By Kathy Gibson – Talking about digitalisation is all very well, but organisations have to be able to unlock value.

“I believe magic happens when you take things that are previously disparate and put them together to they make sense,” says Dr Brian Armstrong, chair of digital business at Wits Business. “When different things come together, really interesting things happen.

He says the digital revolution is the coming together of three forces.

They are the technology revolution that includes things like AI, blockchain, big data and more. “Each in their own right, they are transformative and powerful,” he says.

“But on their own they are not enough to explain the change we are seeing.”

The second element is the way society is changing. “It used to be the millennials that were the tech users, but that is all of us now.”

The third force, Dr Armstrong believes, is the changing ways of doing business. “Platform business models are very real. We talk about peer to peer, business to business, business to consumer, about design thinking. New companies are more about the business model than the technology.”

These intersection cold be magical, he says, but only if they create real value.

“I am asked if there is real business value in digitalisation a lot,” Dr Armstrong says.

New data points show that there is.

Those companies that haven’t transformed show poor shareholder returns, while those they have transformed show a CAGR of 9%. The true digital native players are seeing 40% CAGR.

In the technology sector, there is no question that those that have transformed sow significant shareholder value.”

There is also a correlation between the digital readiness of the market and financial performance. “There is an astonishing degree of correlation between the digital readiness of markets and the companies operating in them – there is tremendous value opportunity.”

In Africa, we are seeing a high level of digital readiness, and it is growing. We are getting to the tipping point,” Dr Armstrong says.

The third factor shows that company value improves with ICT transformation. Studies show that increasing levels of ICT transformation lead to material wealth creation.

“So there is compelling event that, in a true economic sense, increasing levels of digital transformation improves shareholder value and increases the value of the business.”

What company leads want to know, he adds, is how to do this for their own business.

It comes down to strategy, he says. And this boils down to deciding where to lay and figuring out how to do it better than competitors.

“The industry you play in does matter – company growth is often related to sector growth, with very little coming from market share growth.

“So a lot of growth is going to come from finding new sectors to play in.”

This introduces the concept of convergence, Dr Armstrong says.

In the technology sector this is about the full spectrum of computing, communications and entertainment is coming together.

Many of the leading category players in all these segments are good players ,but they have failed to convert a significant part of their revenues into new segment revenue streams.

“At the intersections, however you are seeing new companies that are making changes. “And then there are the new category of players that almost defy categorisation,” Dr Armstrong sys.

The category leaders have tended to show flat growth; those in the intersections have grown much better, at an average of 9% CAGR. The new players – companies like Amazon, Facebook, Google and the like – have shown upwards of 40% growth.

“So you need to look for the intersections, to look at technology and the ability to merge it with other industries – this is where the high growth is going to come from. It is about extending your business into these intersections.”

It’s important to realise that every industry is exposed to digitalisation, Dr Armstrong adds.

Even assuming that services companies are mostly at risk of digitalisation, he points out that the bulk of the South African economy is in the services industry.

Industries that have already transformed are media and entertainment, tech products and services, retail, financial services and telcos.

Just entering the digitalisation phase now are education, hospitality and travel, professional services, consumer packaged goods, and manufacturing.

Also ready for digitalisation are healthcare and others.

Understanding the need for digitalisation is easy: winning at it is a lot harder.

Starting a digital transformation journey is about discovering what business you are in as well as how you do business.

“Often when we think about digital transformation it is about the technology and infrastructure – not about changing the business.”

The foundation of digital transformation has to focus on the customer. “Any business not centred on its customer will have challenges.”

A typical business consists of the back office, core business process, and the customer interface, linked by management and orchestration.

Traditionally, IT has focused on the back office. But increasing profits revolves around price, volume and cost – so addressing the customer has to be the focus for digital transformation.

Making the business case for digital transformation is a vital but difficult task.

The four most important pillars of digital transformation are strategy; leadership; innovation model and risk appetite; and funding, investment and can demonstrate ROI.

It’s difficult to show the benefits of digital transformation, but companies have to start realising that doing nothing means they are bound to lose.

Being bold and fast is key to success, Dr Armstrong adds.

Technology adoption is speeding up, and we are also getting new waves of technology coming n faster cycles.

“This is important because we think in linear terms, while technology innovation follows an S-curve. So leaders need the vision and courage to follow new technology trends. It takes courage, and it means you will be underwater for time before you get to the point where you are in the future you envisaged.”

Speed is critical because of the network effect – adding one customer increases the effect of the overall network. In addition, the effect of exponential growth means that the effect of a delay is truly enormous and possible fatal.

Automating core processes is less about making things cheaper and more about eliminating human subjectivity and weaknesses; achieving scalability; decreasing compute time; and eliminating errors.

Human beings, on the other hand, are still adaptable and resilient.

The optimists say about the future of work that technology will grow the economy, machines and workers will co-exist, technology creates new jobs; and technology democratises work. The pessimist view is that technology and automation will put humans out of work.

“What is different in the fourth industrial revolution is the speed of change, he adds. “In previous industrial revolutions we had a generation or more to adapt. Now we don’t have that time.”

He believes that, when it comes to work, people will still be at the top of the pile. “But routine work, that is fact or analysis heavy, will be automated.”

Functions that are high in genuinely creative or relationship intelligence, and unstructured dexterity will still be dominated by humans. But structured physical work will be automated.

“How do we prepare ourselves for this?” Dr Armstrong asks. “Anything from 10% to 17% of jobs will be impacted, and the situation in developing nations will be worse.

“So the tsunami is coming.”

As business leaders and individuals we need to think deeply about changing our organisations and ourselves.

“IT transformation and change go hand in hand,” Dr Armstrong adds.

To change the outcome we need to change the system, he adds. And to change the system, we have change the business – and for this the market must change; or society must change.

People are at the heart of all this change, he adds and this requires motivation; behavioural support;; systems, tools and processes; and ability to achieve.

The final, and arguably the most important, element is leadership.

It starts with vision, which has to be delivered: you need people to deliver IT – and these people have to be empowered with skills and understanding. “I believe leadership is a skill that can be learnt,” Dr Armstrong adds.

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