Think Tank

Digital Transformation: The Pillars, Strategies and Tactics

In conversation with Anish Shah - Group President (Strategy) – Mahindra Group

The digital age is overwhelming in the scope of change it is engendering. That change is silent, and it is fast. It has overtaken how we live and is transforming how we work. The hype around disruption is often focused on a few new age companies such as Uber, Airbnb, and Amazon. But the fact is, every enterprise is (or at least should be) concerned about digital disruption. Moreover, digital transformation is about much more than just operational issues. Instead, it goes into a realm where systems, people and strategy come together, opening up new options and opportunities for businesses and sometimes, entire industries. At a recent CMO Forum session, IMA India invited Anish Shah – who leads the change agenda at the Mahindra Group – to explain the Mahindra Group’s digital strategy blueprint and its vision of the future.

The pace of disruption has increased exponentially….

Disruption: The Pace and Scope…

Today, the pace of disruption has increased dramatically but it has not always been that way. It took the telephone 75 years to reach 100 million users worldwide, while Candy Crush, a popular online game, took less than a year to achieve that mark. Technology is at the forefront of this disruption, evident from the fact that for every 100 people in the world, there are 95 mobile phone subscriptions, 40 internet users, 32 active mobile broadband subscriptions and 25 social media users.

…resulting in a shorter lifespan of companies

Robo-advisors in financial services

Technologies that augment human intelligence are hugely expanding the scope for disruption. Saudi Arabia recently awarded citizenship to Sophia, a humanoid robot that leverages advanced machine learning and big data to self-learn and make decisions without human intervention. Financial services are seeing the rise of ‘robo-advisors’, especially in the US, which provide automated, algorithm-driven financial planning services with higher accuracy, and at much lower fees.

Emerging technologies like AI and blockchain are disrupting the manufacturing and retail sector

Technology in agriculture is enabling precision farming

In the manufacturing space, emerging technologies like blockchain are enabling suppliers and manufacturers to enter into smart contracts that drive transaction efficiencies while enabling an unprecedented level of trust and transparency. The retail industry is seeing the transformation in the grocery experience, with Amazon GO grocery stores allowing for check-out free shopping via AI, deep learning and computer vision. Smart speakers like Amazon Echo, Google Home and Apple’s Siri, now influence as much as 70% of consumer purchase decisions. The growing adoption of technology in agriculture is enabling more accurate ‘precision farming’, allowing farmers to optimise the use of fertiliser and pesticides and to predict their harvests on the basis of soil composition, weather, inputs and similar parameters. In the auto sector, emerging technologies will have profound implications: Stanford professor Tony Seba claims that by 2030, 95% of all vehicles will be electric, autonomous and shared.

Success will come to those who are flexible enough to leverage technology

With new technologies emerging all the time, the average lifespan of a company is 18 years. Just as striking, today when a company like Amazon decides to enter a particular industry, the sector’s collective market cap instantly falls by 10-30%. This suggests that both now and in the future, success will come to those who are flexible enough to leverage technology to engage with customers in deeper and more meaningful ways.

Disruption comes when a new entrant takes away a significant share of the market

Long-established market leaders are turning the threat of disruption into an opportunity

…and Its Key Dimensions

For most incumbents, disruption comes in three broad dimensions: customer experiences (such as Netflix, Tesla, Paytm); decision support (such as Lenddo, Waymo, Wealthfront); or new business models (such as Ola, Uber, AirBnb). However, incumbents are increasingly responding to threats through planned efforts. Essentially, disruption manifests in the following two scenarios:

  • ‘David versus Goliath’ scenario in which a new entrant takes away a significant share of the market from a successful large company. For instance, Xiaomi became the number one smartphone brand in India after displacing Samsung; Slack, an online collaboration platform, crossed 8 million active users in just four years; Spotify, an online music streaming app, has been able to maintain the highest market share despite competition from biggies such as Apple and Amazon.
  • ‘Empire Strikes Back’ is a scenario in which long-established market leaders turn disruption into an opportunity. For instance, Disney launched its own streaming service to combat Netflix. Wal-Mart has been building an online presence through a series of acquisitions in the last two years. As a result, the company witnessed a 33% growth in online sales in Q1 2018. Vanguard launched its own robo-advisory services in 2015. Today, the company commands the number one position with AUM of USD 112 billion.

  • Disruption and innovation should be part of an organisation’s DNA

    Navigating Disruption: The Case of M&M

    To sustain long-term success in the current environment, disruption and innovation must be part of an organisation’s DNA. The key to success is changing the game internally. Mahindra’s approach involved three aspects:

    Succeeding in a disruptive environment requires an agile mindset…

    • Digital basics: To successfully navigate disruption, companies require fresh mindsets and find an entirely new way of thinking and working: one that is built around curiosity, a willingness to celebrate failure (quickly moving on) and the ability to ‘break things’ wherever needed. Mahindra hired four digital experts with strong experience in leading transformational journeys in both established companies and start-ups. As a first step, these leaders collaborated with the business heads to conduct a three-month diagnostic, which translated into a three-year technology roadmap for the department.

    …leaders to set the tone at the top, both by constantly learning and embracing new technologies

    Despite the backing for digital change from the CEO’s office, there was strong resistance at the middle layer. M&M’s embrace for a culture of continuous change helped overcome this resistance. It tested an AI-based automated marketing tool that proved to deliver better outcomes than humans. Despite initial resistance, the marketing team was quick to embrace the tool, knowing well that it may render a good part of its own team redundant.

    Digital transformation involves changing the core nature of a company, its processes, operating models and systems

    • Digital transformation: Transformation is not just about change management; instead it involves changing the core nature of a company, its processes and operating models. Mahindra Finance, for instance, leveraged blockchain to disrupt its supply chain financing, reducing its supplier bill-discounting time from seven days to seven seconds. It is now working to make the platform an industry standard, which has the potential to disrupt the industry. To stay relevant and ahead of the changes, M&M has built a ‘Centre for Emerging Technologies’ that brings together the heads of business and internal experts, who collectively analyse emerging trends in technology and then frame the appropriate action plans.

    Big organisations must embrace start-ups to promote swift action of strategically-viable opportunities

    • Start-ups: Too often, transformation efforts fall flat due to the problems that arise when silos – a legacy of command-and-control structures – fail to come together with a sense of ‘mission’. To overcome this, many big corporations are embracing start-ups within their walls. This calls for an agile leadership mindset that promotes swift action of strategically viable opportunities, and an organisational structure that lends operational independence and freedom. M&M, for instance, launched ‘Trringo’ – the tractor world’s equivalent of Uber. Similarly, the company is ‘Uberising’ the commercial-vehicle rental space with ‘Smart Shift’, which connects SMEs with transporters and taps into unused capacity, not only of M&M CVs, but those of its competitors too. In the electric vehicle space, M&M acquired an Italian EV start-up – Pininfarina, famous for designing Ferrari sports cars – to develop a high-performance electric sports car. The aim is to leverage new-age electric technology for its overall auto business.