Businesses are sailing rapidly toward more automated operations. To better understand why, let's look at how some of today's most forward-thinking companies have met four of the most challenging headwinds.
All sectors have faced COVID-19, supply-chain nightmares, unprecedented worker shortages, rapid inflation, and the threat of recession. And some companies have had to contend with crosswinds particular to their sector,; for example, automakers have had to contend with the move to electric vehicles and self-driving capabilities, and retailers have been buffeted by the likes of online sellers Amazon, Alibaba, Rakuten, Taobao, and Flipkart.
To deal with it all, companies have had to adopt digital transformation to increase automation, efficiency, and resilience; get closer to achieving a state of intelligent automation; and take other steps. Here's how some are coping with four strong headwinds.
Supply chain
Over the past several decades, the West has experienced a marked deindustrialization as companies moved to lower-cost geographies, and many other regions have seen various manufacturing bases consolidate, decline, or disappear. As a result, companies around the world rely on manufacturers in places such as China, Taiwan, Korea, Thailand, Vietnam, and Mexico.
This has resulted in more extended and thinner supply chains. According to the US Department of Commerce's Semiconductor Supply Chain Request for Information, the "median inventory of semiconductor products highlighted by buyers has fallen from 40 days in 2019 to less than 5 days in 2021" and is even less in some sectors.
Any mishap, such as a ship stuck in the Suez Canal, can cause product and parts shortages that shut down factories and further destabilize supply chains.
Digitization activities within the supply chain have historically focused on end-to-end planning and warehouse management. Now, forward-thinking companies are pulling data from internal and external sources, revealing the source of issues or identifying trends via advanced analytics. These companies are using artificial intelligence (AI) and machine learning (ML) to forecast demand and performance parameters for precise planning and preparing for problems, even recommending corrective measures or initiating resolutions via automation.
All of this expedites cross-functional decision making and can offer a competitive edge in highly aggressive markets. But digital transformation can also be as simple as, say, increasing the reliability and performance of automated quality management processes across 200 production-line workstations.
Talent
The pandemic has given rise to what is referred to as the Great Resignation, a voluntary mass exodus of workers seeking better working conditions, pay, and benefits; improved work-life balance; and career advancement. Meanwhile, skilled workers are in short supply in many areas, including in cybersecurity.
Financial services provider Citi turned to innovation to solve a need for more skilled engineers in functional and performance testing. This is a scarce skill set, whose practitioners can command high salaries.
Augmenting the existing team is Citi's digital transformation project, called VPE, for Virtual Performance Engineer, which aims to bring applications to market more quickly. The VPE integrates AI, ML, and automation to address various tasks while human engineers focus on higher-level initiatives.
In many areas, removal of the mundane has contributed to improved satisfaction with the knock-on effect of improving skilled worker retention.
Fourth Industrial Revolution
Our third headwind is the fourth Industrial Revolution (4IR), which is succeeding the third IR that started in the 1950s and ushered in the digital age. The 4IR is building on the automation initiated by the 3IR, with 3D printing, AI, ML, robotics, biotech, and other advances.
Many larger industrial companies and nations have found that adapting to the 4IR is akin to turning an oil tanker against the current. Gone are the days when you designed and developed a product or service and then served it. The switch to electric, self-driving vehicles is a clear example of industry veterans getting caught short in responding to consumer demand. The early adopters who work and operate like technology startups, such as Tesla, Rivian, Lucid, NIO, and XPeng, are recalibrating what a car is in the customer's mind. This is in turn pushing governments to adapt and change as demand grows for a patchy and often missing infrastructure.
4IR is evolving rapidly, rattling every sector in every country, and is driving changes in production, management, and governance.
Today's market consists of billions connected devices—the Internet of Things—and billions of mobile phones providing access to knowledge. AI and ML can touch every digital data point, analyze our every move and change, protect our current state, and predict our next.
Pioneers are working on the interdependency between the products we consume, the places we live, and us. The rules of business and the public sector are being rewritten nearly every day as a combination of technology advances, evolving customer expectations, process enhancements such as digitization, and new business models are forcing executives to rethink prior IT strategies.
Your digital transformation will not be single technology driven or delivered with a single IT project; you'll be looking at a broad set of technologies in interrelated initiatives aligned to key objectives.
Some of the disrupted will buy companies outright to find the best startup talent. Others will partner up to jump forward—think of combos that could arise such as Ford and Uber or GM and Amazon. More practically, those companies that pick or develop the right IT from the right partner will enhance their differentiation, growth and scale, profitability, risk mitigation, customer satisfaction, and speed to market.
