Are You Waiting For Another Pandemic To Have A Digital Strategy?

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The year 2020 was one of the biggest—if not the biggest—in terms of challenges that industries and businesses faced worldwide. Among these, the hardest hit were the manufacturing industries and all the other verticals of businesses that require people to be present on the work-floor.

The effects of the coronavirus and the events that followed its outbreak were so ruinous that the State Bank of India has projected contraction of over 40 percent in India’s GDP in the first quarter of financial year 2021. Considering the fact that India’s manufacturing industry contributes 16 to 17 percent to India’s GDP, was it possible to minimise this drop in GDP without compromising the health of people and affecting the nation’s progress?

A new McKinsey survey suggests there were three kinds of outcomes: A win for companies that had already embraced digital technologies, a reality check for those that were still adopting, and a wake-up call for those who had not yet started on their industry 4.0 journey. Over 94 percent of industry leaders who took part in a survey conducted by Mckinsey regarding industry 4.0 said that the Industrial Internet of Things (IIoT) had helped them keep their operations running during the crisis.

Sreenath C. Lakshmanan, CEO and founder of i4DigitalValue says, “It is very well known that the economies are grinding towards recession. Post pandemic, it could shrink further down. The most important thing for organisations is to take critical decisions in order to mitigate all the challenges. How we leverage technologies like Industrial Internet of Things, AI, ML, and Big Data to create new pathways for the organisations is of utmost importance now.”

He adds, “Strategy, and especially digital strategy, becomes very important because we are functioning in the middle of a pandemic era now. Like there was a pre-pandemic era, there will also be a post-pandemic era. The use of technology to define the process and yield results for yourself and for your clients will only increase in the post-pandemic era. This is the right time to start working on having a digital strategy in place.”

What is digital strategy?

The word strategy, as defined by different dictionaries, stands for a plan that one prepares to achieve something. Business strategy, however, has different definitions available in books and on the web. But the goal always remains the same, and that is to achieve and maintain leadership in one’s vertical of business today, tomorrow. and day after.
“Most of the people contemplate digital strategy by deploying some software like AI, ML, or IoT. That’s where I think most of the digital strategies fail because their provenance is not rooted in the right mindset,” explains Anand Tamboli of Anand Tamboli & Company, who was keynote speaker at recent India Electronics Week and is author of a book on Artificial Intelligence.

He adds, “The environment is changing every single day. In order to execute your ideas and plans, you have to continuously adapt. That is where digital strategy or a plan to adapt to those changes comes into place. Digital strategy is the pivotal requirement to gain leadership and to maintain that leadership.”

Many companies had to shut operations during the coronavirus-induced lockdowns and wait for the lockdowns to be lifted to start functioning again. It was a matter of survival for such companies. Paying their vendors and employees, and meet project deadlines at the same time, were some of the challenges they faced every day. Most of these companies had no digital strategy in place.

Companies whose Industry 4.0 implementation is more mature report stronger ability to respond to crisis
Fig. 1: Companies whose Industry 4.0 implementation is more mature report stronger ability to respond to crisis (Source: McKinsey & Company)

But there were also many companies that not only managed to survive but also came out as winners in their respective verticals. Most of these had deployed use-cases around leveraging IoT way before the lockdowns were announced, or immediately before the same.

Lakshmanan says, “Digital transformation comes as a very important journey, both for the leaders and the organisations. I have seen examples of companies that, before lockdowns, had big plans for the digital transformation journey, but they had to change plans because of the situations arising due to coronavirus lockdowns.”

A report by KPMG has termed Covid 19 as the perfect storm for digital acceleration. This report notes that the Covid-19 pandemic has exposed a clear digital divide. Those companies which had already invested in digital operating models/enablement have fared much better than those which had not. In fact, for many businesses, the continuity of operations critically depends on their digital capabilities.

No wonder, searches for the terms around the word ‘contactless’ have seen a jump of more than seven times on different search engines. Deloitte rates this increase as a dramatic uptick in the use of digital technologies that help reduce face-to-face interactions and safeguard customer and employee health and well-being.

Overcoming the challenges

A plethora of challenges fell upon the electronics industry when coronavirus started spreading like wildfire. The biggest of these challenges came in the form of supply-chain disruptions. Some of these challenges continue to haunt the industry even today. Logistic companies had to close operations on account of lockdowns and only the essential commodities were allowed to be transported from one place to another. As a lot of companies were relying on Chinese companies for supply of critical components used in electronics manufacturing, these challenges became a nightmare as all international flights to and from China were put on hold.

The Covid-19 crisis has accelerated the digitisation of customer interactions by several years
Fig. 2: The Covid-19 crisis has accelerated the digitisation of customer interactions by several years (Source: McKinsey & Company)

“The massive challenges for our industry have been very common. For IoT, you have to have the hardware piece of it. We were majorly relying on our neighbours for that and once the supply chain disruption hit, the entire ecosystem came to a standstill,” informs Shivam Dikshit, vice president, IoTfy.

Another report by Mckinsey, accepting the supply-chain challenges, sheds light on six things that can help in bettering operations in the supply chains. These include:

  1. Create transparency on multi-tier supply chains by establishing a list of critical components, determining their origin of supply, and identifying alternative sources.
  2. Estimate available inventory along the value chain—including spare parts and after-sales stock—for use as a bridge to keep production running and enable delivery to customers.
  3. Assess realistic final-customer demand and respond to (or, where possible, contain) shortage-buying behaviour of customers.
  4. Optimise production and distribution capacity to ensure employee safety, such as by supplying personal protective equipment (PPE) and engaging with communication teams to share infection-risk levels and work-from-home options. These steps will enable leaders to understand current and projected capacity levels in both workforce and materials.
  5. Identify and secure logistics capacity, estimating capacity and accelerating, where possible, and being flexible on transportation mode, when required.
  6.  Manage cash and net working capital by running stress tests to understand where supply-chain issues will start to cause a financial impact.

