Nearly half (43 per cent) of APAC business leaders stated reducing operating costs as the top priority of digital transformation, according to a Frost & Sullivan survey. However, digital transformation isn’t as simple as plugging in new technology.
Australia is experiencing mercurial economic growth in the face of housing affordability and uncertainty over energy policy.
The country is set for energy policy reform to combat sky-rocketing consumer electricity prices. Providers are under increasing scrutiny from the Federal Government, which is investigating wholesale costs, network charges and the retail margin of providers.
While policy reform, which may drive at privatisation of state-owned networks, aims to reduce the burden on consumers, providers will face continuing profitability challenges if there is further price deregulation, as wholesale costs may not be impacted by government change.
Leading Australian electricity and gas provider, AGL, mentioned in its 2018 annual report that earnings momentum is slowing in the face of a carbon-constrained future; however, the organisation’s new three-year strategic direction includes the aim to “operate, maintain and renew our energy supply portfolio at the lowest practical cost.”
Digital transformation in operations
Despite the challenges across Australia and the Asia Pacific, most organisations are heeding the macro-economic factors and flagging a strategic imperative to drive down cost and operate more efficiently.
These two strategic objectives are the major mitigating factors in overcoming the global negative headwinds in 2019 and beyond. We created this free 40-page e-book, which covers everything executives’ need to know about digitising operations and giving your organisation practical steps to improve productivity and create a cultural hotbed for innovation.
According to the World Economic Forum’s Maximising the Return on Digital Investments paper, digital technologies help increase cost effectiveness, enhance existing revenue streams and open new ones.
However, productivity growth is still slow. To understand this dichotomy, operations leaders must understand digital transition (read more about digital transition here).
Effective digital transition depends on three main factors:
1. Strategic decisions and the ability to implement them – requires high quality management and managerial practices.
2. The talent pool and the ability to upgrade it – requires a pool of workers whose expertise lies in deploying and managing digital technologies and their willingness to upskill.
3. Experimentation investment – requires a company to comfortably invest in digital transition, in order to scale up efforts if successful or quickly exit the technology if they fail.
The adoption of new technology is becoming more challenging over time due to tech innovation outstripping implementation times. As such, digital adoption will be facilitated by efficient resource allocation, since a firm’s incentives to experiment with uncertain digital technologies will be shaped by its perceived ability to rapidly scale-up operations in the event of success, and rapidly scale-down operations if unsuccessful. This guide will help organisations set up efficient resource allocation.
Previously, operations viewed machine as an extension of man. However, today’s operating models need to consider that man is the biggest factor in improving the output of machine. Digital technology is an extension of the machine and only when all three (man, machine and technology) are working in concert can an organisation realise a productivity gain. Arriving at this symphony is the operations leader’s greatest challenge.
To get your free copy of The Complete Executives’ Guide to Digitising Operations click here.
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