Digital Transformation Accelerated – Trends & Implications

Read Time:10 Minute

Digital Transformation is viewed differently by technologists and economists. For a technologist, it means:
• Connectivity
• Computational power
• Technology modularisation
• Annotated data
• Algorithm advance, and
• Visualisation

For an economist, it means lower cost to make previously unimaginable steps possible. In addition to this, personal behaviours have changed significantly because of digital. Many of them have become irreversible.

What Are the Challenges?
• Digital adoption across sectors varies significantly. It is much low in public sectors.
• Only 16% of the digital transformation has led to value. Some of the reasons for this are:

Most projects are done on a pilot basis and not scaled thereafter.

Cost savings from Cloud are not very clear.

Digital needs a different set of talent. Digital natives must gel with others in the organisation.

How Do We Derive Value from Digital Transformation?
This needs to be addressed on three levels by any business attempting digital transformation.
• How can we transform the core?
• How can we build new businesses?
• How do we modernise technology?

Even before we attempt digitisation, the application areas must be stacked up based on business value. For example, for a manufacturing firm, one can think of using digital skills for capacity forecasting, forecasting of cost function, inventory forecasting and so on. Then the areas must be prioritised. The agile model, which talks about co-locations and creating functional teams, has to be used. Agile teams must be fully empowered to make decisions. These teams must have top-notch and differentiated talents.

Key shifts in successful implementation cases are:
• Driving business improvement
• Building capability internally rather than outsourcing
• Realising business opportunities; having pragmatic implementation.

Of the new businesses built by corporates, only 16% have been blockbuster successes. There are various reasons for failure, like having no unfair advantage, misaligned expectations, revenge of mothership, cultural contamination and so on.

Some digital success stories from legacy businesses include SBI Yono; Service Mandi of Ashok Leland and Apollo’s 24 x 7 omnichannel ecosystem focussed on healthcare.

The Big Learnings Are:
1) Have big aspirations.
2) Put the user at the centre.
3) Adopt the Agile approach where Business and Technology teams have to work hand-in-hand.
4) Do not compromise on talent.
5) Have partnerships for enhancing value and ensuring faster time to market.
6) Go for cost-effective (frugal) customer acquisition and at scale. n

Raghavan: Your initial thoughts on digital transformation?

Ravi: For supply chain industry, the head room is huge for digital transformation. We are at very early stages of putting digitally enabled solutions. We need to transform this into digitally-led solutions. On one side, it is happening on the infrastructure front. On the other, we need to give power not only to internal users but external customers as well. If we combine the tools available with tools like social media, it’s going to be very powerful. The key to success is to believe that technology is the spine of the business. Business transformation happens around technology.

Anantha: We first heard the word digital in 2014 or 15. We had IT for 30-40 years. At that time, we heard of digital bytes. Again, we heard of digital from 2014 because a bunch of new technologies appeared on the horizon. We had faster network, computing became more powerful, storage became more available and Cloud became an option.

All this led to delivering of a reliable and consistent performance that businesses could bank on while changing business models using digital technology. A year into the pandemic, all of us have seen the power of digital, not just limited to virtual meetings. Businesses have realised that hundreds of things that they thought could be done only face-to-face could now be done through digital. You can buy, sell, manufacture or pay through digital. Businesses and Technology must come together to make it a success.

A year into the pandemic, all of us have seen the power of digital, not just limited to virtual meetings… ~ Anantha Sayana

Raghavan: Do you think that without digital transformation organisations can survive today? How central is this topic for organisation’s competitiveness?

Anantha: In a large construction company like L&T, how do projects succeed? Projects have to be delivered on time and within budget. That is success. Doing a very complex project at a certain level and scale gives us competitive advantage.

Digital transformation in other industries has happened through interaction with customers like in travel, banking and insurance by giving alert to customers and improving touch points with customers. These are all B2C and we have had thousands of success stories in B2C.

At L&T, we looked at digital to improve our operational efficiency, right from the start of a project like studying the geography of the land followed by engineering, procurement, execution of the project, monitoring, improving quality and safety and doing O & M after completion of the project. In every one of these areas, we could use digital.

We could use LiDAR, geo-spatial survey, satellite imaging and drones to get data about the terrain and complete survey in less than one third of the time and 10 times more accurate than conventional methods. That enables us to do engineering better. In engineering, we use 3D modelling and we are able to see virtually the construction even before the first brick is put in place. You can walk through the building virtually, detect problems and rectify it then and there.
All these help us deliver a project on time. Digital technology is not an add-on. If properly implemented, it can impact every function of the way we do business. At L&T, we started digital transformation in 2016. Now we have got every project site of L&T covered through digital solutions. We have over 40 to 50 solutions and are used by thousands of our employees. So digital transformation is core and it affects everything we do.

