Digitisation: revolution or snake oil?

There's no shortage of catchy words and trends in the technology industry, often to the chagrin of users and anyone signing cheques

There's no shortage of catchy words and trends in the technology industry, often to the chagrin of users and anyone signing cheques. If everything came in a box and with a manual, decisions over the next important step into the future would be simpler. But some concepts are too broad for such comfortable definitions, which obviously make people uncomfortable. Is what lies before them the future or a clever turn of phrase to squeeze more capital out of them?

At the moment, no concept evokes that feeling more than digitisation. The word finds its root in the mid-14th century and was upgraded to a computing term around 1945. Since then, it has become synonymous with the technology age. Call something 'digital' and we all know what it means.

Or do we? Modern companies are under pressure to transform around digitisation, a concept in the spirit of the first paragraph that can equally spark revolutions and punt snakeoil. Just what is digitisation and what are its implications?

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What's in a name?

A roundtable discussion on the topic could only start with nailing down the definition. But even that's problematic, as Alison Jacobson, MD of Strategy & Digital Advisory at Britehouse, notes: "Everyone comes at it from a different point of view. What I call it today might very well change tomorrow. We have a sense of it, but all we can really say is it's about transforming data into value."

Several attendees prefer to define digitisation as a force that enables customers and prompts businesses to think in new ways. Mention of disruption often comes up, but soon director of Growth Consulting at Frost & Sullivan, Alistair Petersen, lays out the concepts in a brass tacks fashion: "Digitisation is when an entire product or process is made digital. Then there is digitalisation, which uses only part of the process to transform, taking out people or other bottlenecks that can impact the efficiency of the process. Those two sit side by side and are applied in different ways."

One thought has consensus: digitisation is inevitable. In fact, unless your office still uses pneumatic tubes, typewriters and the abacus, your business is already in the throes of digitisation.

The Kodak moment

Thus the conversation quickly moves onto the next step: what is its impact?

"I'd rather focus on the opportunities that are leveraging digitisation offers," says Suren Govender, MD of Accenture Analytics South Africa. "This opportunity is disruption both from an industry perspective and how we view the services and products with which we traditionally face the market. There is a bleeding of capability starting to happen ? banks becoming telcos, telcos becoming IT companies and so on. What are they doing to create disruption rather than be disrupted?"

This opportunity is disruption both from an industry perspective and how we view the services and products with which we traditionally face the market.

- Suren Govender, Accenture Analytics South Africa

This disruption is termed the Kodak moment. It refers to the mid-'70s, when the company once synonymous with photography discovered digital photography. But instead of capitalising on its find, the concept was shelved. Fast forward 30 years, and Kodak was being destroyed by that very technology. The lesson: complacency has always been poisonous, but in the digital world, it's even more dangerous. South African companies are not immune, says Integr8 joint-CEO Robert Sussman: "Out of the digitisation world, new businesses are going to be born. Those will apply pressure to our businesses. The real question is: are some of the companies in South Africa going to be able to compete on a global level? Will they become the Kodaks or the Googles of the world?"

 

Indeed, South Africa may be responding very poorly to the challenge of digitisation. This is the feeling of several attendees, but none more so that Kim Andersen, Account CTO at T-Systems, who laments the habit of local companies choosing to protect their fiefdoms at the expense of progress.

"South Africa has a certain way of operating and one of them is to protect jobs. People hang onto their jobs in a way I haven't seen anywhere else. They will justify their existence to the point of complete resistance to change, because they may not have a job if they have to leave this job. I've seen it across the board. Change does happen, but at a pace that I cannot even tell you how slow it is."

This sparks a debate around such protectionism being a global trend. Acceleration's MD for Middle East & Africa, Richard Mullins, says that of the top 100 companies in the US, only a quarter have active digital transformation programmes in place: "It's a global perspective. The speed of change is going to be absolutely incremental and will multiply. The fear factor will multiply."

"The thing is that SA has to understand that the traditional way of protecting jobs is on its way out," says Kevin Attard, country manager of Oracle South Africa. He cites the example of British retailer Tesco. It tried to enter the South Korean market, but found stipulations around jobs strained its traditional store operations. So the company invested in virtual booths at subways that allowed consumers to order products and have them delivered later. Today, Tesco, through its entity Homeplus, is the second largest retailer in the country.

It's all business

Then how does a company embrace digitisation? It's the million-dollar question yet not an easy one to answer. The first step is to accept that this is happening: digitisation is inevitable. The second is to have a leadership that understands this and is willing to take the steps towards transformation.

 

"A holistic shift is a challenge for the business," says Mullins. "Your systems and everything you built over time ? it's very difficult to shift that. So you do it through innovation and disrupting your industry. That takes a pretty fearless leader."

Leadership is key, because digitisation is not an isolated strategy. It's an uncomfortable proposition for companies: they cannot be expected to rip and replace it all, yet at the same time, they have to be prepared to shift many of their eggs into a new basket. This can limit thinking around the challenge.

