The Fourth Industrial Revolution - the blurring of boundaries between the physical and digital worlds - has been described by the World Economic Forum as “a new chapter in human development”; one that “represents a fundamental change in the way we live, work, and relate to one another”. As with the introduction of mechanisation, mass production, and automation in the past, recent extraordinary technological advances are accelerating transformation across the globe, cutting across governments, different industry segments, and people’s lives.
With the world becoming increasingly more connected, businesses must adapt. Business leaders need to move away from traditional ways of working in order to unlock innovation and remain competitive, and this requires a significant shift in mindset.
Insight and engagement
This, then, is just one example of where business leaders need to quickly adapt to this ever-changing technology.
Banking is a prime example of an industry whose traditional operating model is being radically impacted by the Fourth Industrial Revolution. Historically, a bank would have millions of customers who would either visit their nearest branch or, more recently, its website to use one of its products. Now, however, these products are no longer necessarily consumed directly though the bank itself. As a result, the bank as an entity is becoming redundant.
In China, for example, digital bank WeBank recently launched a consumer loan product - Xiao’e Huaqian - on the popular Tencent Video video-streaming platform. Chinese ecommerce giant Alibaba has similarly transformed business lending. By managing the inventory and sales of online retailers using its platform, the company has enough information to advance these retailers a loan, confident that they have the wherewithal to keep up repayments.
Access to data is key to this. Collecting - and analysing - data from multiple sources and dimensions allows a business to know ever more about its customers, and use that insight to inform its decisions - often in real-time.
Amazon knows this, and uses it to its full advantage. The speed and efficiency of its warehousing operations depend on IoT technology informed by data and, by using detailed customer insight to continually offer personalised recommendations, it is able to keep its customers engaged.
This is the challenge facing banks today. Their role in enabling payments and transactions is largely invisible to the consumer. Just as it’s easy for customers to change their energy supplier with no friction, it will soon be easy for them to do the same with their bank. Retaining customers will therefore depend on their ability to leverage the latest technologies to add the all-important “stickiness” factor.
Changing leadership style
Things are changing so quickly that simply being able to support a legacy way of working just won’t be sustainable in the long term. Acknowledging and addressing their own skills gap is therefore vital for any business leader looking to adapt. Leaders need to learn new ways of doing things, and learn them quickly - they must ensure the content and delivery of any training they receive matches the pace of change.
Moreover, there needs to be a shift in mindset toward a more entrepreneurial style of leadership. The time has come for to move from being order-takers to being thought leaders. It’s important that - in the same way an entrepreneur would - they’re prepared to start taking risks and driving the agenda. With all the technology available to them, leaders must ask themselves how fast they’re able to innovate, and how they can inculcate a culture of innovation throughout their business.
Doing this requires the injection of new ways of thinking across the company. Successful innovation is built on diversity of thought, for example, so diversity should be included as a central element in fostering the necessary culture. Leveraging individual employees’ strengths, and empowering teams to make their own decisions will only encourage this further. By doing so, leaders will be able to take to the dancefloor themselves, or enjoy the dancing from the balcony. Whichever they choose, they can be confident that their business is innovating in a way it has never done before.
Finally, with the boundaries between function and technology becoming increasingly blurred, silos are being broken down - technology now pervades every aspect of a business. No longer is it the sole domain of the CIO and the IT department. It’s crucial that everyone within the business is tech-literate, from the leadership to the frontline. Even the CEO should be able to talk with confidence about AI and how it applies to their business.
Accountability and empathy
One further consideration arising around the hyper-connected world in which we now live is the issue of trust and accountability. Take automated vehicles for example. Some can learn your driving style and make instant decisions based on those learnings. But, in the event of an accident, where does the responsibility lie? Is the driver liable? The car? Or the car’s manufacturer?
The same issues apply to financial transactions. If your bank makes a mistake, you know who’s responsible; you have someone to blame. What if there’s a problem with a transaction made via an app? And imagine if PPI had been (mis)sold by AI - who would raise their hands to that? Who can fix these problems when things go wrong? This is a murky area and one that business leaders must give serious thought to.
The rapid pace at which technology is developing means the world is changing faster than ever - and change can be stressful. Business leaders must adapt to this, innovating with speed in order to maintain their competitive edge. But they must also be empathetic toward the impact of that change, accepting things as they are, without judgment, and without applying their own biases. Everyone involved in the change is going through their own journey - even the leaders themselves. Indeed, the pace is such that it’s unlikely they’ll know how things will pan out, and what success will ultimately look like.
Each previous industrial revolution has delivered huge benefits in terms of greater efficiency and productivity, and this fourth iteration is no different. Its impact will forever transform the ways in which businesses operate. However, this new way of operating requires a new type of leader. It’s time to embrace the change.
Anil Awasthi, global head, retail banking, Virtusa