SA digitally ahead, but behind on growth

Although South Africa’s digital economy makes it a standout among its emerging market peers, the country’s digital adoption has not yet translated into industrial growth, according to a Accenture and Gordon Institute of Business Science whitepaper.

According to the report, South Africa ranks ahead of India, Brazil, and Russia on digital competitiveness based on its strengths in areas such as technology skills, research and development expenditure, access to capital, regulatory frameworks, innovation ecosystems and ICT exports. The country now needs to embrace digital technologies to reinvent how its industrial sector operates and re-ignite economic growth.

The report surveyed senior executives from leading South African companies in manufacturing and production sectors, who formed part of the larger global survey group of 1,000 decision makers spanning over 20 countries. “Our study shows that decision makers are hungry for digital adoption,” says Yusof Seedat, Director at Accenture Research. “This potent mix of digital maturity and executive desire isn’t delivering expected results in terms of economic growth.”

“What is most troubling is the performance of South Africa’s manufacturing sector, where growth has been flat for a decade and negative for three consecutive quarters, falling an average of 3.3% beginning the third quarter of 2016, and expanded marginally (by 1.5%) in Q2 of 2017. This stagnation has both economic and policy implications, given the role of manufacturing in the government’s plans for economic transformation and job creation,” says Seedat.

South African companies also tend to mimic digital strategies of large industrial nations which prevents them from contextualising digital strategies to their own industrial reality and as a result, often fail to customise their offerings to meet rapidly changing customer expectations.

Moving forward, the report shows that for South African companies to generate the improvements that will enable them to leapfrog to digital leadership, companies must reinvent their operating models completely and rethink production and value chains. To succeed, companies need to move to what Accenture calls Industry X.0, which is the full digital reinvention of how companies and industries work by leveraging the combinatorial powers of digital. “Companies must reimagine and rebuild their businesses as smart, connected, living and learning entities to digitally reinvent their industry.” highlights Seedat.

With relative ease, industrial companies in South Africa can now adopt a mix of advanced digital technologies such as artificial intelligence, 3D printing, blockchain, and big data analytics to create hyper-personalized experiences, new levels of efficiency and build new sources of growth.  To facilitate this change, the report highlights the following six digital imperatives that need to be addressed by South African companies in order to become Industry X.0 businesses:

• Transform the core. Companies need to build their core engineering and production systems around digital technologies that drive new levels of efficiency. They need to ensure that physical machines and software systems are synchronised to unlock previously-unseen cost efficiencies—thus driving up investment capacity.
• Focus on customer experiences and outcomes. Local companies should invest in creating hyper-personalised experience for customers using multiple “smart” touchpoints. This helps grow core businesses by enhancing customer engagement.
• Innovate business models. Industry X.0 companies ideate and create new business models to drive differentiated value for their clients and new revenue streams for themselves. Such companies inculcate an innovation mindset across the organisation, allowing every employee to contribute ideas towards enhancing customer experience.
• Build a digital-ready workforce. Industry X.0 companies recruit, train, and retain talent with skills for the digital enterprise and encourage collaboration between people and machines. Digital skills are not limited to knowledge of using digital tools or software programs, but also includes intuitive knowhow of how to apply those tools to solve real business problems.
• Build new ecosystems. Companies need to build an ecosystem of suppliers, distributors, start-ups, and customers, which will allow them to scale new business models rapidly. Large industrial companies must assume a collaborative approach to innovation. Despite their size and technological prowess, they must act with empathy and allow creative freedom to smaller ecosystem partners.
• Pivot wisely. Industry X.0 companies are moving into the future, but as they do so, they carefully balance investment and resource allocation between the core business and new businesses to synchronise innovation and growth.

To succeed as digital enterprises, companies must look beyond traditional productivity and efficiency measures, and identify new ones that make the most of the big data and advanced analytics capabilities available to them. In Industry X.0 organisations performance metrics should measure the abilities of digital technology as well as the digital workforce to improve both the top and bottom line.