The pandemic brought innovation to center stage overnight and accelerated organizational digital transformation at unimagined speed across sectors. Professor Rajendra Srivastava (Special Advisor to the Dean and Novartis, ISB Hyderabad) and Professor Ashish Sinha (Professor of Marketing at the University of Technology Sydney) discuss the importance of the following emerging technologies adoption to actively and deliberately fuel Business Innovation and Growth forward
Professor Rajendra Srivastava talking about the Centre:
The Centre's mission is to be recognized internationally, driven by research and insights. The goal is to leverage emerging technologies to improve business performance, growth, and resilience and be the first-ever Centre coming out of India focused on industry engagement and thought leadership.
The focus is predominantly on the platform and channels for innovations from India to the world. Businesses will be able to climb up the value ladder by adopting technology from abroad and by examining the business model evolution in India, thereby encouraging competition on the value created in the marketplace rather than competition on labor arbitrage or cost arbitrage.
The Centre ensures that companies and organizations begin to understand what drives market value or market capitalization in the marketplace. Case in point, for companies such as Microsoft, the price-to-book ratio or the market CAP-to-book ratio is roughly about 14 or 15, which means about only 6% of Microsoft is on the balance sheet.
There is an evitable need to understand which assets are driving the value, whether technology, IP, human capital, the network of distributors, the brand, or the capability of the company to execute. The Centre will lead the process by making a deeper understanding of the value of intangible assets and capabilities facilitated by technology.
The seminar concentrates on emerging technologies and how they can drive value in diverse areas, whether Fin-Tech, Ed-Tech, or Med-Tech. The Speaker, Professor Srivastava, questions people's understanding of fintech, whether fintech or financial institutions are adopting technology or technological companies are adopting finance. Indeed, the Centre's priority is to look at value migration and how technology enables that, as most changes in the marketplace are technology driven.
Much work and talk are done about platforms that develop thinking by looking at organizational transformation, digital transformation, and innovation policy's importance. The Centre's goal is to understand and utilize these insights to observe how various priorities are managed and how they can help us. Through research papers, webinars, and advanced programs looking at business innovation, the emphasis will be on evidence-based research that supports growth and innovation, and value creation.
Professor Rajendra Srivastava talking about Value Creation and Appropriation:
This session will be used to understand business models and how are emerging technologies accelerating the effective use of business models, a framework that is closely linked to value creation and value appropriation. A business model is used for creating value for the customer and appropriating value for the company that is serving the customer.
Framework for understanding this concept:
Shareholders are interested in sustainable outcomes, in particular, making more money that increases cash flows which accelerates shareholder value. Creating shareholder value involves making more money, making it faster and making sure it does not go away. This evolution is triggered by appropriate investments. This could be investing in a brand, investing in emerging technologies such as AI and ML or investing in the census. Businesses focus on efficiency to deliver value to customers. They bring the cost down to compete for price on price and drive out the competition. The third way to add value is through customer centricity. Every company has customers. They need to understand who they are, what they want and how they are going to deliver to them.
Notion: Shareholders are looking for money and customers want value.
The most successful organizations are ambidextrous which means they're able to be both the low-cost leader and technology leader. Profitability is driven by the customer's will and to think of the brands as having pricing power. The biggest risk a company has is losing its customers and customer retention is presented as saving the company.
Putting all these different strategies into a single framework, we get the original 3 market-facing processes: Customer management (referring to focusing on customer centricity), Supply Chain Management, and Innovation management. And value appropriation is through enhancing cash flows, increasing resilience, and accelerating growth. So, this framework captures the notion of value creation for the customers vs value appropriation for the business community.
Other ways to enhance performance are looking at the platform and looking at how we can integrate processes. Much of this can be driven by emerging technologies. Along with emerging technologies, we also must develop the capabilities of an organization to improve performance. We need to understand business models, which are: how do we create value, how do we appropriate value? What are the processes for enhancing value to customers, what are the mechanisms for appropriating value for the company and, finally, as we look at process integration, how do we drive process integration and how do we accelerate growth, how do we accelerate the quality of decisions or quality of solutions available in the marketplace? And this is where platform thinking comes in.
