The fourth industrial revolution or the technology revolution has the potential to change just about every part of our lives. NIR TENZER of Microsoft says that embracing this change will present opportunities for business of now and those of the future.
Technology has become ubiquitous and central to growth and innovation in today’s business. It is embedded in a vast array of services and devices, and accessible to businesses to do what was previously impossible.
When we talk about this fourth industrial revolution, just like the first three with steam, electricity and information technology, it had a pretty broad impact in the way we live, the way we work, the way we entertain ourselves, the way we communicate.
And now, when we talk about this fourth industrial revolution with digital technology, we’re talking about it having perhaps even a broader, deeper impact on all those aspects of our lives. The way we engage is changing, the way we work is changing and the way we solve, address problems and innovate is changing – the pace of the change is also getting faster and faster. The world of the future is going to be different to the world we live today – there will be businesses and jobs that we cannot even conceptualise today. The change and the disruption will come from many directions, including Industry disruption and Technology disruption. Cloud, mobility, social and insight coming from data will contribute to this massive wave of disruption.
The tumultuous period of change for us in our businesses and how we navigate that presents much opportunity for the businesses of today and those of tomorrow.
Opportunity in transformation
As we embark into the depths of this fourth industrial revolution, we come to learn that every business is a technology company. Every company has the potential to transform itself into a digital business.
What is a digital business? It’s more than presenting a website or online service to customers, or simply using technology to run your business. According to leading technology analyst firm Gartner, “Digital business is the creation of new business designs by blurring the digital and physical worlds.”
Contextualising this, here are some examples of what companies are doing today to digitise:
· Innovating with crowdsourcing and data—organisations are changing how they deliver new products and services by integrating customer, employee and general ecosystem feedback into their innovation process. In some cases, they are directly incorporating customers into the process. In others, they are collecting detailed data from the products they have in market in order to better understand usage and enable improvements. During the development process of Windows 10 for instance, Microsoft received millions of pieces of feedback from more than seven million fans who joined the insider programme, tested the software, and helped shape the finalised version of the operating system.
· Working smarter with smart machines—increasingly, smart machines such as digital assistants (like Cortana) are empowering employees and consumers be more informed and productive in how they work and live.
· Adapting the business through intelligent operations—enterprises today are connecting their operations and making them more agile and responsive to changing market conditions and customer needs. For example, a vehicle manufacturer can employ machine learning (quick data analysis) to identify and distinguish between model features that buyers actually need and nice-to-have features that they want based on customer demand, within various demographics across the globe. This will enable the car maker to cater to the needs of customers better with the right standard features everyone needs, while providing most of the cool features many people want as options.
· Staying ahead by anticipating what’s next—machine learning and advanced analytics are enabling organisations to anticipate and predict customer needs and market changes better and faster, helping them be more competitive in the market and wow their customers.
· Delighting customers with richer experiences—in order to deliver engaging customer experiences, businesses today are leveraging digital technology like interactive digital displays, second screen strategies, and mobile/local offers to enrich physical experiences with digital ones to help drive customer engagement and loyalty.
In order to successfully navigate the transformational wave, organisations need to form partnerships that will enable them to utilise systems of intelligence that will help them gain insight and take action from big data, optimise their operations and change the very nature of the business models around their industrial products.
Leaving a legacy of innovation, rather than a depending on legacy systems
Common stumbling blocks that prevent companies from effectively supporting business priorities through digital transformation include the burden of legacy systems. Enterprises and large corporations within sectors such as financial services and retail often find themselves being disrupted by smaller, more agile competitors such as SMEs and start-ups that are not burdened by legacy system that is very complex to manage.
As Microsoft, we are similarly impacted and disrupted and are experiencing our own digital transformation. We have adopted interconnected ambitions that represent more than our ambitions – they are our response to this imperative to transform and designed to help our customers deliver transformation within their organisation.
By adopting the mind-set of a digital company, any business can transform through the four pillars of digital transformation. The first of these is empowering your customers through tools like a customer management system and approaches such as driving viral find, try and buy opportunities that help cross-sell and up-sell, and build these capabilities into offerings. Next up, companies have to empower employees through knowledge and insight tools, enabling staff to access data and collaborate from anywhere, anytime, using any device or platform.
The penultimate pillar is optimising your operations, which is achieved by migrating services to the cloud and focussing automation. Last but not least is transforming your products, which is done by creating connected services and generating insights to see what can be monetised to unlock new business models. Previously businesses designed, built, produced and shipped a product, then customers bought it. That was the end of the cycle. Now organisations are building in continuous feedback loops – sensors in product, after-market services, and customer feedback from a variety of channels. Transformation requires these rich systems of intelligence. And it isn’t simply about technology…systems of intelligence represent the combination of technology, people and process that enable these feedback loops, and define an organisation’s competitiveness and ability to change the entire landscape of the industries in which it participates.
Moreover, organisations, will require a cultural change within the company that sees staff being more open to learning, using and integrating new systems, tools and solutions into their daily routines and processes.
* Nir Tenzer, Microsoft South Africa’s Marketing and Operations Director.
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.
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.”
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.
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.