Virtualisation is the new Industrialisation
V.P. Nandakumar is MD & CEO of Manappuram Finance Ltd.
As the old order changes, what should the upcoming generation of managers and business leaders do to remain in the game?
Very often, the first step in learning something new is to unlearn something we learned before. The raging COVID-19 pandemic has forced us to rethink the routine of our daily lives from work to school to leisure time activities. The trends seen today make it clear that the world, which has always changed with time, will now change at an accelerated pace. The days ahead will be starkly different from the days gone by. It is said that necessity is the mother of invention and, in keeping with that assertion, virtualisation has become the new mantra. Be it the digitalisation of entertainment services (OTT services like Netflix, Prime Video etc.), e-commerce, virtual training, online education, digital banking, or digital healthcare, you can prefix the ‘digital’ or ‘virtual’ tag to almost all services today and it would not be out of place. Virtualisation is the equivalent of Industrialisation for the 21st century and it’s suddenly come to the fore thanks to the pandemic.
In response to travel bans, school closures, and social distancing norms, the world is turning to digital tools to help people carry on with their lives as far normally as possible. It has now become necessary to digitally transform our places of work and education to be able to operate effectively. The companies able to use technology and who can rethink and reshape their business models for the needs of the future by fast-tracking digital transformation will emerge ahead of their competitors.
Specialisation is inevitable
As the world becomes virtual, we are moving away from an age when we relied upon managers who were considered to be generalists. These are people who combined different skillsets such as being good in sales, relationship, operations, technology and some essential soft and hard skills. This came about because it was costly to hire all these talents separately and so generalisation became the key.
In the future that we are coming to, the whole world is our playground. You could be sitting at home or in your office and digitally collaborating with a team spread across the world. Physical distance (or proximity) is not the differentiator but the skill is. There is an emerging need for the specialist, not a generalist, as it is now easier and more cost effective to hire the skillset required, for the duration needed, and without any long-term commitments. Welcome to the world of the “gig economy”!
Today, if I want an app developed, I don’t need to hire a team of IT professionals. Instead, I can hire freelancers, who are the best in what they do, and get the job done at a fraction of the cost and time. An early example of this paradigm is how Brian Acton and Jan Koum founded WhatsApp. In January 2009, they hired a developer on RentACoder.com to code the initial app for iPhone. Within five years, in 2014, Facebook acquired WhatsApp for a whopping US$19 billion!
The crisis has undoubtedly accelerated digital transformation across the world and opened our eyes to the possibilities offered by technology solutions to enhance the quality of our lives and grow our businesses. There are a lot of unknowns about what the world will look like post-coronavirus, but one thing is certain, things won’t be the same anymore. Virtualisation is happening across the spectrum of industries, especially in the services industry be it financial services, information technology, healthcare, tourism, hospitality or manufacturing. Growing up, we have learned about the “power of compounding”, but now we learn that the “power of virtual” is stronger. You may have heard that today the world’s largest hospitality chain, AirBnB, has more rooms than the combined top 10 hotel chains and it does not own a single room! The largest mobility company, Uber, does not own a single taxi. That is the power of virtualisation!
Obviously, the shift from physical to virtual may take a few years to materialise, but the process has already started, in fact, it had begun even before the pandemic. Recent events have given it the push of urgency needed to accelerate the shift. Now, almost every company is working towards taking their products and services virtual to the extent possible.
There are enormous opportunities for leaders of future businesses in the field of Information technology, automation, data science, artificial intelligence, machine learning, medicine, pharmaceuticals, e-commerce, e-learning, robotics etc. For example, in my own company, our Online Gold Loan (OGL) today accounts for more than 65% of our gold loan business. The gold loan business which was carried on in the same traditional way for centuries, got virtualised within a short period of 5 years!
The crisis has also sparked a range of out-of-the-box thinking and innovation across industries. Existing technologies– such as 3D printing – are being leveraged in unique ways to support the healthcare industry during the pandemic by printing much needed components for medical equipment. The potential for this industry is enormous in the medium to long term, with direct benefits for communities and across multiple industries. Doctors are now able to prescribe treatment for their patients online because we have apps and portable devices that connect to smartphones through which vital parameters of the patient can be conveyed to the doctor.
The field of education has seen a sea-change with virtual classrooms taking over almost seamlessly. What it means is that in future education will also become a tradable commodity, something which can be availed by the consumer from any part of the world. This is unlike the situation that prevailed till now, when education was largely non-tradable, rather like the services of a barber. Americans pay ten times as much as Indians do for a haircut, but being a non-tradable service, they have no option but to depend on their local barber for the monthly haircut. This shift offers tremendous opportunities to the quality players in education who will be able to address the needs of the market anywhere without investing in new buildings or hiring local talent. India, with its low cost based of skilled English-speaking manpower is potentially at an advantage.
We have also seen the unprecedented rise of e-commerce with online purchases taking away the business of brick and mortar retailers. The banking industry is finding new ways of assisting clients via digital platforms, and the use of cash will likely decrease in the longer term. Restaurants, while currently feeling the pressure of social distancing restrictions, could digitize their supply chain – including online ordering and home delivery and dining alternatives to bolster their service offerings.
What leaders of future businesses should do?
As novel business opportunities begin to emerge, what can the upcoming generation of managers and business leaders do to make sure of their place when navigating the competitive business environment? A report by Deloitte Access Economics suggests that two-thirds of all jobs by 2030 will be made up of soft-skill-intensive occupations, so developing and enhancing soft skills is the key. Even before the coronavirus outbreak, the growing digital skills gap was apparent across business worldwide. In fact, 82 percent of job vacancies now require digital skills of some kind. However, the pandemic has accelerated the desperate need for specialist digital skillsets to help businesses become more aligned with today’s myriad technologies and platforms. With the Fourth Industrial Revolution on the horizon, investment not just in technologies, but in people who understand technology, is becoming essential. Although it’s unlikely that you’ll need to know every system or platform, demonstrating a solid working knowledge of data literacy, computer programming, big data, the Cloud, artificial intelligence (AI), blockchain and more, will help elevate your business profile and give you a head start.
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