It’s time to recognize the fact that any modern company is “software”: business is applications that help you work and make decisions, partner and director of the BCG Moscow office Vadim Pestun is sure. And it’s absolutely not important, he continues, what the company is doing – it bakes pies, produces oil or is engaged in rail transportation.
Digital transformation – the desire to effectively use technology to gain a market advantage – has become a corporate mantra: any large business seeks to become digital in the eyes of partners and investors. According to IDC, in the next three years, global investment in digital transformation will exceed $ 7.4 trillion – half of all costs in the field of information technology. But despite the efforts of the business, a recent study by PwC Global Digital IQ 2020 (a survey of 2380 company executives around the world) showed that only 5% of companies do everything necessary to get the most benefit from innovation. At the same time, inefficient technological experiments that do not bring a quick return on investment during the crisis are an impermissible luxury. How not to be among the digital outsiders?
Digital IQ Test for Business
Today, digitalization is no longer the hallmark of individual industries, says Larisa Markova, Managing Director of Applied Intelligence Accenture in Russia. Three years ago it was possible to say that digital transformation affected industrial enterprises and industries to a lesser extent, and now there are no more industries left outside this process, she points out. This is also confirmed by the experience of IT companies that help introduce intelligent technologies in business processes: from customer service to building complex supply chains and automating procurement activities. So, the company ABBYY, a global developer of solutions in the field of intelligent information processing and analysis of business processes, in Russia alone, over the past year, the number of projects in the corporate segment using smart technologies has increased by 19%. This indicator suggests that more and more companies from different segments of the economy are joining the “digital arms race”.
The success of digitalization initiatives can be assessed by the company’s Digital IQ level. This is a digital competency index that measures a company’s ability to capitalize on digital technology, says Piston of BCG. Elena Ustyugova, head of the KPMG strategic and operational consulting group in Russia and the CIS, calls this indicator a digitalization index and suggests measuring it by a number of key parameters, such as the development of digital products and sales channels, the maturity of transformation program management processes, the level of digitalization of business processes, etc. “If we focus on the reengineering of business processes, the progress of the company can be assessed on the basis of how much decision-making within the process is based on pain analysis their data and analytics, how automated and traceable the process steps are, ”Ustyugova emphasizes. “The most successful companies use technologies and solutions that, on the one hand, allow you to manage large flows of useful information from corporate sources, and on the other, they help to study well the structure of key processes in order to know how to increase their efficiency.” CEO of ABBYY Russia. “The most successful companies use technologies and solutions that, on the one hand, allow you to manage large flows of useful information from corporate sources, and on the other, they help to study well the structure of key processes in order to know how to increase their efficiency.” CEO of ABBYY Russia. “The most successful companies use technologies and solutions that, on the one hand, allow you to manage large flows of useful information from corporate sources, and on the other, they help to study well the structure of key processes in order to know how to increase their efficiency.”
According to a BCG expert, Process Mining, or process analytics, plays a significant role in enhancing digital intelligence. “Process Mining is of direct importance for the transition of the “as at all “class of companies to the “as needed “class,” comments Piston. This is a method of reengineering business processes, but not on the basis of a descriptive model from documents, but on the basis of collected and analyzed signals, events, and metrics. Analysts get these data from the systems with which employees of companies work. “The most advanced solutions — the so-called Process Intelligence — use machine learning to predict the possible outcomes of projects,” notes ABBYY Shushing.
The second important element in the Digital IQ concept is the ability to effectively manage the data that companies accumulate in the course of their activities. It analyzes not only corporate documents, but also the rest of the array of structured and unstructured information from corporate systems: audio, video, text and other streams, Shushing explains. They need to be analyzed “on the fly” in order to promptly adjust the actions of employees, the operation of technologies and even completely change entire business processes, he explains.
Process Mining relies on the data contained in the logs of information systems, allows you to restore the picture of how the business process actually works. And often it differs significantly from management expectations, says Ustyugova from KPMG. The expert gives such an example from his practice. The head of one of the large companies during the interview said: in his company, agreements are agreed in a single system in parallel on all services and spend no more than a week on this. But uploading and analyzing data from the approval system showed that only 12% of agreements are agreed in parallel, the remaining 88% are sequentially, service after service, and the average time, taking into account repeated rounds for the same document, is more than 30 days.
