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Five factors will drive digital transformation

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Digital transformation means different things to people and pursuing a strategy won’t necessarily equate to future success. JONAS BOGOSHI believes if businesses incorporate key ingredients into their transformation strategies, success will follow.

Digital transformation is having a huge impact on every aspect of the way we work, live and learn. Big data, social, cloud computing and developments in mobile technology have already drastically altered the landscape of business, education, entertainment and government.

Whole businesses have been built on cloud and big data, while existing companies have used the technology to diversify into new areas of business. And any company that is not paying attention to social media and mobile innovation is frankly living in the dark ages.

The pace and scale of change that digital technology is enabling means organisations must adapt to remain relevant. And they must use digital technology to do so. In short, digital transformation is now a business imperative.

The form this takes will vary widely, but the majority of enterprises will overhaul their digital customer interfaces, along with the customer engagement systems behind them. Customer services will also become increasingly personalised, with IDC predicting that doing this at scale will be a “complex enterprise-wide digital transformation initiative”.

In addition, IDC predicts that in the next two years, two-thirds of Global 2000 CEOs will put digital transformation at the centre of their growth and profitability strategies while the scale-up of digital business strategies will drive more than 50% of enterprise IT spending within the next 24 months, rising to 60% by 2020.
However, most organizations are still in the early stages of digital maturity, working on isolated projects that lack coordination. Even where digital transformation has taken place, it’s not always been a success: IDC found that less than half of such initiatives achieve their goals. This is often down to IT departments failing to deliver the speed or quality needed to chase new markets, respond to competitive threats or increase profits.

In contrast, the handful of organisations that fully understand enterprise-wide digital transformation are making increasingly-rapid progress, disrupting industries and leaving competitors behind in the process.

Digital transformation clearly means different things to different people and that pursuing a strategy won’t necessarily equate to the changes that are needed to ensure future business success. But if businesses are able to incorporate some key ingredients into their digital transformation strategies, success will more than likely follow.

What follows is a summary of the considerations exchanged in a series of discussions with more than 150 high-level IT executives from different industries across Europe about digital and IT transformation, highlighting what’s really needed to help CIOs thrive and overcome obstacles on their journey, from roadmap definition to multi‑phased implementation across applications, infrastructure and operating models.

Adopt a risk-taking attitude
Transformational change is often difficult to achieve as existing IT systems, organizational setup and culture create an inertia that is hard to break from. A culture of ‘if it ain’t broke, don’t fix it’ persists in many organisations, to the detriment of change.

Businesses must be prepared to take risks and move away from the way things were done in the past if they are to achieve IT-driven innovation.  Essentially, they should try new approaches that will help pave the way for digital transformation across the entire organization.

This could mean putting open innovation and dev ops programmes in place or assigning IT teams to specific business units. Looking at the talent side of things, a hiring programme focused on millennials would bring in native digital skills to support the new way of doing things.

Put data at the heart of things

Data is the fuel for innovation and should be used for value creation, prediction and process optimisation. Success in creating new services and ways of working depends on the data pipelines that flow in and out of organisations.

Some organisations have taken this seriously by appointing a Chief Data Officer who will have an overview of company data and how it should be classified. They will look at the rules and regulations for various data classes to ensure they are used in the most appropriate way.

Big data and analytics are critical in this, as they provide the capability to extract more value from data than ever before, slicing and dicing information in new ways that can provide new and useful insight that could be used to enhance digital customer experience and targeted marketing.
Create a modern datacentre
This secular shift requires and is propelled by a fundamental IT transformation, which embraces cloud as a primary IT architecture and consumption model, to manage millions of devices and the data deluge associated with them, to create large data lakes and enable ‑ for example ‑ predictive services. This all creates the need for a modern datacentre architecture to overcome the information siloes and rigid IT infrastructure that limits transformation and the implementation of a hybrid cloud IT infrastructure.

Hybrid cloud infrastructure is in fact a key enabler of digital transformation as it supports mobile and cloud‑native workloads as well as the existing business-critical and legacy workloads. At the same time, it supports innovative projects initiated by the business.

It is important that CIOs evaluate which workloads and data should move to the cloud so that the benefits of scalability, agility and service-based IT delivery are maximised. A strong business case should always be developed before data is moved between environments to ensure that it is being moved for the right reasons.

Foster closer ties between IT and business innovation
Business innovation initiatives are often limited in their success by being separated from the infrastructure, systems and processes required to support them. This siloed approach means business departments and IT aren’t aligned, making it harder for IT to deliver exactly what is needed.

Effective digital transformation requires an IT organization that acts as a strong partner with the rest of the business that provides the necessary tools and infrastructure to support specific projects. Bringing together the skills and talents from across business and IT will ensure transformation projects deliver the intended impact.

This is particularly important given that long term stable digital transformation requires continuous innovation and integration.

Choose the right tech provider
The final element needed for effective digital transformation is a technology provider that matches the ambition of the business and will be relevant in the long term. To be effective and successful partners to their customers, technology providers must provide support for a strategy and governance framework that spans operating model, infrastructure and applications, delivering measurable results in each phase of implementation to then also transform leadership and customer experience. This will truly help CIOs to thrive in the digital era.

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VoD cuts the cord in SA

Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.

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That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.

The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.

Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.

Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”

The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.

“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”

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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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