"My experience has been that companies think about it in segmented ways," says Shyam Ranchod, associate director, Deloitte Digital. "So either a mobile strategy, a data strategy or a website strategy ? some channel strategy. In fact, the real opportunity and threat is at the core corporate level, where a CEO has to give the mandate. Not many businesses in SA outside of the financial services sector are thinking about it like this."

Many companies also make the classic mistake of placing the cart in front of the horse and defining digital as the leading strategy. Says Jacobson: "It's not enough to have a digital strategy ? that's like having an electricity strategy. You need to have a business strategy and in that be digitally fluent." She laments the problem of segmented approaches: "What we see often is that people come up with channel strategies. But it's not holistic or systemic. That's not going to cut it: the whole business needs to be re-engineered. Not one line, one channel or one mobile app."

That's easier said than done. As mentioned, the luxury of starting from scratch does not exist and talk of wholesale change can instead encourage fear of change. Clearly, digitisation, for all of its omnipotent qualities, still needs to be engaged in iterations. The trick, says Govender, is to consider where you want to be tomorrow.

"Where it starts is analysing what it is you do to serve the market. So if you are a bank, will you remain in a bank and provide traditional banking products? Will they still be relevant in ten years' time? That should start guiding you, because that is the start of the disruption. You must consider what the new or redefined services you will offer are, translate that back into the business and how it impacts the daily tasks. Will digital take over certain roles? Why would it? Is it more efficient? Is it a cost driver? That starts driving the strategy. Digital for the sake of digital goes wrong all the time. It starts with your future relevance in the market."

Shifting gears

Yet again, though, that's easier said than done. Bold leadership and a good strategy can have every intention of shifting mountains, but good luck if you forgot the earth mover at home.

Are some of the companies in South Africa going to be able to compete on a global level? Will they become the Kodaks or the Googles of the world?

- Robert Sussman, Integr8

Paul Opie, Africa Field marketing manager at Gemalto, notes that the ability to shift has a lot to do with the size of an organisation: "A smaller organisation can look at more fringe development and if something takes off, it's easier to integrate the solution. But a massive company with development on the fringe that all of a sudden comes up with a great idea ? now to bring that technology back into the main core business systems is a big issue."

One can acquire that change, says Petersen: "Take Old Mutual. It's a behemoth financial services organisation. But the way the startup 22-7 changed the dialogue it was having with its customers gave Old Mutual a different spin on things. It allowed it to take a different customer journey. Instead of trying to build change in its current organisation, it acquired the capability and capacity."

 

That's not enough, though, adds Sussman: the all-digital bank 2020 failed because its timing was wrong. He goes back to the Kodak example. Although the company invented digital photography, it had nowhere to go as nobody had home PCs, let alone commercial digital storage such as flash memory cards.

So change for the sake of survival is not the right approach. But neither is being too cautious.

 "I was having a discussion with the CEO of a bank and he made a profound realisation that he's having his Kodak moment," says Govender. "He sees cryptocurrencies as the next big disruptor, not only in banking but literally how the world does payments. He has a task team exploring it, figuring how to merge it with their traditional business because that's what they are still dependent on. If you don't have a toe in the water right now, then nobody knows if you are one of those guys to follow."

People hang onto their jobs in a way I haven't seen anywhere else. They will justify their existence to the point of complete resistance of change.

- Kim Andersen, T-Systems

Oracle SA's Attard adds that wringing hands over funding or scale is not going to make the issue go away: "My grandmother always told me: be afraid of the devil you don't know, not the devil you know. The disruptor is the devil you don't know. But if you keep postponing it, you will move from the driving seat, to the passenger seat, to the trunk. Then you're out of the business."

But larger companies have an advantage in this sea change, says Gemalto's Opie: "You still need physical infrastructure, be it electricity, skills…Google itself has massive datacentres that create massive costs. So a big company sometimes has the benefit of an ecosystem of infrastructure to launch something like that. A startup needs capital investment to do a lot of it. So digitisation is fantastic, but you need some form of physical infrastructure to back it up."

 

There remain two players in this saga: the customer and the employee. Customers often attract the most attention in the digitisation debate, as they are effectively leading it through their actions. Attard says that while the customer was always called the king, now they truly are.

But true transformation has to be internal and that requires bringing employees on board.

"The employee has to also be empowered by the same digital advances," says T-Systems' Andersen. "It takes both sides of the coin to achieve digitisation."

"Digitisation is an opportunity for businesses in South Africa to reimagine themselves in three ways: dematerialise the way they do business, demonetise the way they do business, and democratise the way they do business," says Deloitte Digital's Ranchod. "That's both from how they engage and treat their customers, but also in the way they treat their employees. This is where it becomes relevant to SA. In our context, digitisation for the local market will have the greatest impact if it impacts the employee. Customers are important, but given levels of unemployment and strong unions, digital solutions for business in SA allow them to take those three concepts and make it their own."

He adds a warning for local companies: "In South Africa's context, not enough businesses are taking it seriously."