Web. Some of the leaders have gone ahead and started the journey of DX doing micro projects in spite of the challenges. Their success will drive their competitors and so on.
How should the SMEs prepare for Digital Transformation?
SMEs are the backbone of our economy, registering 11.5% growth. In spite of tremendous potential, the SMEs face various challenges such as poor infrastructure, lack of funds, little or no innovation, and lack of training and skills of tech savvy people. DX has taken the world by storm and is fuelling growth like anything. With sensors technology becoming cheaper and better, DX in manufacturing has become much easier as compared to few years ago. The projections for the growth in digital technology in IoT, AI, Cloud and data analytics are huge. However, more than 50% DX projects have failed. SMEs must learn from these big failures and save themselves from these pitfalls:
1. Knowing the ‘Why’ of DX: According to Mckinsey & Co, most leaders have a limited view of what DX means and very few have a holistic view. Some view it as an upgradation of the IT systems and others focus on digital marketing or sales. SMEs need to have a clear definition of what is digital and should be able to connect their digital strategies with Business. SMEs should decide why they must go for transformation, what are their priorities and strategies.
2. Deciding a Team: DX should be initiated and driven by the CEO. Once the why is clear, a team should drive the DX initiative. The team should be provided necessary training on change management and technical knowhow. A right team which embraces DX will go a long way in bringing the success to the organisation
3. Knowing What: SMEs need to decide which areas require immediate attention for DX. Faster delivery, better customer experience, reduced costs, increased efficiencies, more profitable results are many reasons to speak of.
4. Knowing When: SMEs should set targets on achieving the DX and make a roadmap indicating milestones and dates.
5. Building strategies: Once decided, the DX project needs to be broken down to micro projects. Areas that are the most painful need to be identified. Areas with low hanging fruit should be implemented first so that the results bring in the RoI much quicker and this provides fuel for further transformation.
Most SMEs due to fierce competition now realise that in order to survive and grow they need to transform their organisation. With easy access to technology like never before, the adoption has become easier for those who are willing to accept and embrace change at faster rate.
Are privacy and cyber security concerns regarding the cloud exaggerated?
With the growing connectivity of everything, come greater challenges in data protection and security. Privacy matters. Whether it’s a person or an organisation, each has its own right to privacy of his or her own data. DX is everywhere. At the same time organisations still suffer from security attacks and data breaches. While cyber physical systems in digital transformation provide opportunities for enhanced productivity and improved decision-making, they also increase potential vulnerabilities. In 2016 a large scale Distributed Denial of Service (DDoS) attack brought down much of America’s Internet. The main cause of outage was the Mirai Botnet, which unlike other botnets, who run on computers, was typically made of Internet of Things devices. Because it had many Internet devices to choose from, attack from Mirai was much bigger in scale.
Nowadays it is impossible to understand DX of organisations without cloud computing. Cloud services provide a simple and economical way of storing and retrieving data. Cloud services must comply with cyber security standards that guarantee the integrity of data of the users or companies. However, as there have been cyber-attacks, there have been data breaches also. According to 2017 Cost of Data Breach Study (Ponemon Institute) the average cost of data breach is $3.62 mn. The average cost of each lost or stolen record containing sensitive and confidential information is $141. As more and more data is stored in the cloud, the cyber attackers will start eyeing the cloud. The future of cyber security is in the cloud. Predictive security in the cloud will be able to identify attacks, which other end point security products often miss. It gives the ability to hunt threats before the attacker begins to hunt for the data.
Amit Bakhle has 28+ years of experience in various cable manufacturing companies in India and Singapore at Plant Head/General Manager levels. He has overseen manufacturing of high, medium and low voltage power cables, control cables, coaxial cables, instrumentation cables, marine cables, shipboard cables, fire survival cables, fire resistant cables, heat tracer cables, aerospace cables, specialty cables, jelly filled telephone cables, fibre optic cables, electro-optical cables, submarine cables, etc. Amit has actively carried out projects for automation and digitalisation in Singapore and is currently working with some startups as Manufacturing Domain Expert for Digital Transformation, consultant to some cable businesses and working on his own startup.