Raghavan: What does digital mean in a B2B context?

Ravi: At TVS, we have taken it as the core of the business. For instance, as a partner with L&T, I need to know how they move from point A to point B. It’s about getting the right material, in the right time, giving that visibility to the customer. If my system can correctly pick up this information, I can plan for the number of vehicles and right size of vehicles based on the equipment size.

I can provide information to L&T about the vehicles moving to their sites in real time. They can view these in their system. So digital transformation gives an end-to-end path. Competitors who don’t have the baggage of legacy, challenge you. If you don’t invest in technology, you will become outdated and lose out on competition. Organisations have to look at their processes and see what can or cannot be digitised. It requires change management.

Our customers are consumer product companies. Real time information about our logistics helps them immensely. We need to look at our business and see which problems can be solved using technology. That is where the buy-in becomes stronger. ~ Ravi Viswanathan

Raghavan: How did you evangelise the concept of digitisation in your organisation? How did you rally support?

Anantha: Software like ERP focussed on the office: Balance Sheet, Trial Balance, P&L Account, Purchase Order, Sales Order and so on. They automated office functions. When we started digital transformation in 2016, our focus was project sites and not office.

My team and I travelled extensively to the sites. Every solution originated from discussions in the project site. We used technology by deploying highly advanced equipment. We also used IoT. Without manual intervention, we could get enormous of amount of information and visibility. Problems could be solved by discussions and collaboration.

Digital was a passion for our CEO and MD; in every forum, he mentioned that digital is our core. We also sent the message that digital is not just for experimentation and that people will have to master technology.

Ravi: It is very important that the messaging is constant and continuous. It has to go down to the last person in the chain, which in logistics is, the picker and packer. They need to understand that this is the new way to do things and that they cannot go back to old ways. Communication with customers is also critical. It has to be followed up with execution. Youngsters have a real-time mindset and are tech-savvy. In digital, work gets captured at the point where it is done. Once a consignment is received, we label it. Once it is labelled, it can be tracked on a real-time basis. You may use a barcode or QR code scanner. We have used vision technology using AI in our warehouses and the returns from investments are almost immediate.

Our customers are consumer product companies. Real time information about our logistics helps them immensely. We need to look at our business and see which problems can be solved using technology. That is where the buy-in becomes stronger.

Raghavan: What are the challenges that business leaders driving digitisation should take care of?

Anantha: The first digital solution that you’re going to roll out will be the toughest. Don’t keep it on the table as blue print for a long time, but go and implement, so people can see and experience. Be alive to maturing and agile solutions. Tune them as you go along, making use of feedback. Digital implementing teams must have empathy.

Digital solutions must make the work of people easier, faster and more efficient. The solutions have to be user-friendly. There must be focus on UI (User Interface) and UX (User Experience).

Ravi: The trick is to get early wins and buy-in from the people who are going to use it. If they see the benefits of technology, 50% of our roadblock is gone. The biggest challenge is the mindset of the people who think, “How is it different from what we are doing?” They will say that it cannot work in their area. We can’t push it on them either. We need to cull out the commonalities across the organisation and build a platform. Only then, we can scale it. It is easier to get customers on a customised platform. In a B2B, the buy-in of a supplier or customer is very critical.

The first digital solution that you’re going to roll out will be the toughest. Don’t keep it on the table as blue print for a long time, but go and implement, so people can see and experience. Be alive to maturing and agile solutions. ~ Anantha Sayana

Raghavan: How do you attract and retain digital talent? What are the challenges?

Anantha: In L&T group, we have many technology companies. For us, getting the work done using one of these companies is not very difficult. I have a great relationship with the technology companies in the group. I feel that very often, we are looking for more talent than what the job calls for. I may know multiple machine learning techniques and algorithms but finally what matters is the one that I am going to use. If you are clear about the problem that you are going to solve and the value that you are going to provide, you just need to fit that with the right technology and skills. Another motivating factor for our employees is that they are able to solve real life problems within the group companies. They are able to see what impact their solutions make.

We created a bunch of films on safety using virtual reality. This gave our workers a visible and immersive experience. We have distributed VR glasses to all sites and more than 10000 workers have seen the two minute films in virtual reality, delivered in their local language. The developers get immense satisfaction at the results.

Ravi: There is so much talent in our country. We are blessed to be in a country which got onto the digital bandwagon quietly early. At TVS, we have global operations. We have created a very strong back office. 80% of our global operations get executed from India. We have centres in Madurai and Coimbatore apart from Chennai and Bangalore. The nerve centre is Madurai.

