According to Ernst & Young’s report, ‘Tech Horizon: Leadership perspectives on technology and transformation’, which takes a look at new technologies and how they are helping to accelerate business digital transformation, companies leading the field in embracing digital technologies are, putting it simply, able to make more money than their competitors.
The report looks at the key drivers of digital transformation and highlights six key ‘habits’ exhibited by digital transformation leaders, and suggests that industry laggards could learn from these transformational leaders.
According to Beatriz Sanz Saiz, EY’s Global Consulting Data & Analytics Leader, the report shows that, “We have reached a point of no return when it comes to digital transformation. The process has been accelerated by the global pandemic and the debate is no longer about investing in new technology but rather how to embed and integrate technology at the core of your business.
“There are plenty of companies, across different sectors, that are well advanced along this ‘transformation journey’, and are, as a consequence, generating significant additional value.”
Saiz says that the six core ‘habits’ that are critical when it comes to transforming a business through the use of technology include: “Focusing on customers, first and foremost; accelerating investment in artificial intelligence (AI) to drive growth; driving innovation through embracing ecosystems and partnerships; nurturing talent; accelerating governance plans for emerging technology and, finally, powering innovation by leveraging data and being agile.”
According to Saiz, while adopting these habits is critical, it doesn’t guarantee financial success, although, “AI has a crucial role in driving growth and revenues and enabling new and different customer experiences.”
She points to Tesla as an example of a company that has embraced technology and applied AI to deliver a better customer experience.
“It embedded AI at the core of its business, transforming not only its back office but the entire supply chain. Critically, it became, as a result of that investment, more nimble and able to implement changes quicker.”
Debunking some myths
Saiz says that when it comes to investing in AI there are certain ‘myths’ that have surrounded its application.
“When I talk about ‘myths’ I refer to ideas such as AI should always be implemented away from business units. In reality, the ultimate value of AI can only be realised when it is placed at the very heart of the business.
“Another is that AI and the IoT should be considered separately. That is certainly not the case. Companies that are capturing the benefits of AI have coupled that capability with the IoT in order to extract greater value.
“And finally, when it comes to data, there’s an argument around quantity rather than quality being the goal. Another myth, because only well managed and reliable data will drive more impactful insights,” Saiz argues.
Saiz accepts that it will be very expensive for those laggard companies to catch up with those that have embraced AI and other technologies already.
“While it will certainly be more expensive for followers, it will be even more costly if they don’t invest in technology,” she argues. “Transformation is critical when technology is constantly undermining traditional business models.”
According to Saiz, the market is seeing increased merger and acquisition (M&A) activity across all sectors, as companies use it as a mean to catch up with sector leaders and acquire the technologies they need in order to compete.
“This trend is being driven by companies looking to catch up or by those looking to become a leading player in their space,” she believes. “We are seeing a lot of activity among companies trying to better understand how to embrace emerging technologies.”
In terms of sectors, Saiz says that most sectors are now embracing technology.
“We don’t see any sector where AI, for example, does not apply but there are some sectors that are benefitting more than others,” she concedes.
“Sectors that have to handle large data volumes, for example, banking and insurance, and manufacturing, with the rise of the IoT and Industry 4.0, are investing heavily in technology and AI.”
Covid-19 has certainly played a part in accelerating existing trends.
“Health is based on data and the impact of the pandemic has driven increased levels of investment. We are seeing a more active role for technology and AI, in particular. Covid has accelerated plans and we can expect to see huge investments in AI and emerging technologies by health providers over the next 3-5 years.”
According to Saiz, any sector that is customer facing is accelerating the take up of cloud, data platforms, and infrastructure enabled AI, in order to improve customer interaction.
“The E&Y research showed that AI continues to be a big part of a company’s spend, as they look to respond to the needs of their customers. However, in many cases AI investment continues to lag behind that made in cloud, data and advanced analytics and the Internet of Things, among the companies that were surveyed.”
According to Saiz, “The future is about embedding AI in core processes. As a consequence, companies are able to get smarter and better align AI to their process and business needs. It’s those companies who are investing more in AI that are gaining the most.”
These leaders look at how processes, products and services can be improved through AI, and crucially are able to measure, monitor and assess the benefits that they derive from AI.
Saiz points out that as companies look to invest more so they also need to turn to developing more expansive ecosystems and partnerships, and a growing number of organisations say that forging innovation partnerships is now a core priority going forward.
However, establishing partnerships can be a challenge in itself with the need to create the right culture and putting in place the agreements you need to manage and govern the relationship.
“A successful relationship depends on trust, transparency and the equitable sharing of benefits,” explains Saiz. It will also require time and resources.
Nurturing talent is also critical and to be successful companies need to constantly be looking to reshape and re-skill their workforce, in order to meet the challenges associated with technological transformation.
“Leaders are developing new incentives to encourage their workforces to learn new skills and in many case introducing mandatory new training programmes,” Saiz explains. Business and workforce strategies are increasingly connected.
Technological innovation also needs to be governed properly and ethically, according to Saiz.
“Many of our clients are asking for a trusted framework when it comes to AI - trust is at the heart of ethical governance.
“Ethics is becoming more important and more businesses are looking at establishing executive level governance of emerging technologies, but they still have a way to go. Few have an established framework in operation.
“I believe there is a need for a private/public partnership when it comes to ethics and ethics at scale implies institutional involvement,” argues Saiz. “Regulators are a necessary part of the equation, if we are to effectively leverage AI and other emerging technologies.”
Saiz concludes by saying that she is optimistic at the way in which AI and technology is progressing.
“We’ll see constant innovation and that will have a real impact on people, business and technology. It’s a journey and we still have a long way to go, but I'm an optimist.”