The Fourth Industrial Revolution has already taken shape and quite steadily it is impacting each and every industry whether we like it or not. Most organizations are either experiencing or expect to experience some form of significant digital disruption within two years. Few are really prepared for it and lack an enterprise-wide strategy. Digital business is about digitizing the end-to-end processes that represent the organization’s value chain. Business models that historically made many companies successful are becoming the bane of their existence. Former strengths like size, structure and culture are fast becoming liabilities as established companies struggle for agility in the digital world. Once the gold standard for information, Encyclopedia Britannica announced an end to printed editions in 2012 after 244 years. In 2010, U.S. Internet ad revenue surpassed newspaper ad revenue 305 years after the first newspaper ad appeared.
Many companies are falling behind nimble new entrants that are setting—even leapfrogging—the pace of change, and are inherently structured to reap the benefits of digital success.
The good news is that all is not lost. There are significant opportunities for companies that embrace digital realities and use them to drive customer relevancy.
For most companies, digital transformation will require reorientation around an “outside-in” lens to deliver enduring customer relevance at scale. Companies should first consider the visible part of their business—everything that customers experience directly. With a clear picture of the customer journey, companies can then align the parts of the business that customers do not see—internal operations and technology infrastructure—because these elements make or break the customer experience.
Companies must understand customers to design delightful omni-channel experiences and services. Customer systems should be relevant, simple and elegant. This is just what digital pioneer Amazon has always prided itself on. Amazon wins with customers because it makes it easy for them to get exactly what they want hassle free, while continually raising the bar on the customer experience.
Companies must tune brand management and the operating model toward customer-centricity and agility while infusing analytics into the core culture. Business systems should be effective, efficient and deliver return on investment. Performance should be monitored and measured, with changes made as necessary.
Making a complete digital transformation means accelerating the effectiveness and efficiency of the current business, driving growth. Or it can be differentiating the business by launching new products or services that delight customers. The ultimate reward is breakthrough business performance.
The digital strategy needs to articulate how to truly support the business and enable it to achieve its strategic goals. One of the biggest challenges faced in response to digital disruption is a lack of vision and strategy. Central to the success of digital is ensuring that ownership of the strategy is both championed and understood at the highest level.
Digital transformation must start at the top of the organization and permeate through it —the entire C-suite must be committed and work in a highly collaborative manner toward shared goals. There is no prescriptive approach as the CEO, CIO, CMO, or ideally a combination of C-level executives, could lead the transformation depending on a company’s circumstances. In many organizations, digital expertise is held by a select few. Moving forward, it is imperative that digital knowledge goes beyond isolated pockets to become embedded throughout the organization. An essential part of digital transformation is to make structural changes that enable collaboration, not just in name only, but in practice. Companies can set digital key performance indicators for personnel in all areas of the organization—and reward high performers with incentives. Truly owning the mantle of the digital business means always being willing to think and work like the best of them. Throughout the digital transformation, companies should ask themselves, “What would Apple or Google do in this situation?” This entrepreneurial spirit can lead companies to exciting opportunities to innovate outside of their comfort zone— where the magic happens.
Digital gains are not necessarily immediate. Companies must be patient, pursuing digital transformation as part of a lasting vision for change, making long-term investments rather than focusing only on point solutions that promise an immediate payoff. Planning and creating a customer journey blueprint are essential to coordinate efforts around all three elements of the customer-relevant digital business.
The Fourth Industrial Revolution is no longer a ‘future trend’ – for many companies it is now at the heart of their strategic and research agenda. Companies are combining advanced connectivity and advanced automation, cloud computing, sensors and 3D printing, connected capability, computer-powered processes, intelligent algorithms and ‘internet of things’ (IoT) services to transform their businesses. Just over two-fifths of companies report that they believe their product development and engineering and their vertical value chains are already benefiting from an advanced level of digitisation and integration. Areas of focus include digitising and connecting functions such as digital order processes, customised product development and the automated transfer of product data to connected planning and manufacturing systems, and further on to integrated customer service. These are also the areas that they anticipate will also be furthest advanced in five years’ time. Advanced digitisation and integration of the horizontal value chain, with suppliers, customers and other valuechain partners, and digitisation of customer channels are progressing a little slower than with the vertical value chain. Big advances are expected in five years’ time but these are areas that companies believe will be more challenging than those closer to their core production activities.
