Getting ready for a technology driven economy
Many boardrooms recognise the importance of Information and Communications Technology (ICT), but many leaders still see technology as something for ICT managers to worry about. Some leaders are not able to provide strategic leadership or make effective decisions in leading this critical function because they are digitally illiterate. In many cases this has led to some push backs and limited engagement between different role players within organisations. In the end strategic ICT alignment becomes an afterthought. This is negatively impacting growth of in our economy as some boardrooms still invest in technology only to get internal operational efficiency and effectiveness but they miss opportunities of digitally transforming their organisations, and exploit technology disruption.
The Story of Kodak:
“A few years ago, a “Kodak moment” meant something that was worth saving and savouring. Today, the term increasingly serves as a reminder and a warning to executives of the need to stand up and respond when disruptive developments encroach on their market. Unfortunately, as time marches on what actually happened to Kodak is being forgotten, leading executives to draw the wrong conclusions from its struggles. Given that Kodak’s core business was selling film, it is not hard to see why the last few decades proved challenging. Cameras went digital and then disappeared into cell phones. People went from printing pictures to sharing them online. Sure, people print nostalgic books and holiday cards, but that volume pales in comparison to Kodak’s heyday. The company filed for bankruptcy protection in 2012, exited legacy businesses and sold off its patents before re-emerging as a sharply smaller company in 2013”.
The story of Nokia:
Nokia emerged from Finland to lead the mobile phone revolution. It rapidly grew to have one of the most recognisable and valuable brands in the world. At its height Nokia commanded a global market share in mobile phones of over 40 percent. While its journey to the top was swift, its decline was equally so, culminating in the sale of its mobile phone business to Microsoft in 2013. It is tempting to lay the blame for Nokia’s demise at the doors of Apple, Google and Samsung. With a young, united and energetic leadership team at the helm, Nokia’s early success was primarily the result of visionary and courageous management choices that leveraged the firm’s innovative technologies as digitalisation and deregulation of telecom networks quickly spread across Europe. Although Nokia’s results were strong, the share price high and customers around the world satisfied and loyal, Nokia’s CEO Jorma Ollila was increasingly concerned that rapid growth had brought about a loss of agility and entrepreneurialism. Between 2001 and 2005, a number of decisions were made to attempt to rekindle Nokia’s earlier drive and energy but, far from reinvigorating Nokia, they actually set up the beginning of the decline. Beyond 2004, top management was no longer sufficiently technologically savvy or strategically integrative to set priorities and resolve conflicts arising within the organisation. Increased cost reduction pressures rendered Nokia’s strategy of product differentiation through market segmentation ineffective and resulted in a proliferation of poorer quality products. This may have contributed to its demise.
Disruptive innovations are here to stay. These are innovations that continue to create a new market, value network and eventually disrupt existing market and value network, displacing established market-leading firms, products, and alliances. Robotics, Artificial Intelligence and machine learning is creating new products and services that will soon define the new technology savvy world. The question that we must ask is”Are our boardrooms able to predict what is coming down the road and counter its negative impact, whilst exploring the opportunities they present to us?”
COVID-19 pandemic has been for the world, during the same period the world and South Africa has been pushed into an unplanned digital journey that would have been impossible a few years ago. Over the period until October 2020 many businesses have now experienced what technology can do and are now beginning to ask pertinent questions and the answers seem more acceptable. Two such organisations are an insurance company in the Western Cape and a provincial government department that seem to entertain a possibility that certain functions will continue with remote work for the foreseeable future. We also see many universities move some of their postgraduate programmes into virtual classes and University of Pretoria seem very aggressive with the initiative. The question is, are these isolated incidents or is there a move to retain some benefits of remote-work, and if so what will the new world look like?
The direction and implications of a digitally transformed economy is still yet to be determined and defined. We need to be more proactive and start defining our world into the future. We must take it upon ourselves to take ICT into our boardrooms, understand it and put the necessary effort to own and drive ICT collectively at an executive level. The risk of an incorrect ICT strategy and investment may have serious implications for many organisations as they may even lose relevance in the future, but creating a platform for innovation and creativity may be change our future for the better. Therefore, boards, CEO’s, CFO’s and Corporate and Strategy Executives must begin to understand and appreciate digital transformation and its impact to the organisations.
