Implications of Digital Transformation on the Strategy Development Process for Business Leaders

Implications of Digital Transformation on the Strategy Development Process for Business Leaders

Theunis Gert Pelser (University of KwaZulu-Natal, South Africa) and Garth Gaffley (University of KwaZulu-Natal, South Africa)
Copyright: © 2020 |Pages: 43
DOI: 10.4018/978-1-7998-4882-0.ch001


What the internet with its connectivity did to facilitate the third industrial revolution, cloud computing and artificial intelligence have done for the fourth industrial revolution. Technology is changing the world at an alarming rate, which includes products and services that require scale to manage the growing demands of an ever-changing and increasing population. Digital transformation is enabled through cloud technology where human comprehension cannot cope with the size and speed of data required to manage a business in the digital economy. Artificial intelligence and machine learning assist in activities to overcome human limitation, using algorithms to develop predictive and simulation models and scale to provide data for decision making. The technologies employed to run and execute these require skill and resource. The challenge for the modern-day CEO is that the use of technology and its demand in the digital economy of the Fourth Industrial Revolution is not fully understood by them due to their digital skill level and managing the generational skill sets in their structure.
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The Fourth Industrial Revolution has manifested itself in the modern era, sparked by artificial or machine intelligence enabled through cloud technology which is having an unprecedented impact on businesses where embracing it is essential to corporate survival in the digital economy, Kaldero (2018). Mell and Grance (2011) define cloud computing as, A model for enabling ubiquitous, convenient, on-demand, network access to a shared pool of configurable resources and released with minimum management effort or service provider interaction.

Cloud technology has facilitated digital disruption of traditional business which has seen the rise of technology businesses in a short period of time dominating their industry sectors, such as, Amazon, the world’s most important retailer, and Uber, dominating digital transportation, through cloud technology having no limitation to the size and speed of data and software development. Digital transformation is all about software, where hardware without software has no value at all and software developers are and have become the most important people in the world Chappell (2015).

Meffert and Swaminathan (2018) define digital transformation simply as driving the business forward by leveraging the opportunity offered by technology. Westerman, Bonnet, and McAfee (2014) offer an alternative definition whereby the use of technology radically improves the performance and reach of the business where executives are transforming their businesses in three areas, customer experience, operational processes and business models. Gruman (2016) finds meaningful common ground between these definitions by stating that all aspects of business and society are impacted on with the application of digital technologies. Balachandran and Prasad (2017) share that big data analytics and cloud computing are two of the most significant developments in the information technology industry in recent times.

Kane, Palmer, Phillips, Kiron, and Buckley (2015) in their 2015 Digital Business Global Executive Study and Research Project by MIT Sloan Management Review and Deloitte concur with Pyle and San Jose (2015), identified the key driver in the digital transformation process as strategy, and not technology. A repeat study in 2017 showed 63% of respondents were over 45 years old. Most of these business leaders are familiar with strategy, strategic direction, and strategy development processes but are not technically astute in the digital parameters associated with digital strategy fluency and competing in the digital economy. If not digitally astute or competent and there is hesitation on the part of business leaders to take risk, invest in technological innovations, minimise the impact of digital disruption, and delegate key decisions to more technologically astute individuals the strategic direction of the business could be impaired. It is essential that business leaders have the confidence to make these decisions off an informed platform through having the correct data available in the right format at the required time.

This view is supported by Andriole (2017), of the opinion that it is imperative for business leaders to become fully proficient in cloud computing which enabled the Fourth Industrial Revolution and that in leading the organisations digital transformation, one must not be seduced by the hype, but that the first step is to grasp the realities of digital transformation.

The aim of the chapter is to source meaningful content as input to develop a unique framework and model for business leaders to better understand digital transformation and technological innovation for inclusion as an integral component of their strategy development process to meet the digital demands of business in the 21st century. Also to determine if human limitations, Ross et al. (2016), by business leadership is the contributing factor to the lack of digital transformation in the strategy development process for their businesses. The objectives to realise the aim would include:

  • Determine the importance of data to the industry sector under review

  • Understand the societal influence of the digital economy and level of digital capability

  • Determine of the threat of digital disruption limits investment and risk

  • Investigate human limitations of business leaders and human capital investment

Key Terms in this Chapter

Cloud Computing: Digital transformation is enabled through cloud technology where human comprehension cannot cope with the size and speed of data required to manage a business in the digital economy. Storage, size and retrieval of data is no longer a problem to humans. There are no longer limitations to the amount of processing, size of data required or how much data can be sourced and the time in which to source data this is enabled through cloud technology. Cloud technology overcomes these challenges though the storage and access of big data and enables the development of algorithms that drive artificial intelligence and machine learning, both key enables of the fourth industrial revolution.

Cybersecurity: Cybersecurity is seen where security alerts and cyber-attacks are becoming more frequent and malicious, these threats include private access attempts and exploitation software or phishing, malware, web application attacks, and network penetration. Organisations can counter these threats through two key areas of innovation, security analytics and biometric identity measurement. The focus of security analytics is on predicting and preventing breaches through early identification and intervention of such threats, to apprehend intruders enabled through managed services platforms. Biometric security for a more secure, accurate, and convenient form of identification has become the standard for governments in all identification documentation. Biometric fingerprint sensors are the favoured identification method currently in use in commercial access control.

