It will take months or even years before we can fully comprehend the full extent by which the Covid 19 pandemic has impacted our lives and the way companies conduct their business. But one thing is evident, that this recent global pandemic has brought on various consumer and business habits that have accelerated the digital transformation journey. These changes would require companies to think deeply on how to take advantage of the opportunities arising from these new trends, how it is transforming their business at an accelerated rate, and how they should embrace these changes to adapt to this rapidly changing new normal. Exhibit 1 shows the six digital trends that serves as the core in making digital transformation possible.
SIX Digital Trends are now seen as CORE to Digital Transformation
History has shown that in severe economic downturns and recessions, some companies are able to gain advantage by reassessing the growth opportunities created by these downturns and reconfiguring or transforming their business models to better realize those opportunities. Companies today need to reallocate their resources in order to focus their capital on the transformation programs needed to be more successful in this new Digital Business Model. In the following document, we will discuss how companies can identify opportunities from changing habits brought by the pandemic. We will also zero in on two specific industries, banking and e-commerce.
Identifying Growth Opportunities from Changing Habits:
To emerge in a stronger position from this crisis, companies must have a systematic approach in understanding changing habits and how it impacts various industries and products. A company can start by mapping the potential impact of the changing behavioral trends to identify specific products or businesses that will most likely grow or contract because of the change in behavior. The chart below shows some of the products or businesses that may be affected by the behavioral change of “Reduced face to face interactions or meetings”. We focused on specific impact of this change in habit on the banking and retail industries.
As depicted on the chart above, the pandemic has resulted in a decline in face-to-face interactions/meetings, as more and more people would like to protect themselves from the virus. This new habit in turn has resulted in an increased volume of online meetings, encouraged more people to do online transactions when dealing with their banks or favorite retail stores, and has dramatically changed the way banks or retailers alike communicate with their clients. Most of these changes did not happen overnight with the emergence of the virus, but rather these changes were accelerated, resulting in a new work paradigm, where digital transformation and remote working are the new business modus operandi.
The increase in online meetings has also resulted in a growth in demand for equipment that makes online meetings effective and efficient. This includes PCs, laptops and mobile devices such as smart phones and tablets. Such growth in IT related equipment has a clear correlation to an increase in cyber security investments for companies as most meetings and communications will be done through these devices. Consequently, the growth in online meetings has aversely resulted in a decline in traditional office space and meeting rooms and the required busines travel for face-to-face meetings. Industries affected by this such as airlines, hotels and restaurants, commercial real estate and even mass transit are expected to experience declining revenues.
As face-to-face meetings are reduced, the continuing need to transact with banks and retailers would push most clients to execute their transactions online. This would increase the growth of digital/ online banking and e-commerce with the detriment to traditional brick and mortar bank branches as well as retail stores. It may not totally remove these facilities which have been a staple in both industries, but the growth in online transactions would require management to review in detail the opportunities to transform their business model and re shape the industry. These changes would cover areas such as the KYC (Know Your Client) process, having a robust fully digital on-boarding process, capturing, and managing documents for a purely online/digital experience. We will discuss in a latter section, how banks and retailers alike can look at solutions to enhance their capabilities in responding to this changing need.
A recent study shows that economists and business analysts alike are also in agreement that Filipinos of which 73 million are registered internet users and 99% have at least one social media account, have warmed up to online transactions given the reduced mobility experienced during the pandemic lockdowns. In fact, a steady growth has been seen for the e-commerce industry in the country with annual sales increasing to $ 3 Billion in 2019 from just $500 million in 2015. This is expected to reach $12 Billion by 2025. This has given rise to e-payment platforms as well as delivery services like Grab and Lalamove creating a whole new business model that has left traditional delivery platforms, trying to catch-up and adapt.
The way we communicate has also been vastly affected by this change in habit, as most of us who have been working from home for months already could attest. As we long for the human connection and interaction of face-to-face communication and the quick results it delivers, digital communication has become vital with communication platforms such as Zoom, Google Meet, Microsoft Teams, becoming standards across the entire SME landscape. Work collaboration tools like Microsoft O365 have also been utilized fully to facilitate transfer of documents and regular coordination among employees. The need for an instant response has expanded the demand for messaging platforms like Viber, WhatsApp, and Messenger, using these facilities for a mix of social and business environments. This growth in digital communication has increased to a point where organizations need to devise clear digital transformation road maps and solutions and communicate these clearly to the whole organization.
