In an increasingly digital Middle East economy, how fast and how far should businesses in the Kingdom of Saudi Arabia (KSA) go in reshaping their operational models and meeting new customer expectations?
Individuals and businesses alike are embracing the digital revolution. Social networks and digital devices are now being used in the region to engage government, businesses and civil society at a much larger scale than ever before.
At the same time, businesses are undertaking their own digital transformations, rethinking what customers value most and creating operating models that take advantage of what’s newly possible for competitive differentiation. According to IDC, the total market value for Internet of Things (IoT) technology & applications in the Middle East and Africa will increase from $5.81 billion in 2015 to $7.03 billion in 20161, with spending on areas like public cloud services expected to grow at almost six times the rate as the rest of the IT industry by 20192.
The Kingdom’s new Government Services Observatory inaugurated just this year represents an expanded roadmap for e-government services, with data from the Observatory indicating that over 88% of government services in the Kingdom are now being delivered in electronic form3. However, the challenge ahead for many organizations is how fast and how far to go on the path to digital transformation.
Balancing priorities
In every industry, business leaders realize customer expectations have created tremendous pressure to change the way they set their strategies and run their organizations. Yet because they have to manage existing often traditional offerings and operations, new requirements to incorporate interactivity quickly are driving up operational costs.
The recent IBM study “Redefining Boundaries: Insights from the Global C-suite Study,” found that entrenched business players are today being threatened by new entrants with completely different business models, as well as smaller, more agile players unencumbered by legacy infrastructure. Executives from the Middle East & Pakistan have once again put technology at the top of the list of external forces buffeting their organization, with 91% of respondents from the region also planning to drive more digital interaction with their customers4.
While business leaders have long used information technology to improve productivity and efficiency, what’s new is that customers’ “digital” expectations have also changed. People everywhere are using social networks for finding jobs and restaurants, making bookings, household management, and many other uses. One recent survey noted that the Kingdom of Saudi Arabia ranked as the seventh country globally in terms of individual accounts on social media, averaging at around seven accounts per individual5.
How can businesses best respond to this shift? And how can they do this cost efficiently, leveraging the newest information technologies as part of their overall physical operations?
We have found from our research and client experience that the strategic routes to transformation can be summarized by three basic approaches. The first focuses on an organization’s customer value proposition. The second approach looks more at transforming a business’s operating model through the use of technology. The third approach combines these two, simultaneously using technology to transform your customer value proposition and also reorganizing operations for delivery.
The best path for a particular company will of course depends on its strategic objectives, competitive pressures and customer expectations. In industries where the product is mostly physical, such as minerals and mining, companies may want to begin digital transformation with operations. In others, such as financial services where new revenue-based services can be offered online and through mobile devices, an initial focus on the customer value proposition can provide more immediate benefits. However, many companies and indeed entire industries need to redefine their customer value proposition and their operating models simultaneously.
Key considerations
Determining the best path to transformation – whether an extensive reshaping of the customer value proposition, a transformation of the operating model, or a combination of both –requires a thorough evaluation of four factors:
• Where products and services are on the physical-to-digital continuum in your industry
• Mobility and social networking adoption levels and expectations of customers
• Strategic moves by other industry players
• The degree of integration at every stage of the transformation – between new digital processes and legacy, physical ones
The bottom line is that businesses in every industry are under intense pressure to rethink both their customer value propositions and their operating models. Yet few if any value offerings or operations will ever be entirely digitized. Buildings and servers, as well as customers and employees, will always have physical requirements. Physical and digital processes need to be managed together without alienating customers or creating unnecessary levels of complexity. Whichever of these three transformation paths is right for your business, every industry is under pressure to change, and every organization needs to have a plan in place.
- The author is the managing partner of IBM Global Business Services, Saudi Arabia
Charting a course to digital transformation
Charting a course to digital transformation