I did Cobol programming and managed with it for 15 years. Today, you can’t be wedded to a technology for more than two years. You need to get the talent which is able to very quickly assimilate new developments and apply them as required. We also have a strong brand, so we are able to attract and retain talent. People understand the value systems of TVS group.

India’s Turning Point – Challenges & Opportunities

Read Time:9 Minute

I am happy to share the outcome of the year-long research done by McKinsey Global Institute. The findings are important in the context of Covid-19’s effect on health and economy. Though people have not returned to work at the levels that existed before Covid, it has been steadily recovering.

Covid and lockdowns have taken a big toll on our economy. Though we are bouncing back, we have structural challenges which cannot be ignored. Exports are slowly recovering but it has yet to show the buoyancy that it needs. Capex announcements are one fifth of the normal level, indicating weakness in the Capex recovery. Job creation is a challenge. The pace of growth of bank credits is a cause for concern. The report looks at not just the pandemic year but the next decade. The call to action is quite urgent.

Action Plan for the Next Decade
By 2030, India must create 90 Million jobs, which is three times the non-farm jobs created in FY13-19. For this to happen, GDP growth should be twice that of pre-Covid rate of 4.2%. Our research focused on four areas:

• Building frontier businesses that generate higher wages for workers; there are 43 of them.

• Climbing the ladder of scale. We need 1000 more mid-size companies to become large companies; 10,000 small companies must become medium size companies. The larger the companies grow, the more productive they will be.

• We need to raise $2.4 Trillion capital, which is three times the pre-pandemic level, at 3.5% lower cost. The cost of capital for investors must come down.

• Broad based reforms need to be implemented at a certain speed and urgency over the next 12 to 18 months.
Frontier Businesses

• We must create global hubs serving India and the world

• We must unlock efficiency engines for India’s competitiveness

• We must find new ways of working and serving.

India’s long-term savings must flow into long-term capital market products like insurance and pension funds. Liberalisation of insurance announced in the budget is one of the reforms that could enable this. The cost of capital also must come down. An average commercial borrower in India buys credit at 5% points more than the average commercial borrower in other Asian countries. The cost of bad loans is passed on to the borrower. The privatisation of banking can bring in more efficiency and, in turn, benefit the borrower.

On the reforms front, some progress has been made in intent and bold announcements. The Production Linked Incentive (PLI) for manufacturing is a good example. In agriculture too, we are seeing reforms. We need a whole range of reforms in land and labour market and power distribution to reduce tariff cost. Moreover, ease of doing business needs improvement. Reforms are needed in the financial sector too.

How Can We Make This Happen?
• We need two engines of reforms: 60% State-led and 40% Centre-led.
• 50% reforms need a policy or law that can be speedily implemented.
• There has to be an effective implementation architecture with a consultative process involving all stakeholders, rigorous PRAGATI style reviews for the next two years, and CM-led war rooms.

Naveen: Can you share your thoughts on our turning point in the year gone by, from your and your organisation’s perspective?

Preetha: I am sad at the number of people we have lost and the battles we have fought. It was a tough year. There are so many lessons we’ve learnt. I am excited about the prospects of the future.

We had the courage to announce a lockdown of this size. It was a question of lives versus livelihood. Suddenly we were thrown into a digital ecosystem. ~ Dr. Preetha Reddy

We are in a position to give vaccines to the world. We have used it for our countrymen and we have already given millions of doses to other countries. Vaccination at a global scale has not happened like the way it has happened in India. We had the courage to announce a lockdown of this size. It was a question of lives versus livelihood. Suddenly we were thrown into a digital ecosystem. We have come through the challenge with resilience. India is a country that uses crisis as a spring board.

We have the largest English-speaking workforce in the world, which is a big advantage. We have 65% of our population as youth, and it’s a powerful driver to take us forward. Using healthcare opportunities, we can keep our ageing population comfortable at their homes. Keeping people out of hospitals is a big opportunity for the healthcare sector.
Josh: The courage we have seen from the government, the frontline workers and factory workers has been incredible. India has already taken off from the springboard. Indian manufacturing will not be the same again for three reasons:

• Because of travel restrictions, we had to lean more on local expertise.
• Industry 4.0 and digitisation were on the back burner, but these will be in the forefront this year.
• Social distancing has led to new ways of conducting business. These will power India into a global manufacturing powerhouse and become a part of global supply chains.