On average, companies expect to reduce operational costs by 3.6% p.a., while increasing efficiency by 4.1% annually. High levels of cost reduction are expected in every industry sector. Some of these cost savings can be achieved by implementing smart manufacturing initiatives. For example, companies are moving to integrated planning & scheduling for manufacturing. Such systems combine data from within the enterprise – from sensors all the way through to ERP systems – with information from horizontal value chain partners, like inventory levels or changes in customer demand. Integrated shop floor planning improves asset utilisation and product throughput time. Another example is predictive maintenance of key assets, which uses predictive algorithms to optimise repair and maintenance schedules and to improve asset uptime.
As the Fourth Industrial Revolution develops, the traditional model of products pushed out to the market will fade and ‘customer pull’, with customers intimately involved in a more collaborative relationship with manufacturers, will be much more the norm. Digitization will greatly enrich the opportunities to retain and grow the customer relationship but it will also make the fight for the customer more intense. Digital integration with the customer and new technological opportunities to move production closer to the customer, for example with 3D printing, will enable greater individualisation and customisation of products. Most companies we spoke to are expecting to strengthen their digital offering to customers, either by digitising existing products or by developing new digital products. The opportunity is there not only to greatly increase the ability to respond flexibly and more rapidly to customer demands but also to anticipate demands, helping the customer move ahead in a range of predictive ways.
The Fourth Industrial Revolution has massive implications for the nature of how a company chooses to organise itself and its delivery model. Companies will need to make sure staff understand how the company is changing and how they can be a part of it. The biggest challenges centre around internal issues such as culture, organisation, leadership and skills rather than external issues such as whether the right standards, infrastructure and intellectual property protection are in place or whether concerns about data security or privacy concerns can be overcome. The absence of a digital culture and the right training was identified as a top challenge.
Lack of skills or competencies in the company’s workforce is also the biggest challenge when it comes to making use of data analytics. It’s not surprising, then, that increasing in-house data analytics technology and skill levels as the single biggest improvement route to boost data analytics capabilities.
Data is coming from multiple sources, in different formats, and there is a need to combine internal data with data from outside sources. Expert and effective data analytics is essential to using data to create value. And with so many points of entry, companies need to take a rigorous, proactive approach to data security and related issues and work to build digital trust. To succeed, companies will need to use data in predictive, forward-looking ways that make sense of market developments and customer behaviour to improve products and develop new products and services.
Many industrial capabilities have already begun digitising their business, but often the process has started in organisational silos, rather than through a holistic approach. Take the time to evaluate your maturity level in all areas so that you understand what strengths you can already build on, and which systems/ processes you may need to integrate into future solutions. As you start to think about where you want to go in the future, take the time to consider what you could gain by collaborating with customers, suppliers, technology partners and even competitors, without limiting your vision based on current constraints. Move your focus beyond technical details and consider what impact new applications could have on your value chain and your relationships with, and access to, your customers. Your roadmap will need to consider future changes in customer behaviour and how your relationship with them will change.
Moving from the current to the future desired state will need precise steps and a clear prioritisation. Companies that become a digital champion embark on a journey that starts small but ends ultimately in a transformation of the core business.
With so much riding on the outcome of digitization, companies will need to work hard to overcome initial challenges. It can be difficult to secure funding and stakeholder buy-in, as the economic benefit case of digitisation is not always easy to calculate. And initially teams will only be able to provide very limited proof of concept and demonstration of technologies.
Developing strategies for attracting people with the right digital skills will be a critical challenge for HR. Success with the Fourth Industrial Revolution will depend on skills and knowledge. Your biggest constraints may well be your ability to recruit new employees or train existing ones who can put digitisation into place. You need to introduce new roles in your company, like data scientists, user interface designers, or digital innovation managers. And you’ll probably need to update existing job profiles to take into account new digital skills.
Kinjal has over 21 years of experience and has worked with organizations like Amazon.com, PepsiCo, ITC Infotech India Limited, Hindustan Unilever Ltd & ITC Limited. Kinjal holds a Master’s Degree, Human Resources Management/Personnel Administration from XLRI Jamshedpur.