FT-EY Global CFO Forum: Emerging Markets

Digital disruption

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  • A new renaissance: the age of digital disruption

    Professor Ian Goldin, Director of the Oxford Martin School at Oxford University, presented a vivid analogy of how our current era, beset by disruptive change and technological revolutions, in many ways, resembles the explosion of knowledge dissemination, learning, scientific progress and creativity that took place during the European Renaissance of the 15th century. 

     “We have been here before. The dizzying pace of change in every aspect of life presents us with both the risks and potential rewards of a new renaissance taking place in our modern world. Except this time, it is the entire world and a population of seven billion who are becoming connected, and able both to access and input information that is globally accessible. The pace of advancement is therefore many times faster, and the degree of instability that ensues, many times greater,” said Prof. Goldin.

    “These conditions create an ideal habitat for ideas and genius to flourish.” — Prof. Ian Goldin

    For better, for worse

    New technologies, from artificial intelligence to genetic medicines and nanotechnologies, are now driven by a global effort, 24/7. But the upheavals engendered are creating losers as well as winners.

    “Our new openness and connectedness cannot be taken for granted. Disillusionment is spreading among those whose savings are damaged by unforeseen financial risks, or whose jobs are now done by people overseas or by machines, or where elites are the main beneficiaries,” said Prof. Goldin. 

    Equally alarming, the integration of trading, financial and other systems multiplies risks, which can spread extremely rapidly, overwhelming regulators and institutions.

    “CFOs need to get better not only at managing the risks arising from hyper-integrated, cross-border systems, but also be sufficiently resourceful to leverage the opportunities that arise from increasing connectedness and rapid advances, if they are to create a lasting legacy,” said Prof. Goldin. 

    “Key drivers of change will come from our ability to manage our connectedness.  None of these new forces understand borders,” concluded Prof. Goldin.

    Professor Ian Goldin, Director of the Oxford Martin School at Oxford University

    Adapting to the smartphone generation — as consumers and as employees

    Digital technologies are not just transforming society, but also impacting human behavior, argued futurist Mike Walsh. To understand the future, we need to learn to think like an eight-year old. Because any child born after 2007 will have grown up with the smartphone — initially as a pacifier, but later as a tool of instant interaction and entertainment, everywhere.

    “Our exposure to technology, at any age, doesn’t just change the way you expect to do things, it changes our worldview.”

    “This generation is going to demand better, faster, richer experiences, as both customers and employees.” — Mike Walsh

    The falling cost of digital processing and storage are giving us the tools to invent new ways of meeting needs and serving consumers. Mobile phones and apps bring access — opening a new path between companies and customers in emerging markets, and providing a torrent of information on which we can base decisions. 

    Futurist Mike Walsh giving a lively dinner-time speech

    Realizing the innovation potential of the technological revolution

    Companies today need to focus on this digital revolution, because it will affect every industry, said Dan Cobley, Managing Partner: FinTech at Blenheim Chalcot, and previously a senior executive at Google. The plummeting cost of digital processing and storage is opening the door to a slew of new products and services, and this process still has a long way to run.

    The spreading use of radio frequency identification (RFID) tags, 3D printing and other breakthrough technologies are also contributing to a radical reduction in the cost of innovation, he said.  

    CFOs must channel resources to secure the present and invest to drive growth in the near and distant future. Mr. Cobley highlighted the example of a prominent digital company that invests 70% of its effort in current business, 20% in expansion and 10% in inventing disruptive solutions, a strategy he labeled “Core, Adjacent, Crazy.”

    EY - Dan Cobley

    Dan Cobley giving his keynote address on ‘Disrupting for growth’

    “Companies need to scale up their ambitions and bring in innovation that can deliver, not 10% growth, but tenfold (10X) opportunities.” — Dan Cobley

    CFOs need to be constantly learning and adapting to change, Rajiv Bansal, CFO of Ola, stressed. And as firms increasingly use digital technologies throughout the business, the finance department needs to adapt and keep pace. CFOs focused on transforming their function can leverage robotic process automation (“bots”) to enhance efficiency, capture more information and improve performance — and the data can feed into decision-making across the business.

    Shouldering a growing regulatory burden, today’s companies must increase spending on compliance and information gathering. The introduction of more robotic software can help contain the costs, aid compliance and help companies meet new obligations, as well as enhancing existing operations.

    Driving on data

    Making more use of bots allows staff to be redeployed into more creative tasks, facilitating the growth of both people and organizations. Ankur Kothari, Co-founder and Chief Revenue Officer of US robotic software specialist Automation Anywhere, put it like this: “The technology now exists to automate any business process, and it is viable; it makes business sense.”

    But automation also enables companies to collect data more effectively and crunch it more quickly, he said, enabling them to identify and seize commercial opportunities, for example, recognizing when a customer has moved to a more up-market address.

    Raisibe Morathi, CFO of South African financial services group Nedbank, agreed: “You will be able to use the data that you pick up from big data analytics to take much better business decisions.” But she said it was also vital that systems were integrated “from end to end” so that companies weren’t prevented from reaping efficiency gains in one area by business process bottlenecks in another.

    Companies must also carefully manage this transition by up-skilling their staff to achieve the sought-after gains, she said.

    “Robotics allows you to take the robot out of the human and spend less time doing robotic tasks.” — Ankur Kothari

    Keeping it safe

    But keeping those insights — and other critical data, private and within an organization is becoming more difficult.

    As computers and online storage and services become ever more integral to businesses, however, companies also become more vulnerable to online leaks, attacks and accidents.

    A key concern is that cyber services are increasingly interlinked. “People and companies use the same passwords for multiple services including Facebook, LinkedIn, Google, corporate intranets and more. Photos are uploaded automatically. Cloud services are shared,” said Mr. Raman.

    He suggested that a “chief fluidity officer” could play a key role in pursuing this goal of ensure organizations are more reactive and can more effectively deal with the complexities of the modern cyber world.

  • Rethinking money

    Jon Matonis, a Founding Board Director of the Bitcoin Foundation, talked about the future of money and transactions in the digital age.

    “Bitcoin will challenge state issuers to be more honest and more prudent with monetary and fiscal policy.” — Jon Matonis

    A US$7 billion act of faith

    “Bitcoin takes the form of an immutable public ledger in the cloud, secured by cryptography. It can be used for transactions by re-allocating ownership. There is no movement of funds.

    Today, the 15 million Bitcoins that have been “mined,” each worth about US$450, give Bitcoin a “capitalization” of around US$7 billion. Every 10 minutes, 25 new Bitcoins are registered, and issuance will stop at 21 million, he said.

    “Bitcoin won’t replace state-issued currency,” said Mr. Matonis, “but it will run in a parallel economy and it will challenge state issuers to be more honest and more prudent with monetary and fiscal policy.”

    In cryptography, we trust

    The value of the currency is based upon trust — just like the value of other currencies, including paper currencies and gold. But Bitcoin was likely to hold its worth better than the currencies of some countries, he argued.

    The adoption of such crypto-currencies would be a slow process, Mr. Matonis argued. But for companies faced with currency volatility and cross-border transactions, the attractions of a stable, universal currency could be strong.

    EY - Jon Matonis

    Jon Matonis, Founding Board Director of the Bitcoin Foundation