Look at the government sector. Citizens have demanded more online interaction, driving government IT and service teams to re-evaluate system availability, proactivity versus reactivity, and the speed at which they respond, all of which is a challenge when you are working with a complex IT environment.
Derek Truesdell, CTO at Intact Technology, points to a major government agency where "a lack of observability allowed a high-profile outage to occur, impacting citizens." The resolution required a culture change and a shift from firefighting to proactive prevention. Executive sponsorship paved the way for a digital transformation initiative to drive change governance across the environment. Now, post-implementation, "the organization serves its internal and external customers better and more efficiently, improving customer satisfaction," Truesdell said.
ESG: Environmental, social, and governance
Our fourth headwind involves how an organization acts toward its employees, the marketplace, its communities, and the environment, factors that have become fundamental to business success. "Who Cares Wins," as the 2005 study that originated the term ESG was titled, has set the tone for how customers choose what to buy and select their business partners, employees for looking at where to work, and investors deciding where to put their money.
Today, requests for proposal almost always include an ESG element around sustainability and more often than not will be aligned with the United Nations' Sustainable Development Goals, a call to action to end poverty, protect the planet, and improve the lives and prospects of everyone, everywhere.
Digital transformation can help organization deliver on many ESG goals. Ultimately, ESG helps build an inclusive and diverse company that does business the right way.
Özgür Burak Akkol, president of MESS, the Turkish Employers Association of Metal Industries, recently stated, "Industry has been reshaped by digitalization and 4IR technologies, to improve efficiency, but also as a prerequisite to achieving sustainable development goals."
His organization has built the MESS Technology Center (MEXT) with use cases and scenarios, training and multidimensional experience areas covering services required for the digital transformation of an industrial company. MEXT's aim is to train 250,000 people in five years, preparing the workforce for the digital future with digital literacy and AI.
Akkol, in a piece for the World Economic Forum, explained, "It is important to establish a digital production infrastructure and a complementary working life that will support socio-economic development and include employees at every level of every organization."
Börje Ekholm, president and CEO of Ericsson, believes that information and communications technology can help other industrial sectors move towards the low-carbon economy. AI, IoT, and 5G can all be used to do more, and do it faster, according to Ekholm, to achieve even greater reductions in net carbon emissions. Applying digital technology in cross-sector collaboration will be a key enabler to meeting the challenge.
Micro Focus, TechBeacon's primary sponsor, recently undertook a DX initiative that reduced its carbon emissions by cutting energy consumption by 510kW, the equivalent of 42,500 12W LED light bulbs. Not only was this good for the environment and the company's ESG, but it also saved US$3M annually.
Digital transformation is a given
Two years into a pandemic, with many leaders considering that COVID-19 will be endemic, there have been many reasons for traditional large, slow-changing industries to accelerate their embrace of rapid digitalization of business models. IDC's Worldwide Digital Transformation Spending Guide predicts that spending on the digital transformation of business practices, products, and organizations will reach $2.8 trillion in 2025, more than double the amount allocated in 2020.
As you can see, despite the enormous challenges, technology has the potential to bring some fascinating and positive changes to your business.
Technology is changing how manufacturers and retailers can sell and deliver their products. Rather than focusing on marketing their products, manufacturers need to get better at real-time delivery, servicing, and distribution. We are entering a new world that is changing incredibly quickly, and organizations will need to keep up.
The rapidity of those changes, and the new normal in work environments and flexibility, has also broadened a number of risks, as highlighted by the World Economic Forum's Global Risks Report 2022, which reports a 358% increase in malware and 435% increase in ransomware attacks for 2020—a whole topic unto itself.
McKinsey states that "digital transformation demands fundamental change across every part of the company. The CEO is the only person who ... can accelerate both the pace of change and value captured by focusing their energies" in six areas: strategy, talent, agile, tech, data, and adoption of the new digital environment. The ultimate challenge is how to run and transform a business, often with deeply embedded legacy technology, from code to hardware.
Many different paths lead to digital transformation, and each organization's journey will be different. A company might introduce AI or cloud computing to enhance customer experience, redesign its supply chain to make better use of ML to improve merchandise allocation and inventory management, or try new ideas faster with up-to-the-minute data analytics.
In every case, starting the digital transformation journey requires a new mindset, to reimagine how you do things from the ground up.
Keep learning
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