Global uncertainty and inflation are just two of the challenges that every enterprise in the world has to deal with. In South Africa, these are exacerbated by power and political issues.
As enterprises strive for the resilience to counter these challenges and pivot to new opportunities, digital transformation can be a critical weapon in their arsenal.
The way companies think about how they plan for technology has to take these macro-economic factors into account, says Nihmal Marrie, MD and partner at Boston Consulting Group (Johannesburg).
A massive 70% of CEOs have said they need to change – but only 12% have made plans to do so.
A lot of the global events are a result of the Ukraine war, Marrie says. So far, 12-milion people have been displaced and the cost of reconstruction runs into the trillions of dollars. But the global supply chain has also suffered from the conflict.
But the Ukraine conflict is not an isolated event, Marrie says. Across the globe unpredictable geopolitics is playing out, underlining other potential flashpoints.
“We have never seen the pace of change like now. So we need to anchor digital decisions on this level of uncertainty.”
In Africa, we will suffer reverberations from the global situation, leading to food insecurity, ongoing conflict, and climate risk. So the continent, and South Africa, need to gear for these changes and prepare for higher inflation.
Dr Martin Kotula, global vice-president: industry and value at SAP, points out that inflation rates have surged by about 400%.
Some of the root causes have been exploding freight costs and volatile lead times; Covid-caused production and harbour shutdowns; food and grocery price increases; and material shortages and reduced supplies.
There have been further pressures from labour unions pushing for increases, spiralling inflation rates and foreign exchange fluctuations, changing company valuation and more.
Into the future, one potential scenario could see global power plays reverting to collaborative mode. Another scenario could see ongoing conflict with concomitant economic shocks.
We could potentially see the building of a western and eastern bloc, and undecided nations forming a third bloc.
The last scenario could see global escalation, which will lead to further conflict, more supply chain disruption and other economic challenges.
These scenarios are important for resilience planning for companies.
A massive 82% of CEOs expect high interest rate to affect their company’s performance; 52% pack the capability in comprehensive cost management to transition to a lean organisation; 97% will take action this year to address global challenges.
Technology and digital transformation could be a game-changer, says Marrie.
“We see an unpredictable outcome, and anything could change day by day,” he says. “The good news is that the advances in digital technology allow us to chart a path to make organisations much more resilient.”
Making the right decisions means building a more resilient and secure tech platform; and to build digital and technology as a capability that can increase efficiency and create competitive advantage.
These organisations will be more resilient and more agile and more innovative.
Enterprises can turn ambiguity into opportunity by rapidly deploying and adapting technology and digitalisation to withstand, recover and thrive in altered circumstances.
Of course, cost is a key element of any CEO’s agenda, Marrie says. “We use the term fit for purpose – tech should be a key enabler of business outcomes, but must be built on a fit for purpose platform.”
Companies are spending significant amounts of money on tech, but there is significant value to be realised.
“However, in gaining cost savings, the technology function must also be fit for purpose.”
New technology projects could save 30% to 50% in costs. But only part of these savings can be realised purely by technology – the rest have to be achieved through business collaboration, with a systematic approach to a business technology model.
Disentangling technology is going to be key to these savings, Marrie says. Regulatory compliance is one driver, followed by risk mitigation, and business and user expectations.
Technology leaders are already looking at various decoupling projects, including social media, applications, data platform, infrastructure, network and vendors. But these all need to be undertaken against the backdrop of regulator compliance, risk mitigation and expectations.
Enterprises have to pay special attention to reducing the digital risk. The potential cost of cyber threats is $2-trillion this year – which is a big potential loss.
At the same time, 82% of breaches are still caused by organisational and people failure. But, with 3,5-million unfilled cybersecurity roles, tis number is not expected to decrease in the short- to medium-term.
Against the backdrop of these challenges, technology and digitalisation re a key driver to future-proofing the business, says Dr Kotula.
It might be obvious, but companies need to focus on planning and forecasting, optimising forecasting and panning, optimising prices and contribution margins, and ensuring supply chain transparency.
Funding the journey can be done by bringing the cost of operations down – using technology. Kotula says defining use cases can be useful in doing this.
“We also have the opportunity free up money t fund large systems, but enterprises also need to protect the core.”
Marrie sys this can be done by disentangling technology and reducing digital risk.
The ideal outcome is to future-proof the business by building a business with growth and resilience.
Technology and digitalisation can help companies to do this.
Analytics can guide companies to fast, informed decisions across all business dimensions. A digital supply chain lets companies identify and analyse the supply chain disruptions, take corrective actions and respond and collaborate in realtime.
Sourcing and procurement lets companies understand spending patterns.
Sales can be optimised with an omni-channel presence with realtime adjustment depending on material availability, lead times and demand changes.
Supply chain finance enables digital capabilities for suppliers in vital cash flow freedom. Working capital can be achieved by leveraging inventory optimisation strategies and hedge risk. Receivables finance gives companies an understanding of when the customer might pay, and how to speed it up.
Human resources systems let employers monitor the employees’ pulse of engagement levels, identify problem areas and mitigate them.
Kotula advises that, to combat inflation, companies must have insight-driven analytics to assess the impact of price spirals. They must look to accelerate cost and cash management. The should become more nimble in decisions and pricing. They must build an agile supply and demand chain.
“The hardest thing is to become a digital and resilient company,” he concludes.
This article first appeared on ITOnline.