Dikshit further explains that the pandemic gave birth to a new market, which demanded products that do not require physical touch to be operated. These products, as per him, became possible only because of the digital technologies available in the market.

Relative relevance of advanced technology use cases across industries in a post-Covid-19 scenario
Fig. 3: Relative relevance of advanced technology use cases across industries in a post-Covid-19 scenario (Source: Deloitte)

“We continue to get inquiries from Marquee brands about the availability of touchless switches that can be deployed in consumer electronics like air-conditioners. Providing hands-free experience to end users continues to remain a part of strategies that were born out of the pandemic,” Dikshit says.

There are two kinds of companies in the world when it comes to deploying IoT—those that are proactive, and others that are reactive. Proactive companies were able to deal much better with the pandemic than the reactive ones. Dikshit explains that the percentage of proactive ones in India is less than one.

Tamboli adds that when working on a digital strategy, one should not approach the same with words like IoT, but with a problem solving approach. He says, “Don’t lead with words like IoT, but lead with the problem that you want to solve, and the things will fall in place.”
Mckinsey, in a report, states that manufacturers who are using digital transformation to develop new or enhanced ways of operating their businesses have recorded 30 to 50 percent reduction in machine downtime, 15 to 30 percent improvement in labour productivity, 10 to 30 percent increases in throughput, and 10 to 20 percent decreases in the cost of quality. Most of these have included data, computational power, and connectivity—such as sensors, the Internet of Things, cloud technology, and blockchain—as a part of their digital strategies.

Not only this but having a digital strategy in place in times when the old rules are no longer applicable becomes important, even for the employees working in an organisation. “Having and clearly communicating a strong strategic vision for the company in the midst of both acute and chronic disruption helps employees know how to respond when digital disruption changes the environment. When the old rules are no longer applicable—whether temporarily suspended due to Covid-19 or because technology moves faster than regulation—it’s important that employees know which overarching principles are guiding their work,” reads a report by Deloitte Insights.

The post-pandemic factor

The outbreak of coronavirus has introduced many changes in how things happen across the world. Looking at these changes with a digital transformation perspective in mind, the number of challenges that can be turned into opportunities are plenty. Technologies like AI, ML, and IoT—which make a critical part of digital strategy—will rise exponentially from here.

“There is no normalcy like before. People have seen new things. Some they like and some they do not. We are not going back to the same world we used to live in before the coronavirus pandemic hit. If you look at it from the digital transformation perspective, there are plenty of problems waiting to be solved. So far it has been a steady growth, but from here you will see an exponential growth in adoption of digital technologies like IoT,” explains Tamboli.

The global industrial IoT market, as per a report by Mordor Intelligence, was valued at US$313.27 billion in 2019, and it is expected to reach a value of US$607.73 billion by 2025, registering a CAGR of 12.3 percent over the forecast period of 2020 to 2025.

Significant advantages, such as large-scale profit margins through improvements in power efficiency, are attracting companies to invest in the market aggressively.

According to a study by Microsoft in 2019, IoT is increasingly becoming indispensable to the manufacturing industry. 87 percent of IoT decision-makers in the industry have adopted IoT, and the vast majority say IoT is critical to the success of their company and are satisfied with the technology.

Next in line comes the data generated. IDC states that there will be about 40 billion connected devices by the end of 2025. It would be impossible to make use of the data that these 40 billion devices generate without knowing how to leverage digital technologies, which again is a part of digital strategy followed by any company.

“Data is the new oil and without having a proper digital strategy in place, it would be impossible for the companies to mine this data,” says Dikshit.

Think of a company selling smart lights to end consumers in the market. Now this company, if it knows how to mine data, can cross-sell/upsell other smart products like ceiling fans using the same app that the consumers are using to operate those smart lights.

However, this will only be possible if the company has a digital strategy in place and has teams working on that aspect. Otherwise, the data generated by the app downloads might keep on sitting in the company’s servers for years without anyone knowing what to do with it!

Having a digital strategy in place can also help your organisation to start working on a new product development, in normal or in pandemic times. Medical ventilators never received the attention of the market before the pandemic occurred, but during the pandemic these got the attention and focus not only from the governments worldwide but also from the companies that made components for these life-saving medical devices. In fact, a lot of companies were allowed to operate during the pandemic times due to their capability of producing components for these devices.

“While the demand for ventilators was somehow met during the pandemic times, would it have been the same case if companies manufacturing these, as a part of digital strategy, were enabling ventilators with IoT capabilities? Not only could such companies have benefitted from servicing the ventilators without physically being available there, but it would have also been easier for the hospitals to monitor health of patients remotely,” explains Lakshmanan.

One of the key things that most of the companies miss in their digital strategy is keeping ahead of time. Even though it may not be possible to predict perfectly well, at least constantly thinking of what the next big thing could be should always be a part of the long-term digital strategy. This can be done by companies that know their customers well, and at the same time also keep an eye on the market trends. Both these aspects, again, hint towards having a good digital strategy in place, according to Tamboli.

He adds, “Thinking three steps ahead about where you can use digital strategy is what really adds value to the overall idea. Working on the problems in a supply chain via the digital route is more effective when your approach is ahead of the problem, and less effective when it’s done after the problem hits you.”


 

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