Rakesh: I was in the US until October and was locked up in my place. In the US, Covid infections—after coming down in September—continued to rise; while in India, it is steadily coming down and I hope this trend will continue. We need to understand how the pandemic has unfolded in different places around the world. There is no explanation as to why the pandemic has been voracious in Europe, the US and North America, while it has been less virulent in South Asia and Africa and much less in East Asia. There is no way to figure it out if health systems are responsible for this difference.

For each one of us who have been privileged to take care of us staying in and working from home, there are 10 others who didn’t have that much advantage. I have been on the Board of Companies in India—Nestle and Kirloskar. In both the companies, it’s very impressive how they managed to come back to production very quickly despite the lockdown, and implement safe work practices.

There are many people we cannot avoid working together and having face-to-face interactions—in factories, warehouses, logistic companies, kitchens, restaurants and so on. These are the people who risk themselves and make it possible for others to work from home. We need to give our thoughts to these people, to their courage and to their continued working in a pretty efficient fashion.

Coming to the budget and the economy, given the adverse situation, I must say that this has been a very innovative budget. It has turned around the mood in the economy. Among the welcome points is the focus on capital investments, particularly infrastructure expenditure. Of course, the devil is in the details and let us hope for the best.

Atmanirbhar is a good trigger point. We must focus on design. Whatever we design, we must be able to produce in India. ~ Josh Foulger

I would like to highlight a few issues:
• The tax-to-GDP ratio has remained rock solid at around 10% over several budgets, which is baffling and indicates a structural issue.
• Lack of adequate generation of non-farm employment has been a matter of concern over the past many budgets. No country, especially in Asia, has grown without high manufacturing and employment growth.
• Manufacturing growth is also linked to export growth. From 2002 to 2012, we had higher manufacturing export growth than China. Since then, it is almost zero growth in manufacturing exports.
• If we keep our exchange rate competitive, we may not need artificial support like PLI.

Naveen: What is your view on FDI in India and how can we spur manufacturing growth?

Josh: FDI must translate to gainful employment and employment for women. Atmanirbhar is a good trigger point. We must focus on design. Whatever we design, we must be able to produce in India.

The next important thing is the supply chain. India has the breadth in supply chain. Very few countries have India’s capability in this sphere. Right from fundamental research to true productization, hardware design, software design, mechanical design and integration, India has strength.

We need to generate big companies. In the last 15 years, no new big companies have come up. ~ Rakesh Mohan

In machines and instrumentation areas, FDI has always been poor and we majorly import these. We take pride in getting imported machines. This budget talks about incentivising machine building in the country. PLI is definitely a right kind of boost. Automobile industry is slowly becoming an ICT industry. If we get the right kind of FDI and we are able to execute it, then India can achieve gainful job-led growth.

Preetha: We can provide skilling services in Healthcare sector, which can lead to gainful employment. We can export these services. Also, Ayushman Bharat will generate 5 million jobs for the country.

Anu: There is a feel good factor now, perhaps because we are coming out of the pandemic and bouncing back, and partly because of the budget announcements. There is no room for complacency, and reforms must stay the course.
In a global research study done by us, we noted that remote working, digitisation and automation to manage workforce, health and safety. All these will accelerate in the long-term and there will be a big churn of jobs. Many more workers will be displaced and they have to find new occupations. We need to simplify skilling and reskilling.

We have seen that 50% of the reforms are made at the stroke of a pen. They must translate to reality. The policies have to be framed in a business-friendly manner. State governments also have a big role to play in the reform process.

Naveen: Any advice for the corporate leaders?

Rakesh: We need to generate big companies. In the last 15 years, no new big companies have come up. I feel that the money reserved for PLI can be spent for infrastructure development. Since independence, we have been lacking in health and education sectors. We need to give much more attention to coordinated programs in these areas. Companies must focus on R&D.

Preetha: We are getting a lot of support and learnings from our friends in the manufacturing sector. I find that many of the young graduates from business schools come with a menu on their hand and that things have to be as per that menu. We need to learn from the opportunities that stare us in the face. Who would have thought of the opportunities that exist now in digitisation? Let not conventional wisdom cloud the trigger of innovation.

Josh: This is going to be India’s decade. $5 Trillion is a milestone around the corner. $10 Trillion is on our way. Manufacturing will be a big part of that. Leaders in the industry must embrace the Atmanirbhar concept and take it forward.

Anu: We are on one more major inflection point in our growth and a much welcome one. During the worst days of the pandemic, we saw the spirit of innovation, can-do nature, agility and whatever-it-takes-to-make-it-happen approach in the leaders. We need that kind of a mindset. The worst thing that can happen is the feeling that we can go back to the pre-pandemic style of life. Things will not pan out like that. The spirit of openness and lifelong learning, not just for youngsters but for all is very important.