COVID-19 has resulted in a lifestyle, livelihood and economic disruption of a magnitude that nobody expected. Organisations have shifted to virtual modes of working, learning, interacting and collaborating making the pandemic a turning point for digital transformation of businesses.
This study presents the views shared by some of the top digital leaders in the country on key digital transformation trends that are shaping tomorrow’s possibilities, opportunities that will drive tangible business value, challenges in executing digital transformation initiatives and the top priorities and actions over the next two to three years.
Digital leaders believe there are four key trends driving the digital transformation agenda in the country.
Changing consumer behaviour
- The way how Sri Lankans purchase and consume products, services and information has been going through tremendous changes even before the pandemic, which was evident with the meteoric growth of social media and e-commerce.
- However, the pandemic had accelerated the consumer’s digital adoption both as a medium of communication and purchase.
- CIOs of several FMCG companies in Sri Lanka have mentioned that due to the surge in online orders, their key priority was to ensure relevant systems are in place to facilitate online purchasing, payments and delivery with ease by integrating with different partners such as banks and logistics companies.
- Few CIOs in banks and financial services have witnessed a significant growth in both new sign-ups and transactions in their Internet Banking and e-wallets segments.
New normal of working – working from home or anywhere
- COVID-19 pandemic transformed how companies operate due to mandatory lock-downs, social distancing rules and working from home norms.
- Some CIOs and CTOs shared with us that they had robust systems in place to operate in an environment like this. However, this has created several challenges such as:
- allowing access to centralised ERP;
- ensure secure authentication and access;
- network connectivity issues.
- Few also highlighted that ensuring employee engagement and productivity in a virtual working environment is another challenge that they want to overcome.
Changing nature of competition
- Competition in the digital age is entirely different from what companies have seen before, due to the rise of start-ups and unconventional players entering and trying to grab the market share from incumbents.
- Even though true disruption is yet to be seen in Sri Lanka, bank and insurance CIOs have acknowledged the entry of telecom companies in financial services domain can be a key competitive threat unlike they have experienced before.
Emergence of new digital technologies
- Digital leaders sight several emerging digital technologies driving digital transformation:
- Data Science and Big Data
- Artificial Intelligence/Machine Learning
- Internet of Things (IoT)
- Robotics Process Automation (RPA)
- Cyber Security
- Industry 4.0
- However, there were four specific technologies that were highlighted by all our participants:
- Cloud – Cloud transformation was identified as a key priority and many companies who had already invested in comprehensive ERP systems are now planning to transition in to Cloud based ERP systems, driven by the increasing flexibility and cost efficiencies it promises to generate.
- Mobile – Due to growing smart phone penetration in the country, many corporates are attempting to deliver exceptional mobile experiences to their consumers. This range from m-commerce, targeted mobile advertising, mobile wallets and touchless airport kiosks that can be accessed via mobile phone QR codes.
- RPA – Robotic Process Automation has been widely used by many of the participants to automate certain manufacturing processes in factory environments, from Apparel to FMCG and personal care. Also, some companies have employed RPA to transform their back-office operations.
- Analytics – Analytics is another key priority for many Sri Lankan corporates. Both analytics and big data analytics are used by companies to analyse and predict consumer behaviours.
- Even though other emerging technologies such as IoT, AI/ML, Blockchain are being used by some of the companies, they are still at very early or experimental stages.
Opportunities arising from the trends; digital leaders see five key digital transformation opportunities in Sri Lanka that companies can capitalise on.
Personalisation and differentiation
- Availability of big data and advanced analytical capabilities (augmented by AI/ML) offer Sri Lankan companies the ability to deliver personalised offerings to their customers while also supporting in differentiating their value proposition from their competitors.
- A CIO of a diversified conglomerate shared that integrated data has the ability to offer the group a 360-degree view of their customers as they can integrate customer data via multiple industries like banking, insurance and retail.
- Many Sri Lankan companies have started offering an omni-channel experience to their customers via a hybrid of physical and digital channels.
- As stated by few CIOs, this is especially important in banking and financial services. Opening and operating a new physical branch is involved with significant overheads which will increase bank’s cost to income ratio. As digital finance disruptors like telcos and start-ups can operate cost effectively in a much larger scale, banks need to develop digital channels to reach mass scale of customers. This is evident via the proliferation of mobile apps, wallets and other smart consumer touch points over the last two years.
Digital Marcom and engagement
- Many CIOs have identified that the advancements of digital marketing have presented many new opportunities for Sri Lankan companies. This include reaching out to customers via multiple internet and social media channels, ability to run hypertargeted personalised campaigns and engage with customers and prospects via rich content.
- However as highlighted by a few participants, there are some gaps in Sri Lanka when it comes to Digital Marcom. This includes skill gaps in comprehending digital marcom analytics and lack of tools that can support Sinhala and Tamil content.
Reinvent business models
- Digital technologies have enabled companies to reinvent their business models through new sources of value creation, revenue generation and the use of wide eco-systems.
- For example, in the media and telecom domains Over-the-top (OTT) technology that enables content providers such as Netflix have bypassed cable TV providers to bring content to users. However, as a response to this, cable TV companies/Telcos have started collaborating with them.
- Also, a few digital leaders have highlighted cross-industry collaboration between companies in domains like banking, insurance, technology and telecom to offer joint solutions and creating value across the entire eco-system.
Agility – be agile and nimble, predict, forecast demand and supply, cost optimisation
- The global pandemic has made the world further unpredictable and uncertain. To navigate through these difficult times, the digital leaders emphasised that Sri Lankan companies should be agile and nimble in the way they conduct their business.
