Economic Times (ET): We’ve all heard of digital transformation and it seems like a mere word, but what do you think actually constitutes digital transformation?
Rakesh Prasad (RP): Today everyone talks about doing digital transformation, but if you look at it from an Innovate perspective, there are three layers. The first will be the change needed at the fundamental level of technology – how you place the technology stack and this is where technologies like cloud and SaaS solutions are leading the way for digital transformation.
The second big change that needs to happen, which I think is the hardest for people to understand, is the fact that just embracing the cloud or using new technology doesn’t digitally transform you. Unless you start making those connections across disparate silos of processes and applications within the organization and across the supply chain space, you’re not doing digital transformation. The entire ecosystem must now extend beyond the four walls of the organization and extend to suppliers, sellers and consumers.
The third layer of digital transformation, which I think everyone talks about the most, is the whole aspect of data, analytics, and insights. It’s about how to leverage those inputs to change the way you engage.
ET: What should be the starting point for digital transformation in a company and should everyone, across all sectors or companies, engage in this transformation?
PR: There is going to be some notion of digital transformation for anyone interacting with the outside world, that is, everyone in business. The extent, however, varies.
If you’re a consumer-centric business, you need to consider how you’re going to engage in this changing world. Otherwise, you’ll be out of business very quickly. So if you’re in the consumer business, you have to. There is no choice.
To some extent, even banks and insurance companies, which are more traditional and used to have strong relationships with their customers, are also feeling the pressure with the arrival of new era neo-banks that are disrupting business. The definition of digital transformation, in this case, is what you do to change your engagement with your end consumer. It doesn’t matter what you do on cloud, data analytics, infrastructure, API, micro-services, as long as you don’t engage with the consumer.
In B2B, things are very different. B2B products are usually more complex, it’s not just about selling an SKQ or a unit. Beyond that, there are always services, warranties, after-sales services, all of which make relationships sticky, but also increase the cost of maintaining relationships. In the digital world, companies can really reduce that cost of retaining a customer and that’s what they’re really trying to build their transformation on.
Digital transformation is very relevant when the notion of cost was the trigger, but now your ability to adapt is also a trigger. It’s not about “my infrastructure is getting old or my server is getting old so I should move to the cloud”. Now companies know clearly that they should be on the cloud, as it will give them more flexibility and speed up new updates.
ET: There is also the supply chain and inventory aspect?
PR: Inventory management is becoming a very critical aspect and during Covid this has become evident. Everyone was affected and Amazon, WalMart, Target also faced significant disruption. However, Amazon rebounded much faster than any of the other retailers; and the reason was that Amazon had a better way to play with a supplier base where they could source from a larger pool rather than a WalMart or Target because their supply chain is structured in a star pattern.
Today you need capacity and an idea of how demand will fluctuate and what inventory you need to prepare for. This is where a good data analytics ecosystem can provide visibility for the future and enable quick understanding. The fundamental problem is that the data is handled very differently by the sourcing team, the manufacturing team, and the sales and planning team. How to bring the same visibility and create an accurate image and this is where aspects like the control tower come into play.
ET: What trends are you seeing around digital transformation? You mentioned the growing emphasis on demand forecasting, but what more do you see?
PR: If you look at supply chain today, everyone is looking at demand planning and demand sensing. Covid has changed the game and everyone fears something else is going to happen. The biggest challenge is that the big players have a lot of technology debt to worry about and if you look at all the big players, most of their demand planning, demand forecasting happens on big applications like SAP and Oracle. I don’t like big products. They’re kind of trying to create a “catch-all” platform and it doesn’t matter, honestly. In fact, SMBs are adopting much faster and modern demand sensing technology because they don’t have a legacy problem. Inventory optimization is very much related to this. Once you have planned your demand well, the next step is inventory optimization and/or capacity planning. This includes the amount of raw materials to keep, the amount of finished goods to have, and the capacity you need.
The second big topic that everyone is talking about in the aftermarket world, mostly in the B2B context, is how to optimize the entire service lifecycle, i.e. from training and the development of your service teams, technicians and after-sales people.
The aspect we focus on the most is supplier risk. The traditional vendor risk model has always been driven by cost, timeliness and quality, but Covid has changed that. Companies now want to know which supplier is at risk, especially if you’re looking at products with a longer supply chain life cycle. Supplier risk is a big challenge where companies want to know about country risk and geopolitical risks.
ET: Can something like geopolitical risk also be taken into account?
PR: Yes, based on the trends we see. We have lots of data from UN sites, WHO sites and even the Centers for Disease Control and Prevention (CDC). If you look at traditional datasets, no one sees diseases or the CDC dataset as a risk to anyone. Now, at three companies where we’ve built this model, CDC data on new viruses is a very big variable right now. Likewise, if your supplier is based in Taiwan, there are new risks due to geopolitical issues with China.
ET: What are your product offerings in India and how is business doing in the country?
PR: For us, there is a big gap from the perspective of tech players in the Indian market. You have big American players that can do the end-to-end work for you, but the fact is that Indian customers will always be your second, third or even fourth target market. Then you have niche players who can do some of the work, but they won’t be able to deliver end-to-end solutions for digital transformation. Innovation plays in this area. With that in mind, I think our goal is to grow at least 300% of our business in India over the next three years.
From an employee strength perspective, we operate in five cities and will have our operations in Bangalore by the end of this year, Pune and Hyderabad through our partner ecosystem. In terms of headcount, we expect growth of nearly 2,000 to 3,000 people in India over the next three years. If you look at our journey, we started independently in 2020 as Innovate. Our employees have grown nearly 80% year over year and our revenues have experienced compound annual growth rates of nearly 50%.
Today, India represents almost less than 3% of our turnover. In five years, I want India to contribute almost 10% to 12% of my income independently, which will be a huge number for us. We are very clear that we would not target large companies, and my target in India is SMEs.
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