Half-year review: how digitalisation is leading the way to the New Normal Read here
2023 will be the year when…
…everyone becomes a digital native
Working from home (WFH) hit the mainstream during the COVID-19 pandemic. And, in turn, the term ‘digital native’, conventionally used to describe an individual reared on technology, now applies to pretty much anyone who can switch on a computer, connect and do their job via a virtual platform.
The WFH reality has shifted the goalposts on digitalisation. Investment in digital transformation and digitalisation, both at a government and corporate level, won’t just be a nice-to-have. It will be a must-have. Despite the expected economic slowdown and competition for capital, digitalisation should be the starting point for corporate strategy in 2023. It shouldn’t just augment it.
…digitalisation means cost savings and efficiencies
A frugal mindset will characterise digitalisation initiatives in 2023. Instead of promising revenue growth, projects will be strategically packaged to highlight cost savings and efficiencies.
… slowbalisation feeds and impedes digitalisation
The world is becoming more politically fragmented. Countries and companies are seeking greater security and self-sufficiency in their supply chains, particularly in the aftermath of the COVID-19 pandemic, and ongoing dislocation created by the Ukraine war. That fragmentation, coming on top of the economic headwinds expected in 2023, could see corporates adopt a more local focus in their investment decisions.
“People, as consumers and employees, rely on digitalisation more. But I think corporates can be more reluctant to embrace a single-world view, and the benefits, through digitalisation. Because of fragmentation across economies, their digitalisation strategy may not be as internationally minded as it once might have been."
Raza Rivi,
Partner, Simmons & Simmons
Longer-term, global localism as it’s been called, makes a powerful case for digitalisation. Whereas the global village was once bound only by the trade in physical goods, now digitalisation will connect politically fragmented elements of corporate empires.
But digitalisation will bring challenges of its own. How do you raise tax revenues efficiently when greater volumes of commerce are enacted virtually rather than across physical borders?
Slowbalisation, or the push back on globalisation that we’re already seeing, is likely to persist in 2023. Sovereign states, recognising their data as a valuable commodity, will protect it with rules and laws that further contribute to localisation. Moreover, if the free flow of data is curtailed, the technology that enables digital transformation, like cloud computing, artificial intelligence, distributed ledger technology and blockchain, could be hamstrung.
… digital talent returns home
The brain drain of talent from Silicon Valley and other traditional centres of digital excellence, will likely continue during 2023, given shifting demographics and changes in emerging economies. Comparative standards of living, disposable income and career opportunities, are coming together. And they’re enabling engineering and data science talent to return to India, Asia and Eastern Europe. In doing so, new talent will grow and prosper locally.
… questions are asked about the greenness of data centres
Digitalisation and the ESG agenda will challenge each other. Data centres, the engine rooms for large-scale corporate digital transformation programmes, are colossal consumers of energy. They are already under scrutiny and will have to make greener energy choices and offset their carbon emissions. Digital infrastructure will need to focus its strategy on carbon neutrality, like never before.
… demand for rare earth metals becomes a bigger strategic issue
Increasingly, in 2023, the pace of digitalisation may be frustrated by continuing demand for the rare earth metals used in semiconductor chips, especially if trade tensions escalate. Taiwan will become a focus for that increased demand and could find itself at the centre of high-stakes, geopolitical tensions. Meanwhile, political fragmentation and rising nationalism could lead to hoarding by some nations.
… investment into blockchain slows
In buoyant economic times, investors may be prepared to wait four or five years – or even more – for an innovation to realise its commercial potential. But economic headwinds can increase the pressure for faster returns on investment. 2023 is very likely to bring heightened due diligence and fewer speculative investments.
So, emerging technologies, especially those that have not yet demonstrated scalability beyond limited use cases, or have lost their lustre, or those that can be substituted for something cheaper, are at risk. Blockchain may be one of them.
… small tech quits big tech
Watch out for an exodus of talented and business-focused engineers from big tech companies like Google, Meta, Microsoft and Amazon. Working from home on their own side hustles during the pandemic, some of them created new and exciting business propositions, which were incubated initially by their big tech employers. Now showing significant promise, these start-ups may find it difficult to co-exist on big tech platforms and stand a good chance of scaling.
Raza Rizvi’s tips for digitalisation strategies in 2023
- In recessionary times, front load your rationale for investment in digitalisation and digital transformation with a cost-savings narrative, not a revenue-generation business case.
- Expect your digital transformation to be more evolution than revolution. Five-year plans may need to stretch, given pressures on investment and challenges in securing shareholder buy-in without a short payback period.
- Given the mobile and transient nature of the talent that drives digitalisation and digital transformation projects, reconsider how you will resource your plans and whether more agile approaches should be adopted.
- Cyber threats continue. Protecting technology assets, data, and the supporting digital infrastructure is not a luxury. Investment in cyber security should remain a top priority.
- Don’t divorce the digitalisation narrative from the corporate and social responsibility narrative. Be mindful. Use it to attract, engage and retain the next generation of employees and consumers, whose choices are governed increasingly by their social values.
… in conclusion
Despite the expected economic slowdown, competition for capital and the politically fragmented world, we expect digitalisation to remain high on the agenda. Supporting the new ways of working and showcasing cost savings, while also looking more local in terms of talent and data laws. But, in a fast-moving and unpredictable world, anything is possible. Look out for our regular updates during 2023 and find out where we’re at, versus where we expect to be.
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