Intelligent Digital Technologies
Intelligent disruptive technologies will bring improvement in processing speeds, capacity, and timing as validation steps of multiple processes will now be performed in parallel by robots. More effective workload balancing and 24-hour processing capacity will increase productivity and may address challenges of different time zones. The new technologies will deliver enhancement in quality, reduced physical space requirements, and standardisation opportunities.
Integrating intelligent automation, artificial intelligence, cognitive processing and block chain may begin to change how we run our enterprise resource planning (ERP) solutions, risk management, internal and external auditing. The new technologies may allow organisation to automate key repetitive manual processes. Some activities that are currently being performed may be replaced through automation as technology will now run these processes. So, executives must look at how a technology driven future will look like and how it will impact their operations so they can plan accordingly. When Nokia CEO announced being acquired by Microsoft, his last words were “We didn’t do anything wrong, but somehow we lost”. Their opponents were too powerful and they could no longer survive.
An example: If an integrated Artificial Intelligence and Block, chain solutions were to be implemented to drive ERP solutions many of our processes will be redefined and many job as we know them will be lost. When we ultimately fully automate supply chain and logistics management many SCM practitioners will be affected. Our executives need to start asking some tough questions so that they can prepare for the future and minimise the risk experienced by Nokia and Kodak.
Questions to ask
- What business are we in today?
- What problem are we solving for our customers?
- Can our solution be automated?
- What new opportunities will a digital disruption open up?
- What opportunities will technology disruption bring for our organisation?
- How do we integrate latest approaches to software development and delivery to keep us competitive?
- What capabilities do we need to realize these opportunities?
- Remember that incumbents are best positioned to seize disruptive opportunities. After all, they have many capabilities that entrants are racing to replicate, such as access to markets, technologies, and healthy balance sheets.
- Of course, these capabilities impose constraints as well, and are almost always insufficient to compete in new markets in new ways. Approach new growth with appropriate humility and learn from Nokia and Kodak’s experience.
King IV (principle 12) recommendations to Governing bodies:
- Assume responsibility by setting the direction for how the organisation should approach and address ICT,
- Approve policy to give effect to the direction,
- Delegate to management the responsibility to manage ICT effectively,
- Oversee the management of ICT, including overseeing that:
- ICT risks are integrated into organisation-wide risk management,
- The organisation is resilient,
- Management responds to security and social media incidents with a breach coach,
- ICT is used ethically and responsibly through an ICT policy,
- ICT laws are complied with,
- Information management sustains and enhances the intellectual property protection of the organisation,
- An enabling and supportive ICT architecture exists,
- Data protection,
- Information security law aspects are in place,
- The risks pertaining to the sourcing of ICT in ICT contracts are managed,
- The organisation responds to disruptive technologies,
- Consider receiving periodic independent assurances on the organisation’s ICT arrangements, including outsourced services,
- Disclose the governance and management of ICT by the organisation, including disclosing an overview, focus areas, actions taken and plans.
KNMINC can assist?
King IV provides a guide on how the executives can begin to take ownership of ICT. Key to this is to start understanding your own ICT and being able to ask the right questions to ensure that ICT strategy supports the business strategy. We can assist the organisation in building towards the future of ICT being owned and driven from the boardroom. Some of the things we can do to assist include:
- Perform a high level ICT Control Self-Assessment (CSA).
Objective is to assist management identifying control weaknesses and risk within the system, so that the ICT risks and mitigation activities are owned collectively by the executives and not only the ICT function;
Develop an implementation plan
- Help integrate ICT Risk Management, CSA and King IV (principle 12) recommendations into a comprehensive ICT Governance, Risk and Compliance Management programme;
- Assist identify technology platform to drive implementation;
- Assist create a reporting dashboard to track compliance and implementation; and
- Phase-in other departments and begin automating their key business processes as well.