Embrace digital technologies or go out of businessgbs17
Digital advancement should be looked at as an opportunity to create, said panellists at a discussion on navigating digital disruption at the third edition of The Economic Times Global Business Summit in Dew Delhi on March 27-28.
Amit Midha , president, Asia Pacific & Japan, Dell; Ananth Narayanan , CEO, Myntra; Bibop G Gresta , cofounder, Hyperloop Technologies; Janmejaya Sinha , chairman, Boston Consulting Group (Asia-Pacific); Rana Kapoor , CEO, YES Bank, Vanitha Narayanan , chairman, IBM India and Shane Smith , CEO Vice Media discussed the impact on digital technologies at the discussion moderated by Supriya Shrinate, chief editor-news at ET NOW. Edited excerpts:
Supriya Shrinate: How big a differentiator can digital be and is India ready to leapfrog?
Rana Kapoor: I think this is the tipping point of disruption, and creative disruption, because disruptions need to be explained in terms of being a very positive factor. I personally believe that the three Ds for disruption absolutely are totally aligned, like the ducks in a row. If you look at the demographics, and the improving statistics behind the demographics including the income part which is being generated by the demographics, I would like to believe that is a very important D. The second D is really the pace at which the government over the last three years and in the latter half of the last three years has been in a way taking the speed breakers out of the way and helping in what I call deregulation, which really means ease of doing business and that is also cascading into the states … And the third part, which has been gradual in India … is digitisation. Honestly the fourth factor is the sigma of all of this which adds to disruption. All the Ds are aligned for what I would like to believe is going to be a very entrepreneurial economy, a very enterprising economy which is almost around the corner.
Shane Smith : …if you are to look at a laboratory for what is going to happen in the future with young people, you have no further to look in India on how they consume, where they consume, what they consume …
Supriya Shrinate: What are board room discussions like as far as digital is concerned in India? Have the conversations move from the CIO’s office to the CEO’s?
Amit Midha: I see this as an opportunity for our customers, I see this as a way to become globally successful, far more efficient … (gain the) ability to create something that something you cannot imagine today … unexpected possibilities are possible. Technology is leapfrogging 10x every five years, so in 15 years everything will be 1000x more powerful … this would lead to unexpected outcomes and I think that is where leadership has to think about that this is not IT, this is not a CIO agenda. Some of the folks have said, ‘let us create a chief digital officer’. We think that is also a wrong strategy. This has to be led by the CEO … it has to be led from the top … this is about creation. I would say conversation three years ago used to be lot more about disruption. Today it is about transformation and more the companies realise this, the more likely they are going to be successful. Let me give you one quick stat: 40% of the companies actually would not survive this, which means if you see this as a disruption you are less likely to survive than if you see this as a digital transformation and ability to create so much more, and I think that is a pretty startling fact. Size is no longer your advantage unless you are in the utility industry, oil and gas or mining. If you are in retail, media, travel, you got to get on with digital first mindsets CEO led transformation mindset.
Vanitha Narayanan: Digital disruption, digitisation, digital transformation and it is really digital reinvention for the companies that have been around. There are digital natives and they use all the design points of being digital and we have heard from several of them and there are several on the panel as well, but for companies which have been around it is about reinvention which means it is much more than just customer engagement which is probably the first thing that people looked at and it is far more than just mobile technology anymore because when you look at it, it is about supply chain so it is about efficiency, it is about trade finance, it is about precision medicine, it is about precision agriculture. So, when you start to put things like IoT, blockchain and AI cognitive, it is about completely imagining the way people live and people work. So, it is not just board rooms but it is your entire ecosystem, it is your employees and you have got to take the fact that your millennial want to work and live differently and your customers want to interact with you differently.
Supriya Shrinate: Is there a connection between how digital a country or business vis-à-vis how they are growing, vis-à-vis how they are doing in terms of their performance?
Janmejaya Sinha: The basic problem is this big conflict between experience and imagination so all of us have grown up in a world with our own experience and all our experience was pre-digitisation. So, we have grown up thinking, working, doing things in a manner which has grown very slowly and it has gone incrementally but what is happening is that you have to really imagine and it is really hard because the constraints on our imagination are forced by our experience and so whenever we are talking about board rooms and about how we think about the opportunities in every segment that we talk about how do we imagine the possibilities. And to be honest with you whether you take cyber risk, whether you take digital marketing, whether you take the transformation of an operation you know what you look for redundancy for focus, for enhanced transparency or you look for digital attackers like a Myntra coming in and destroying Wal-Mart, it is really interesting that the imagination is our biggest constraint. So, when we sit in company board rooms, when we sit and talk to people what are we fighting, we are fighting the ability to take risks on our imagination.
Supriya Shrinate: We see more and more people adapt to and adopting online shopping and paying online. What do you think have been the enablers here?
Ananth Narayanan: I think there in India there are few fundamental things that are going on. The first is mobile penetration. At Myntra, 80% of our revenues actually come from our app and that by the way is going to leapfrog. You have talked about disruption and leapfrogging. We will have 750 million phones by 2020 half of which will actually be smartphones. So, if you look at more than 55% revenue coming from tier II towns, I could tell you a bunch of customer stories where people who do not have internet access all the time or have intermittent internet access still coming and shopping online because this is their view to the world. So, mobile is one big one. I think the second is digital payments. I think we are just going to leapfrog credit cards. I think with the combination of Aadhaar and mobile penetration, and a whole bunch of innovations that are happening, that is the other thing that is going to dramatically change the way we work. The third is, at least at Myntra I believe we are at an inflection point where this combination of AI machine learning with the amount of data that we have is starting to transform how regular work happens. So, one of the big things I keep talking about is just like you have driverless cars, can you actually have designer-less fashion and I think that is not far from reality. So I think all of these things – mobile, digital payments, as well as AI – are the fundamental forces that are doing it. And then, of course as many panellist mentioned that, demographics and the fact that the customer now spends three to three-and-half hours on the internet every day and consumes most of the content that way is another big factor. So, these are the big things that are actually happening in India and fuelling the entire ecommerce and digital lifestyle.