Professor Ashish Sinha talking about Digital Transformation:
The narrative around digital transformation has been changing. It is no longer about just knowing how to use digital technologies, but also about building resilience and creating shareholder value. Popular media might lead us to believe that digital transformation has all been figured out with almost every company jumping on board. However, data tells us that about 70% of organizations fail in their journey of digital transformation. To understand what digital transformation is, why should companies be interested in digital transformation, how should they embark upon this journey, how can they monetize emerging tech, and how can they create value with it; we've come up with a simple equation. It is not just with data, emerging tech, and AI that one can complete their transformation journey. For value creation and appropriation, regardless of the kind of technology in use, any organization will also require a change in its business model. Only an innovative business model, combined with emerging tech can lead to a successful digital transformation for any organization.
Prof. Ashish explaining the Transformative Marketing table:
A new business model allows you to target a new segment/set of customers. Gaining competitive advantage is also crucial in the journey of moving from the first quadrant (incumbent) to the fourth (new business model and digital transformation), as explained in the article. Unless you place yourselves in the fourth quadrant, there won't be any explosive growth as you see in the examples of the big tech company transformation such as Microsoft and Apple. They innovate their business models with the launch of every new product. With the release of each product like the iPod or iPhone, Apple had a different business model. The problem however is not identifying what must be done, but rather how, as it’s not an easy journey from the first to the fourth quadrant.
Prof. Ashish explains the Framework for the monetization of Emerging Technology:
Organizational assets like data-related capabilities, model-building capabilities, and managerial capabilities would allow the organization to understand the needs of existing and new customers. This helps organizations gain a sustainable competitive advantage by creating new business models and by entering new markets. This further helps companies to increase cash flows and reduce volatility. Due to that shareholder value increases and attracts more investment. Thus, Digital transformation helps companies to grow bigger.
Summarizing Digital Transformation, Prof. Ashish said that Digital Transformation is not only about emerging tech, but also actually about coming up with a new business model which is about value creation and value appropriation. That allows companies to target new segments that they couldn't target before, and it also allows them to do something that their competitors haven’t done. This becomes a disruptive innovation or sustained competitive advantage.
Prof. Ashish’s views on how companies should embark upon the digital transformation journey:
Digital transformation could be a smoother process if the leaders of the organization have a data-led growth mindset. There are some data-related capabilities and assets such as data capabilities, data curation capabilities, data governance capabilities, and data factory platform capabilities. Then it's the model-building capabilities of technology as well as the managerial capabilities. And then, as the capabilities of the market-based assets, you know either you build, or you leverage market-based assets. This helps to build customer-centricity and helps in digital transformation.
Discussion between Professor Rajendra and Professor Ashish
Professor Rajendra’s views on how the framework could be used in Fintech Space
We are using Data to leverage insights that could help us in developing new products and ideas. This could help in accelerating growth. If we look at the agricultural business, they need money for all activities. Previously, they had a difficult time borrowing money, as money lenders extracted a lot of value and people with asymmetric resources and asymmetric information took advantage of the farming community. Now, it has gradually changed as the banks are using the information of the previous planting and previous harvesting. And by using blockchain they can establish credibility, so rather than having a credit bureau, blockchain is used to establish the credibility of the farmers, and hence farmers are being offered loans. So, that’s how we are beginning to combine Agri-Tech with FinTech and Mark-Tech.
FinTech is not so much innovation in the financial product, it is the innovation in how to manage customer relationships. SBI’s YONO and E-KYC are examples of how technology is enabling productivity with the help of analytics. The marketing is more effective with this fair amount of cross-selling. It takes the uncertainty out of the market; increases resilience and the cash flow is more stable.
Platform thinking is also helping Indian companies. The power of having data and information is realized. Information is being provided and if you've got a marketplace and then you, you can bring in different actors and players which changes the whole landscape. What is already happening is that the development of that B2C access is creating a B2B opportunity. For example, BMW or Maruti be interested in knowing who their credit-worthy customers would be, and they would like to have access to that. And, in effect, what they can do is the appropriate value from the B2B clients, based on the value they have created on the B2C side, so this kind of activity has already started.
Professor Ashish talks about how Indian fintech innovations could contribute to the West
With the increasing technological prowess and sophistication of the Indian markets and businesses today, it is expected that the next few decades will see a lot of reverse innovation wherein the Indian firms will have a lot to contribute to the global operations of their Western counterparts. Moreover, the scale that India has in terms of the axis of data or its quality to data mining can provide valuable insights which can help the West innovate and come up with new ways of doing things which could be in the form of new business models, business processes or modes of targeting customers that no one has ever thought of or even attempted.
The Centre for Business Innovation is putting forward these knowledge series. We will be hosting these learning sessions once a month and we look forward to engaging with all the participants in the coming sessions.