Digital Transformation: When Risk and Opportunity Collide
While concerns are growing that trade tensions might slow global growth in 2019, business activity has bounced back from the decade-long shock of the global financial crisis. Major indicators show that the number of new companies being formed hit a 20-year low in 2014 before hitting pre-crisis levels in 2017. And with tech companies leading the S&P 500, a big driver behind this recovery is the rapid pace of technological evolution in a highly connected world.
“Industries are going through tremendous change,” says Lori Goltermann, chief executive officer, U.S. Commercial Risk and Health Solutions, Aon. “Consumer preferences coupled with technology are shifting traditional business models. As digital transformation continues, industries will continue to be disrupted and new models will constantly emerge.”
Not only will digital transformation create significant changes in the ways organizations do business – from workforce planning though to supply chains – but these opportunities will also come with risk. So how can the C-suite embrace – and prepare for – key changes and adapt to the business environment of the future?
Smartphones and the growing number of connected devices have changed the way consumers buy goods and services. A decade ago, the idea of being able to earn money when you wanted to by sharing your home – or even a car ride – seemed far-fetched. Fast forward to 2019, and companies such as Uber, Lyft and Airbnb have a combined valuation of close to $100 billion and expect to have IPOs this year. As the world becomes even more connected, leaders will embrace – and prepare for – various elements of digital transformation:
Consumers will force change With the swipe of a screen or a click of a mouse, consumers are interacting – and transacting – with companies more often. “We’ve seen entire industries emerge because they promise something to the end-user: a better customer experience,” says Randy Nornes, executive vice president of Risk Solutions at Aon. Whether through investment in R&D or forcing disruption within their own organization, leaders will seek to disrupt the status quo to create – or maintain – their competitive advantage.
Talent models will evolve Companies will compete for workers with the skills of tomorrow as the digital transformation alters the talent equation. “As organizations prepare for continued digitalization, workforce transformation will be at the core of their business strategy,” says Michael Burke, chief executive officer of Talent, Rewards and Performance at Aon. Business leaders should build talent strategies that best align with their business’s changing needs.
Physical and digital worlds will collide As devices continue to communicate and collect data, the industrial internet of things (IIoT) will change the way they operate. Increasingly, Goltermann notes, organizations will prioritize the protection of intangible assets, such as data and brand, while also ensuring that physical property and equipment are properly protected against emerging cyber threats.
Technology and big data will drive improvements Whether via enterprise technology systems or personal wearable devices, data will continue to be collected and, when used correctly, it can help businesses optimize processes and performance. Companies that can connect systems and data throughout their organizations will be in a better position to extract insights and capitalize on the value that the data brings.
“As digital transformation continues, and we begin to realize the future of industry across traditional sectors such as manufacturing and construction, more data will generate analytical insights that can move companies into real-time decision-making,” Goltermann says. “Whether to mitigate or manage through a risk – or capitalize on an opportunity – these insights can lead to competitive advantages.”
Supply Chains: A Connected World Creates Opportunities And Increases Dependencies
As technology changes businesses, one area where its influence is especially felt is in the supply chain. Whether optimizing manufacturing operations or fulfilling consumer expectations of speedy product delivery, the connected world has created even more links in how goods get from A to B. A few ways in which new technologies are reshaping supply chains include:
• Speed: Data and communications will allow businesses to improve the speed of product delivery or get needed components or supplies in a timelier fashion.
• Efficiency: Tools such as blockchain will allow businesses to better track items along the supply chain, increasing efficiency, improving supply chain performance and providing greater public safety in such areas as food supply chains.
• Improvements: Data analytics will allow businesses to more efficiently respond to regional differences in consumer demand. Artificial intelligence and the internet of things will provide greater insight into supply chains allowing businesses to manage them more effectively.
And while the opportunities are great, businesses will need to find ways to monitor and mitigate the risks of a just-in-time delivery system.
“Supply chains are constantly evolving,” says CJ Dietzman, managing director and Security Advisory Practice leader at Cyber Solutions, Aon. “As suppliers and models change, understanding key dependencies in the supply chain is critical.”
Dietzman notes that having policies, procedures and the appropriate governance in place, will help organizations capitalize on the opportunities while also understanding and addressing emerging vulnerabilities – across IT systems, people, process and controls.
Seizing Opportunities As Business Is Transformed
Today’s digital transformation is as significant as the forces of the Industrial Revolution more than 200 years ago. The companies that best understand how they might apply those technologies to their businesses will be poised to thrive in the business world of tomorrow.
As technology continues to raise the bar of consumer expectations, there will be unknowns. However, business leaders can view the shifts as opportunity. “From protecting against emerging risks to long-term workforce planning, change will be constant. Finding the opportunity amid this change and building teams to capitalize on it – will be key to long-term success,” says Goltermann.