As the Gulf’s oil producers seek to readjust their economies in response to the long-term expectation of lower oil prices, core sectors in the region such as oil and gas, construction and banking are accelerating efforts to incorporate digital solutions into their industries. It is forcing many long-established players in the region to rethink their entire business model.
Middle East digital transformation
Simply being ‘technology-focused’ is no longer enough and many of the region’s biggest companies are seeking to incorporate digital solutions into their services promising increased customer value.
The shift in approach is evidenced by the proliferation of innovation departments and research and development centres in the region‘s business centres over the past two or three years. It has been accompanied by the introduction of new roles, such as chief digital officer or chief innovation officer, which have been introduced to support a change in the organisational culture.
But while this digital business transformation is not unique to the Gulf, its impact on a region that has grown on the back of capital spending driven by oil revenues for decades is set to be profound.
“Digital business transformation is organisational change through the use of digital technologies and business models to improve performance,” says Tomoko Yokoi, a researcher from the IMD Global Centre for digital business transformation. “It is based on a digital foundation whereby one or more digital technologies must exert a significant influence.”
He says that delivering digital business transformation requires organisational change that includes processes, people and strategy.
“Traditional companies are changing their business models to stay competitive in a digital age,” says Yokoi. “And they are changing their culture to adapt to the new realities of digitalisation. Whether these changes are more relevant to a younger workforce than an older workforce remains to be debated. The message is that this is just a new reality.”
Across the Gulf, companies increasingly are paying waking up to the requirements of this new reality.
“Innovation has always been in our DNA,” says Johnson Controls’ vice-president and general manager for the Middle East and Africa Claude Allain. “Now, thanks to digitalisation, the pace at which we innovate has to be faster.”
The pace of change is getting faster as the latest generation of digital technologies including artificial intelligence and machine learning become embedded in core industries and stimulate new partnerships between players from different industries.
At a recent Microsoft-hosted event in Sweden on the future of manufacturing, the US software giant brought together some of its leading industrial partners including Germany’s Siemens, Sweden’s Sandvik Group and Germany’s BMW Group to discuss the benefits and impact of digital business transformation in the manufacturing sector.
“Digitalisation is the glue,” says Sandvik’s head of digital business development for the crushing and screening division, Petra Sundstrom. “Ideas are seldom the problem. It is the implementation that is the challenge. Companies have to be open to new technologies if they want to move ahead.”
There are many elements to successfully delivering but none is more essential than a digital-first mindset across a whole organisation, according to experts from Microsoft.
“The more successfully a company builds a digital workplace, the more likely they are to attract the talent they need and establish a digitally minded culture,” says Necip Ozyucel, cloud and enterprise business group lead at Microsoft Gulf.
“Beyond just digitising traditional processes, digital transformation requires a complete rethinking of how a business operates in the modern world,” says Ozyucel. “Companies need to envision the customer journey, rethink operational processes and evolve businesses to take on new opportunities.”
“Connecting people, processes, things and data securely across the company is the cornerstone of digital business,” says Ozyucel. “Connectivity enables you to make the invisible visible and discover unprecedented insights.”
Yokoi says that it is common for some executives to view digital business transformation as a one-off revolution or challenge. This is a mistake, she says.
“Like a caterpillar, the organisation undergoes a metamorphosis and, after a good deal of effort, emerges as a butterfly,” says Yokoi. “But the reality is that digital disruption and transformation are not singular events. They are perpetual and continuous cycles, which are accelerating in speed and complexity.”
“We need to be open to learning,” says Sandvik’s Sunstrom. “I hate it when someone says they ‘know IoT’. How can anyone know a technology that is constantly evolving?”
For companies and governments in the Gulf, many of which have endured a somewhat painful digital disruption, this is a critical message.
Ensuring continuous transformation will be as difficult as delivering the initial leap forward. Digital transformation requires the constant upskilling of employees, adopting a work culture that embraces innovation, and partnering with like-minded firms to propel the business forward.
Companies serious about championing a digital transformation should be prepared to try different strategies to find the best fit and must be patient. One size does not fit all. But the long-term impact of finding the right method will far outweigh the short-term inconveniences of trial and error.
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