As these modes of communication have transformed the current work environment, the roles of physical tellers and salesmen have more and more become less relevant, with people doing their own banking and shopping online. This creates an opportunity for banks and retail outlets alike to rethink how to re-purpose these well-trained personnel to add further value to the business under this new normal. These rapid changes towards digital communication have also opened opportunities for a new branch of marketing and selling, under the digital realm. Today most companies would measure the effectiveness of their campaigns based on the number of views, likes and comments on its digital ads or by the average length of time that viewers watched their adds. Target markets can be classified by gender, age, work, and other demographics ensuring that the ads hit their intended target markets. Those who can become leaders and innovators, will have a clear competitive advantage. Having a digital first mind set, and first to market approach are clear business imperatives in this new world.
The Role of Digital Transformation:
Many have confused digital transformation with digitization. Digitization as the word suggest, means converting your current processes, documents, or information into digital format. Digital transformation on the other hand, entails a lot more and normally involves a total re-think of the company’s business model, identifying the opportunities brought about by recent technologies like machine learning, AI, Blockchain and cryptocurrencies. It involves creating new values for clients by harnessing the full benefits of these new technologies.
Going back to Exhibit 2, and the impact that one change in habit has on the banking and retail industries, both industries are up to a big challenge of transforming themselves to meet the digitally driven current and post pandemic requirements of their respective industries. Instead of the traditional business growth attained through branch and retail store expansions, growth will now be driven digitally. This implies that new customers need to be on-boarded digitally, their identities verified and managed through digital identity platforms that store personal, business, credit and other information. This is a dramatic paradigm shift from the centralized information management that these industries have been accustomed to for several decades now.
With an end to end digital on-boarding, new client verification and registration are all seamlessly translated. The banks and retailer platforms should have a unique and strong functionality to validate the identities of new clients by sweeping through global identification databases for an independent identity validation. The use of highly advanced Optical Character Recognition (OCR) and machine learning to automate these processes including management of client related documents, which allows for a new AI Identity recognition well beyond 2FA.
All the above changes towards a more digitally adept market also expands the need for cyber security, as more and more people are doing their transactions online. These would not mean just enhancing the existing anti-virus or firewalls we have in our systems, but rather planning more deeply on how to manage risks related to phishing and other cyber security attacks. Exhibit 3 gives an executive summary of what cyber security means in today’s digital world.
vectors are due to escalated privilege attacks. Loss
Executive summary cyber security
Over the years, the level of sophistication that cyber criminals have gained in their attacks have tremendously grown and with more people using their laptops or PCs and their home networks, interacting with various websites, or using dozens of applications, the challenge for cyber security has never been at its peak. This would require an entire security, digital maturity, and capability review, with more focus on strengthening endpoint security, BYOD, or the laptop and PC users, as attacks can happen from unsecured home networks or from malicious individuals locally. Exhibit 4 shows a new approach on Cyber Security given the new normal.
A new Cyber Security a NEW Approach
A stronger platform such as blockchain which utilizes distributed ledgers and have been proven over the years to be more secured may have to be considered. In the end, investments may have to be refocused on this area as companies expand their digital presence. With DLT 3.0 coming online into the commercial space tokenization of assets, ultra-low latency as well as reduced cost are now clear consideration in leading organizations.
In conclusion, the pandemic has brought dramatic changes in the way we do our work and the way we do things. This has created a lot of negative impact on some industries but have also brought opportunities for some. It is only by analyzing the impact of these changes, identifying opportunities, rethinking our business model to maximize these opportunities, and re-focusing our resources, can our companies survive and go out triumphant amidst the pandemic.
To be the front runner in this digital world and to protect data sovereignty, government and companies should perhaps consider implementing 3.0 DTL technology as we move forward in this fourth industrial revolution.
Cyber Security must be seen as a business imperative and constitute the fabric of the new digital landscape. With a business-driven approach model, upgraded digital workforce and a cyber culture, organizations will be well placed for the future.
About the Authors
Ariel Victoria is the Partner and Managing Director of BI Consulting Philippines. He is a Certified Public Accountant (CPA) and a seasoned finance executive with more than 27 years of experience in finance, 20 years of which as a Chief Finance Officer (CFO).
Marek Boguszewicz is a senior Partner and Chief Cyber Security Officer / Digital Officer of BI Consulting Group, is a senior technology executive / adviser / speaker with over 30 years of experience in the Technology-Finance, Digital Transformation, Cyber Security, Blockchain and NextGen 3.0 DLT Technology.
• The State of E-commerce in the Philippines- August 2,2020, Business World Online; “Numbers Don’t Lie” by Andrew Marasigan
• “Adapt Your Business to the New Reality”, Harvard Business Review, September-October, 2020 Issue; by authors Michael G. Jacobides and Martin Reeves