Similar observations are made by ABBYY regarding the financial sector. So, according to the regulations of the largest Russian banks, the process of opening an account for a legal entity should be from several hours to a day. In fact, in many financial institutions, this procedure in Russia takes from a week or more, and such routine tasks as checking documents by security services and financial monitoring take up 52% of the time.
Intelligent analysis of business processes allows you to not only observe their course, but also to determine the factors that affect business performance, says Pestun. For example, to study not only the requests and time of users on the website of the seller company, but also to see what happens to the servers, backend systems and supporting infrastructure at this time. Thus, each transaction and its parameters, success or failure of the “search and purchase” process can be explained, he continues. “If earlier conclusions on the status of a particular business process were made on the basis of fragmentary information from different information systems, now market leaders do it centrally, relying on the entire set of data. The reengineering of business processes from analog becomes digital, “emphasizes Shushing.
Signs of Digital Intelligence
Those 5% of companies that are doing everything to get the most out of digital technology, PwC experts called Transcoders (from the English word transcend – “go beyond”, in Russian the company calls them flagships). The flagships’ view of digitalization is wider, investments from investments in this area are larger, and their profitability is growing 17% faster.
How do flagships differ from other companies? First of all, they have a clearer and longer-term vision of digital transformation. The changes require top management to plan a career and business roadmap for 5–10 years ahead now, says Alexei Kosher, partner, head of technology practice at PwC Russia. “Companies with high digital intelligence do not resort to patchwork automation (when different departments solve similar problems with different tools), they do not solve a one-time task, gathering a working group each time. They look at the whole landscape of future changes and introduce innovations not once, but continuously, in real time, “Shushing explains.
Increasing digital intelligence contributes to a change in the approach of leaders to the introduction of innovation, said Shushing. They need to deeply understand how the processes that are planned to be automated are built; understand how such a transformation will affect employees; change company expenses, analyze risks, he points out.
How to stop catching up with leaders
What is holding back the development of digital intelligence? An insufficient level of stabilization of processes, the development of basic information systems, insufficient maturity of data management processes, Ustyugova lists. It’s not enough to test digital technology, it’s much more difficult to integrate it into the regular activities of the company, changing the existing business processes and decision-making approaches, she explains.
In Russia, the main obstacles to the development of digital intelligence are a lack of understanding of the real capabilities of IT solutions and the opacity of business processes in organizations, Shushkin points out. So say 68% of companies representing large businesses, according to the study “Artificial Intelligence in Russia” IDC and ABBYY, published at the end of 2019.
Many companies need staffing changes, the development of skills, working methods and infrastructure to ensure digital transformation, says Okishev. It is necessary to conduct training and introduce digital tools – the priorities of employees should be shifted so as to help further business development, he notes.
“Technology is a means. But it is very important to accompany the application of new technologies with changes in the management and communications of companies. Only these measures will help educate employees and ensure that they are ready to accept changes, and not be afraid of them, ”says Jörg Dorler, Deloitte partner.
An important step to becoming a company with high digital intelligence, a flagship, is to empower employees, write the authors of the Global Digital IQ 2020 study. Most traditional trainings focus on building knowledge, rather than developing skills or understanding, they point out. “Modern technology and employee roles may become obsolete, but if you focus on helping your employees think and work more flexibly, they can add value to the organization as the situation changes,” the study said.
Businesses are applications that help you work, make decisions, participate in value chains, says Piston. Any errors in digitalization or a lack of understanding of the importance of this leads to great losses. So, the era of building ERP-companies only for the needs of the financial department and accounting ended with the understanding that, if possible, a person should not participate in transferring data from one system to another. “In other words, in order to provide better data and calculations based on them, it is necessary to exclude the human factor,” Piston concludes.
“Only those who can keep their ship afloat will go further. And for this, the whole team and each “screw” should work smoothly and at the peak of performance, “Shushing emphasizes.