Supriya Shrinate: Is India ready to embrace something as disruptive and revolutionary as hyperloop?
Gresta: I think it is absolutely ready because you have a big need for a hyperloop … the density of population and the amount of innovation that you have in this country and the resources that are available (make it) a perfect candidate to have a system like this.
Supriya Shrinate: How ready are we to embrace digital across the financial services sector?
Rana Kapoor: There is still the fear of the unknown right, fear of missing out, I think there is a fear in the system of missing out. Number two, what I called SMAC that SMAC today is something which is a reality because what has happened in the last five years, probably happened in the previous 50 years and what happened in the previous 50 years probably happened in 250 to 500 years so SMAC is about the social, it is about the mobility, it is about the analytics and it is about cloud. We have to understand that there are frugal technologies, whether it is in my profession of banking or everybody else who is here in terms of diversity that frugality is very important and technology today is becoming a very frugal mechanism to achieve that. In banking blockchains and marts and machine learning and the impact of even UPI and more recently the government’s programme (such as) BHIM or QR sounds better, why QR is an outstanding programme because it will create so much frugality in payments that it will leapfrog just like somebody said in a different context like mobility did in 1994-1995 … So, I think SMAC – social, mobility, analytics and cloud – they need to really emerge and the sigma of that is India’s quantum leap in digital transformation.
Janmejaya Sinha: There are six types of transactions we make – people to people, people to merchant, people to government, merchant to merchant, merchant to government and government to government. Where is the problem? The problem is in people to merchant and merchant to merchant. And why is there this problem? Because the merchant and we are 50 million MSMEs of which the micro enterprises are 45 million. This is where a lot of India lives and a lot of India interacts, and for them to switch to cashless is actually losing their business model because they will have to pay tax, they will have to comply and they have to pay the moneylender. Rana does not lend to these micro enterprises. His bank does not. It is the moneylender … The point is that till those people can be taken out of the informal economy, they cannot go towards digitisation and cashless and if they cannot, we will not because that is the crux … we need to get the formal sector to lend to them at normal rates…
Ananth Narayanan: If you look at ecommerce right before demonetisation, in Myntra 60% was cash on delivery and 40% was some form of digital payment, credit cards for the most … So it has now become closer to 50-50. It used to by the way, the first month of November it shifted the other way, so it became 40-60 but it has sort of come back. In the ecommerce space by the way it is different problem. I think Flipkart invented this. The reason for cash on delivery is that it is actually also the trust factor, so part of it is trust, part of it is the digital transaction. So, what has now happened is we still actually have the trust issue, so interestingly lot of our service delivery agents now carry point of sale machines and the card on delivery as oppose to cash on delivery as a percentage has gone up. I think it is not easy to change mindsets. I am not talking about the unbanked sectors. I think there is a mindset shift that needs to happen, to say I am getting more and more comfortable with it.
Supriya Shrinate: What does digital or data do to the future of jobs? Which are the ones that are going to be redundant, which are the ones that are still going to stay?
Amit Midha: I think I find lot of folks who believe we are moving to Terminator work, right. So, in the sense that machines will take over and all of a sudden you know humans are in minority, I do not subscribe to that. I think first and foremost the humans have lot of challenges; machine has to help them solve bigger challenges. It is more of a Star Wars kind of scenario where machines are still under control of humans versus Terminators where machine have taken over. But frankly speaking, if you just look at the jobs that we used to have in 1963 in the US economy to the jobs today we have, there are 69 job titles that have disappeared completely. So, this is where I say but all those folks have moved on and average income has gone up, quality of living has gone up and all of a sudden this is a much more prosperous society where people can experience life and their quality of life is significantly better. So, I would argue that technologies, be it precision medicine, be it AI, be it robots, you know, this is disruptive to certain entrenched players, but it is also evolutionary to create new jobs, to create new outcomes and in the process create better quality of living.
Supriya Shrinate: What role can old institutions play?
Rana Kapoor: Old institutions have deep pockets, right, so they have to keep their vision intact and change their strategies and follow what I call the FANG strategy. What is the FANG strategy? Today you look at Facebook F, A, Amazon, N, Netflix and then you look at Google. So you adopt those frugal and global strategies and then you look at what Uber has done and Airbnb has done and they have become global multinational with super scale and no brick and mortar. So, they have become multinationals with very frugal and agility like the good old Indian tiger or cheetah whatever, so they have built those platforms and that to me is the conventional model moving into the more contemporary model because youngsters in America have proven they can build the most brilliant multinationals in a very frugal and in a very short timeframe and build agility. And this is the learning for India.
Supriya Shrinate: Is it a profitable venture to think that companies can rake in profits by selling disruptive technology to Indian consumers?
Shane Smith: I think I would like to go back to your other question and combine the two as are traditional legacy businesses afraid of disruption. Yes they are quaking in their boots because if you look at Wal-Mart, for example, which took all of these years in bricks and mortar and then Amazon comes and then Amazon is coming and that comes they are sitting there saying there goes my business. So are they scared? They are terrified. Can companies make money selling disruption in India? Of course and by the way that is going to be in every country … And, by the way, if mainstream companies or status quo companies do not either buy or absorb or learn from the disruptors, then they will go out of business.