Digital Disruption – Capitalizing on 4th Industrial Revolution Fuelled by Digital Technologies

Digital transformation can unlock opportunities worth US$100-trillion for businesses; however, companies need to re-imagine their strategies for the Fourth Industrial Revolution

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Digital technologies have unleashed what is being called the Fourth Industrial Revolution. A combination of technological advancements is transforming consumer lives, creating value for business, and unlocking broader societal benefits at an unprecedented scale. The potential value at stake is estimated at a massive US$100 trillion over the next 10 years. In India alone, digitization can lead to benefits valued at more than US$5 trillion.

Fourth Industrial Revolution – combinatorial impact
The current phase of technological evolution is particularly exciting as concurrent waves of innovation are peaking simultaneously, adding up to the biggest change since the dawn of the information age.

In the current phase, the maturity peaks of Big Data analytics, artificial intelligence, and the Internet of Things are coming together to bring about a “combinatorial” effect—the capability of technologies working in tandem far exceed their capabilities when deployed separately.

Falling costs of advanced technologies
Many technological solutions today are nearing mass affordability. Costs have fallen sharply for devices such as drones and solar power generation. This plays a major role in accelerating innovation, making technology accessible, and forging a more connected world.

The fact that there are now eight billion devices connected to the Internet enables economies of scale to further reduce costs. For instance, the affordability of drones is allowing a range of applications—from monitoring at digital manufacturing plants to dispensing fertilizers in fields.

Disruption in the marketplace
Digital disruption has changed the definition of competition—it is no longer limited to players of a particular industry. In the Indian context, for instance, the opportunity created by the Smart Cities initiative has players from multiple industries vying for a share of the pie. These include government agencies, auto manufacturers, retail and insurance players, among others. Digital has redrawn the boundaries of the competition landscape, and businesses need to take a relook at their strategies and operations to stay ahead.

Responding to digital
To start the digital transformation journey, organizations need to move from thinking “do something digital” to “what can I do in digital in my industry to unlock value.” They need to focus on three aspects—identifying source of change, strategizing to respond to the digital opportunity, and understanding the cost of inaction.

Source of change
Changes in customer preference: If the Internet is being used to compare hotels, then it will also be used for doctor feedback on peer platforms.

Changes in technology: AI can automate previously human tasks and Accenture is using it to transform the project management of outsourced services.

Changes in business imperatives: Marriott India is facing competition both from global disruptors such as AirBnb as well as local avatars such as SaffronStays that currently has more than 800 verified homestays across India listed on its platform.

Response to change
Traditional business strategies of cost leadership, differentiation and focus now require digital parallels.

Digital customer: Use of digital means to change the customer experience like Proctor & Gamble does to increase sampling through its Rewardme website.

Digital enterprise: Use of Industry 4.0 and other IT enablers to transform the organization like Caterpillar does through connected equipment in its Minestar endeavour.

Digital business model: Leveraging disruptions that change the nature of business. While Uber’s growth and Xerox’s demise are now well documented, equally revolutionary is Michelin’s attempt to sell tires as a “per mile service.”

Cost of change
There is a cost of inaction that businesses need to consider. And the cost can be quantified. Accenture’s research estimates that for a leading Indian life sciences player the cost of inaction can range from -10 percent to +30 percent of revenues, while for a leading Indian auto organization it could be from -30 percent to +50 percent.

Digitizing value chain
Accenture Technology Vision 2017 says digital disruption has a new direction—companies are now using technology to disrupt themselves. The benefits of digital transformation span beyond the value chain to all enterprise areas and Accenture research has estimated the impact.

HR: Virtual collaboration and talent portals can reduce hiring costs by approximately 10 percent.

Finance: Cloud-based accounting systems and AI-driven automation can reduce costs by approximately 40 percent.

IT: Cloud computing can reduce IT system costs by 25-50 percent.

Supply chain: Autonomous transport and sensors for monitoring supply chains can cut costs by 50 percent.

R&D: Crowdsourcing and AI can improve productivity by 20-40 percent.

These numbers may vary across local and organizational contexts, but the salient point is that the impact is now measurable and can be budgeted for.

Realizing digital value through an integrated approach
Digital is not just reshaping industries by disrupting existing business and operating models, but also displaying a profound impact on the wider society, presenting a series of opportunities and challenges for businesses. Businesses need to follow an integrated approach that takes into consideration three impact areas.

Digital customers
Companies need to constantly reinvent their offerings to keep up with the rapidly evolving expectations of digital customers.

Products and services to experiences: Companies need to go beyond offering products and services to focus on delivering the most compelling experiences. ShopSense in India offers product-as-an-experience by installing large touchscreens connected with the store’s inventory to transform its customers’ buying experience.

Hyper-personalization: Customers expect and value personalized interactions at all points of their journey, and digital technology is enabling companies to deliver personalization economically and at scale. L’Oreal’s new Makeup Genius mobile application allows users to virtually try on a wide range of cosmetics on their own photographs.

Ownership to access: Enabled by digital platforms, customers are substituting ownership of goods with access-based models. This trend has accelerated from taxi services of Uber and Ola to truck rentals through new platforms such as Rivigo.

Digital business
Organizations need to take into account two new business realities.

Digital partnership models: Organizations do not need to build every capability within themselves but can partner with others. The recent strategic tie-up between Reliance Jio Infocomm and cab-hailing platform Uber enables each to ride the other’s user base by merging the needs of connectivity and mobility to offer a seamless customer experience.

Peer evaluation: Organizations are being evaluated by users and employees more than ever before. If TripAdvisor ratings determine the success of a hospitality player, JobBuzz (Times Jobs) has provided a platform for employer feedback and already has 80,000 reviews covering more than 2,000 companies in its beta launch stage.

Societal impact
Digital transformation is generating a debate among policy makers, economists, and industry leaders about its societal impact on three key areas.

Employment: Digitization can be a net job creator in some industries and a destructor in others. So, there is a need to evaluate and up-skill employees to manage employment rates.

Sustainability: Digital and its power to drive value creation can decouple economic growth from an increase in emissions and optimize use of scarce resources.

Trust: Studies suggest that trust in technology-based sectors has declined—there were more than 10,000 cases of cybercrime in India in 2016. India is ranked third after the United States and Japan among the countries most affected by online banking malware.

Digital transformation has the potential to unlock value at an unprecedented scale and adaptive organizations that understand, embrace, and prepare for this change can gain significant business value as part of this transformation. However, for transformations of this scale, all stakeholders—customer, business and society—need to work together.

Sanjay Dawar and Peter Lacy, Accenture.


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