by Silvan Mifsud
Digital transformation. The mother of all buzzwords. However, as Simeon Preston once said, “The biggest part of digital transformation is changing the way to think.” You mention digital transformation and today our mind starts thinking on 5G, Internet of Things (IoT), Blockchain, Artificial Intelligence and Robotics.
It is very true that digital technologies are enabling radically new ways to deliver value to customers, altering competitive landscapes and changing the underlying economics of markets. However, technological change is nothing new, except for one thing. This time round the pace at which change is happening is at a rate faster than ever before. The risk of disruption could be the impetus for such a faced pace transformation, as new technologies threaten established businesses whilst creating unprecedented opportunities.
Which leads us to a very important point with regards Digital transformation. Any digital transformation strategy and process, while obviously looking at how to change business processes, business models and the delivery of more new products and services, must also look at how such a digital transformation rests on the change in people’s mindsets, talents and capabilities to operate effectively in a digital world. When all is said and done any digital transformation can truly happen if it rests on a highly skilled workforce, agile workflows and a culture based on testing and learning and a decentralised decision-making system.
Digital transformation impacts society at several levels. On the production side of the economy, digital transformation enables the automation of business operations, yielding operational efficiencies, such as reduction of transaction costs, with an impact on productivity. Similarly, digital transformation provides new business opportunities, impacting employment and entrepreneurship. Regarding the delivery of public services, digital transformation enhances the provision of health and education, while improving the way citizens interact with their governments. Finally, digital transformation has an impact on human relationships and individual behaviour, facilitating social inclusion and communication. However, digital transformation could also result in potential negative effects, such as workforce disruption, the disappearance of companies, cybercrime and social anomie.
To give a context to all this, our experience has shown that digital transformation comes in waves. What can be considered as the 1st wave of digitization, this was associated with the introduction and adoption of what today are considered “mature” technologies, such as management information systems aimed at automating data processing and applied to monitoring and reporting of business performance, telecommunications technologies such as broadband (fixed and mobile) and voice telecommunications (fixed and mobile) which allow the remote access of information. The second wave of digitisation covered the diffusion of the Internet and its corresponding platforms (search engines, marketplaces), which enable the networking of enterprises to consumers and enterprises among themselves for purchasing of supplies and distribution of output. In addition to adoption of the Internet, this wave led to the diffusion of cloud computing. Finally, the third wave of digitisation, entails the adoption of a range of technologies aimed at enhancing information processing and the quality of decision making, while further automating routine tasks within business enterprises and governments. These include Big Data, IoT, Robotics and AI.
All waves of digital transformation have outlined similar benefits – economic growth through business innovation and increase in job opportunities, though some pockets of jobs where eliminated through automation and the positive impact on jobs through the second wave of digital transformation was much less than the first wave. Moreover, the increased use of digital technologies associated with the second digitisation wave has raised the potential negative economic effect of an internet disruption, cybercrime, data fraud or manipulation and technological failure. There are also some negative social effects which include the degradation of human relationships resulting from intense digital consumption and the decline in conducting other knowledge gathering activities such as reading.
The third wave of digitisation has significant implications for productivity improvements. It also promises to have significant benefits on social welfare, more particularly on several Sustainable Development Goals, associated with the delivery of public services. The evidence so far with regards to the disruptive labour effects of the third wave are quite speculative, however there is almost universal agreement that, similarly to the prior waves of innovation, automation will tend to favour those workers with more education and training. In this context, it is relevant to consider the policy remedies that could propel the benefits of further digitalisation and limit the negative outcomes – as always a positive disposition to embrace change and upskill oneself remain the best ways to ride the wave rather than remain crushed under it.