Virtual Reality: Virtual reality (VR), is a distinct, yet complimentary technology used in gaming and entertainment applications creates an artificial environment but can be used for training purposes to replicate physical situations. Holograms of the equipment are used to train technicians by immersing them in a virtual environment using VR which adds a fourth capability of simulation to AR’s visualise, instruct, and interact.

Nanotechnology: Nanotechnology is defined as everything when miniaturised to the sub-100 nanometre scale as having new properties regardless of its origin, source or what it is. This allows and makes nanoparticles the materials of the future where nanoscale materials can be used in various products such as chemical catalysts, anti-bacterial agents, and sunscreen applications. The smaller the particle size the ratio of surface to bulk atoms increases where at a larger scale the surface atoms are largely inconsequential but at nanoscales a particle that is almost all surface is possible where the atoms can contribute significantly to the overall properties of the material. This relationship is applicable to the electronics industry where materials such as graphene and quantum dots find application in small computers and devices for communication to great advantage.

Artificial Intelligence: Or AI, is the most general-purpose technology of the digital era which with machine learning is regarded as the most disruptive technology and is a major source of competitive advantage. The reason why artificial intelligence is becoming so prominent is that humans cannot articulate everything they know which makes automation difficult. With artificial intelligence this is now possible enabled by the internet of things, where continuous processes are captured on an ongoing basis providing data stored and retrieved from the Cloud to be accessed for algorithm development the building block of artificial intelligence.

Blockchain: Is a distributed data base, with storage devices for the system not linked to a common processor but containing a list of ordered records called blocks. Each block is linked through a timestamp to a previous one and through cryptography where only users can edit parts of the blockchain they own through processing keys to write a file. This ensures that everyone’s copy of the distributed blockchain is kept synchronised. With the security built into blockchain through the distributed timestamping server and peer to peer network results in a data base that is managed autonomously in a decentralised manner, blockchain are excellent for keeping records, transactions and enabling mass dissemination of trade and transaction processing.

Digital Migration: The migration of key technological trends on the future time line is best explained on a timeline where the horizontal axis has the level of technological progress and breakthrough and the vertical axis with the level of technological adaptation. Level 1 is the time period (1994 to 2020), the past to current, with the introduction of the internet in 1994 that gave rise to the third industrial revolution. Level 2 around the 2000’s introduced cloud technology enabling the Fourth Industrial Revolution. Level 3, in and around 2020, is about exponential breakthrough within the current situation. Level 4, (2020 to 2025) requires risk taking and experimentation with future technologies. Level 5, (2025 onwards) is the futuristic endeavour with entrepreneurs such as Elon Musk, CEO and founder of Tesla and SpaceX, developing driverless automation in vehicles, space travel to Mars and drone deliveries amongst some of the futuristic technologies.

Paired Technologies: In the migration of technologies from level 3 to 4, (2000 to 2025), the following technologies work in tandem to establish digital enterprise maturity levels. These include, artificial intelligence and machine learning, augmented and virtual reality, nanotechnology with 3D and 4D printing, blockchain and cybersecurity.

Three- (3D) and Four-Dimensional (4D) Printing: The 3D printing process of making a physical product from a three-dimensional model is possible by laying down many fine layers of a material in succession, for example replicating an obsolete motor car part. The printing of matter for example organic material, changing structures or shape over time is found in the fourth dimension contained in 4D printing. This enables the printing of human transplant tissue able to adapt to body chemistry and structure. This shows how 3D and 4D printing are changing the face of manufacturing in the Fourth Industrial Revolution’s digital environment.

Digital Transformation: Is defined simply as driving the business forward by leveraging the opportunity offered by technology. More specifically it is the use of technology to radically improve the performance and reach of the of the business in three areas, customer experience, operational processes and business models. To be competitive in the digital economy going forward business leaders are urged to digitally transform their businesses, using technology to remain competitive and relevant.

Software: Digital transformation is all about software which employs code used by code writers to develop software. Hardware without software has no value at all and code writers and software developers are and have become the most important people in the world.

Strategy Development: The term strategy originates from the Greek word ‘Strategia’ meaning, from the office of the general and interprets the strategic position of the organisation where strategy is the plan for deploying resources to establishing a favourable position. Traditional strategy development is normally undertaken annually. Digital strategy is aligned with the employment of technology to digitally transform the business and is defined as nothing more than a business strategy inspired by the capabilities of technology. With the rapid changes in technology digital strategies are short lived and need to be re-evaluated and updated almost every six weeks. The outcomes of the digital strategy form key objectives in the corporate strategy.

Machine Learning: Together with artificial intelligence, machine learning, ML, is being rated as the most general-purpose technology of the digital era, as both a disruptive technology and source of competitive advantage. Simply, machine learning is the ability to keep improving performance without human intervention on how tasks should be completed and is an excellent learner in that a wide range of tasks can be achieved at superhuman performance levels.

Augmented Reality: Sight, of all the sensory capability is the real powerhouse of human absorption. There is an immense amount of data around products which the human interface must take advantage of where, in the physical reality is three dimensional but trapped on a two-dimensional delivery through an iPad, computer screen or mobile device. The effort in transposing the digital information into the physical space reduces the cognitive resources available to complete other tasks creating human limitation. Answering the challenge of human limitation in the interpreting and use of data is overcome by the breakthrough in Augmented Reality, (AR), which enables humans to assimilate, absorb and act on information. The solution is seen in that AR solves this problem by super imposing digital images onto real objects in real time. In a manufacturing environment these can be retrieved and enabled by pixelated glasses such as the Microsoft HoloLens or Vuzix AR 3000.

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