Technology
08.5.19

Could Cybersecurity Become a New Driver for Business Transformation?

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My involvement in the information and communications technology ( ICT) industry has lasted for more than 40 years. I have always looked at the strategic advantages offered by new technologies.

When I entered the industry, I used Videotex, a precursor to the internet. In the United Kingdom, it then went by the brand name Viewdata. I looked at this technology, at what organisations could do with it. I assisted, for example, in the 1980s, when the Commonwealth Bank introduced Telebank, the world’s first national online banking service. Its basis was that Videotex technology. Since the 1990s, this evolved further through internet-based technologies and more.

For approximately half of those 40 years, the technologies were basically used to improve existing businesses, services, business models, etc. However, from around  2000, it became clear that this was no longer good enough and organisations would need to start looking at totally different business models. I talked about the need to use these new technologies to build totally new products and markets.

Some of you might remember my persistent advocacy for companies in the telecommunications and entertainment industries to make such quantum leaps. Telstra, for example, talked about regulations to stop the internet, claiming it would undermine the reliability of the telecoms network. (AT&T protested similarly in the United States.) In the 1990s, I predicted that Foxtel would never reach its goal of  75  percent penetration by 2000. I challenged Telstra to combine its Sensis business (Yellow Pages) with BigPond and Foxtel to create a truly Australian digital media company. I also criticised the walled-garden online services that telcos and broadcasters launched during the late 1990s.

What I basically want to highlight here is the difficulty that organisations experience in using new technologies to really transform themselves and not use them to just improve their existing businesses but to create new ones. Everybody can see what the digital giants have been able to do. They disintermediate, disaggregate and dematerialise value chains. They have disrupted traditional models of production and distribution.

What has frustrated me is that the traditional companies that most certainly had the expertise to benefit from these new technologies have been largely unable to create new values for them.

One key reason for this was that traditional companies were more focussed on protecting incumbent businesses. Another was that they did not have the culture to allow for more risk-taking. Nor did they have enough internal people empowerment that would have allowed for this as well as increased innovation (eg: by accepting that at least 50 percent of ventures would fail) and embracing community and crowd engagement. The enormous shift in skills alone required for this new environment requires addressing with great urgency by enterprises, educators and government. Meanwhile, draconian immigration rules are creating a significant global competitive disadvantage.

These negative factors are still largely driven by the current economic and financial structures that are focused on short-term shareholder returns rather than long-term, broader stakeholder returns. In order to prosper over time, a company will also have to deliver a positive contribution to society.

With progressive, forward-thinking company strategies and government policies, over time, the value gained would result in higher values for an organisation. For instance, compare the declining values of the traditional telcos, broadcasters and retailers with the skyrocketing values of the new digital companies. As a country, we would reap the economic benefits of this, which in turn would provide the taxes needed to run a modern society.

My trigger for reviewing the above came when I attended a very interesting brief from Optus Business on its recently launched report Enterprise 4.0: a blueprint for success in the fourth industrial revolution.

What worries me is that in this report, published in 2018, we still see the same problems described above. I have reported on these problems for the last 20 years. According to its author, Rocky Scopelliti: “A discord between digital perception and priorities widens the gap between Australian enterprises and consumers’ shifting expectations.”

The digital giants of today, which I mentioned in a recent analysis, are Google, Apple, Facebook, Amazon and Microsoft ( collectively known as GAFAM) in the West and Baidu, Alibaba, Tencent and Xiaomi (called BATX) in China. Singularity University in the United States described them as exponential companies, having a disproportionately large impact or outputs – at least 10 times those of their traditional peers. This is exactly what I mean about the benefits of true business model transformation. The operations of these companies are totally led by data. Analysing, managing and successfully using that data is what has made them so successful. Interestingly, it is cyber surveillance that has been the key commercial driver behind these developments. (I will return to this later.)

With such strategies in place, these companies have been able to achieve, according to the report:

  • multi-sided markets
  • hyper-scaled platform orchestration
  • network market places
  • next generation communication infrastructure

The tools to achieve this first began to appear about 20 years ago. True, they have become more sophisticated over time and developed into what the report now describes as:

  • big data, analytics and algorithms
  • application programming interfaces (APIs)
  • artificial intelligence (AI)
  • the Internet of Things (IoT)
  • advanced wireless networks

Interestingly, the report also states that traditional companies clearly understand the problems they are facing. They are also well aware of the technologies that are needed and available. Yet, sadly, they have been unable to carry out the transformations necessary to bring them up to par with the digital leaders. Typically, traditional enterprises are trying to be new businesses while still operating with traditional methods. As a result, they miss out on speed to market, the scale of operation and market impact.

I argue that the main reason for the ineptness of traditional companies to truly transform themselves is the fact that they are kept hostage by the current neo-liberal economic model that favours short-termism and punishes strategies based on broader stakeholder returns, long-term strategies based on risk-taking, business model transformation, disintegration of company structures and all the other elements that are crucial for change.

It is also important to mention that digital transformation based on neo-liberalism (instead of broader stakeholder returns) could also pose a threat to society. It can find use in the undermining of internal processes, as was all too evident in Australia’s recent banking inquiry.

Additionally, in the rush to face off competition, risks were taken that destabilised markets, and more industry concentration could lead to a growing number of too-big-to-fail companies. This is especially true of the financial and ICT sectors.

We also need to listen to the 116 global leaders, including people like Bill Gates, George Soros and the late Stephen Hawking, who urged the United Nations, national governments and society to oppose the threat of weaponising AI and robotics, and act before the tech world opens this box we got from Pandora.

These are very serious digital governance issues, and there is a firm need for action, but at the same time I would argue that on the positive side there is a new opportunity for organisations to become exponential,  and provide societal returns through digital transformation.

High on the agenda of almost all enterprises now is cybersecurity. There is a clear link to cyber surveillance (data analytics etc) that, as I mentioned, was a key driver in the development of these tech giants. This provides us with the opportunity for the learning of lessons that are both positive and negative. On the one hand, we have the transformational power of our hi-tech tools. On the other is the need for cybersecurity, including privacy and insurance, to deliver positive societal outcomes. As we already see, some financial institutions are now dramatically overhauling their entire ICT systems partly as a result of the banking inquiry in order for them to adhere to their societal obligations and increase cybersecurity. This latter includes better privacy protection. These issues have now risen to the attention of the highest levels of these organisations. This is positive as leadership in true digital transformation will have to come from the top.

There is now a golden opportunity to use this momentum to truly transform underlying business models and operational structures. All enterprises – not just the banks – should carefully consider these developments as we indeed have indications that some serious transformations are starting to happen. See also:  Cybersecurity is failing big-time and this is hard to fix.

Global Seven News

Paul Budde

 

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