- As shared by few CIOs from the apparel domain, due to growth of e-commerce, unpredictable demand and disruptions in the supply chain, factories have to run at optimal levels in order to cater to the customer demand.
- Technology and telecom companies in Sri Lanka have been running agile at scale programs even before the pandemic and had converted traditional waterfall projects in to agile sprints, which has already generated tangible business results.
Despite the many benefits that digital technologies offer, many inherent challenges exist in their implementation. The following three key challenges were observed across all responses.
Culture and change management
- This was unanimously viewed as the biggest challenge for digital transformation.
- Most of the aging staff members are comfortable in the old ways of doing things and have the attitude of “if it ain’t broke, don’t fix it”.
- All the respondents have highlighted the importance of leadership in driving digital transformation initiatives. Many believe the leadership should come from the Board and CEO level.
- Other important point that was emphasised is the engagement of business users throughout the digital transformation journey. Digital transformation should take a cross-functional approach and should not be perceived as just an ‘IT project’. If business users are not engaged, resistance to be expected.
- However, it was also highlighted that COVID-19 has helped for staff and especially for management to understand the importance of digital transformation and had solved many cultural issues.
Investment and ROI
- Implementation of digital initiatives require almost all the time high level of investment in hardware infrastructure, software, networks and skills.
- As per the respondents, most companies have invested significantly on basic infrastructure such as ERP systems. For some of the investments the ROI may not be visible immediately and can take a longer payback period than expected.
- Therefore, some of the digital leaders are finding it difficult to convince boards on new investment. Which is also amplified by the prevailing pandemic situation and freeze on investments and recruitment by many Sri Lankan corporates.
- Interestingly, some respondents have shared that due to the greater understanding of leadership on the importance of digital, IT investments are the only exceptions to otherwise organisation wide investment and recruitment freeze.
Data and analytics
- While data and analytics is a great opportunity for Sri Lankan corporates, it also presents numerous challenges.
- Many digital leaders aspire to make their organisations data driven and implementing initiatives to have integrated data platforms to enable that. However, they encounter resistance from both customers and other supply chain and channel partners who are reluctant to share data.
- Even in the data that they capture, they face challenges in terms of quality and reliability of data as it can affect the data driven decision making.
- Also, given the surge in cybercrimes, companies have to adapt to state-of-the-art cyber security solutions in order to protect data privacy. This was especially highlighted by the banking industry as they are prone to be attacked by cybercriminals due the nature of information they hold.
Initiatives and future priorities
It was observed that regardless of the size, the digital readiness of the Sri Lankan companies shares a very diverse spectrum. Some companies are in the initial stages of exploration and getting started while others have started their journey years ago and being constantly learning and re-inventing themselves.
Regardless of where they are currently in the digital transformation journey, following four were identified as key priorities and initiatives for the next 1.5-2 years.
Developing a digital strategy and road map
- Most digitally advanced Sri Lankan companies and groups have already developed a holistic digital strategy and a road map for their organisation, which guide their digital transformation journey.
- This is not merely a technology plan, rather covers a broad spectrum of areas such as business scope and strategy, vision, mission, goals and objectives, organisational structure and staff, technology systems, processes, performance management, risk, compliance and governance.
- As per some of the respondents, they have developed this for a longer term like three years, but each quarter or so they review and update the plan to account for market volatilities.
- Most of the organisations that were covered as part of this study aspire to become a data driven organisation by the next two years.
- However, the approach taken by them can be different. While one company has centralised their data analytics unit, serving multiple business units and functions, another company has decentralised and placed data analytics teams at each BU and function.
- Most of the companies are investing in data infrastructure such as data warehouses, CRMs, data lakes, mass data management systems and analytics and visualisation tools.
- Also, many respondents shared that they have started investing in data analytics skills, both by hiring data scientists, analysts and engineers and training existing business users.
Skills development and awareness
- Another major initiative almost all the companies are driving is increasing organisation wide awareness on the importance of digital transformation and upskilling of all staff members.
- Many have identified this as a major imperative to address staff resistance and reluctance to change.
- Several initiatives are being implemented to ensure this, such as organisation wide training and coaching both in hard and soft skills, appointing digital evangelists to promote digital adoption within the culture and implementing digital KPIs linked to incentives.
Experimental projects (new tech AI, IOT, 4.0)
- As per the digital leaders, many organisations have started experimenting on emerging technologies such as Artificial Intelligence, IoT, Industry 4.0 and Blockchain.
- Few CIOs shared that they are actively collaborating with start-ups, tech vendors and partners to develop Minimum Viable Products (MVP) to address customer pain points, by incorporating these technologies.
- Some of these MVPs include AI Chat Bots for customer service, IOT based predictive maintenance of machinery in a factory environment, AI based risk assessments etc.
- As highlighted by a few CIOs, the advantage of this approach is companies can test the hypothesis and solution with minimal investment and can scale the solution if it is a success.
Digital technologies and trends are transforming and disrupting the organisations. No industry or organisation is immune from this transformation. COVID-19 global pandemic had accelerated this journey for most of the Sri Lankan companies offering a unique set of opportunities and challenges.
Therefore, for Sri Lankan businesses to become future-proof in this uncertain, complex and volatile environment, they must start embarking on this digital transformation journey.
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MTI Consulting (www.mtiworldwide.com) is an internationally-networked, boutique management consultancy, enabling clients to ‘Analyse > Strategise > Realise’ effective outcomes. Its practices include Strategy, Operations, Corporate Finance, HRM, Go-to-Market and Digital and Analytics.
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|The article is kindly provided by our partner, the international consulting company MTI Consulting.|