As their activities become increasingly dependent on digital technologies, companies in every sector are generating and gathering ever-increasing quantities of data. A new vocabulary has emerged to encompass these vast volumes, featuring words such as exabyte (1018 bytes), zettabyte (1021 bytes) and yottabyte (1024 bytes). The potential to create new forms of value from these data assets, as well as to transform or protect current business models, was widely acknowledged even before COVID-19 accelerated digitalization.
Digital transformation can create entirely new business models, such as the online data-driven platforms that transformed the markets for short-term accommodation and taxi services. But to date, these global successes are the exceptions. The majority of companies are struggling with a common challenge: to transform their business model by turning data from a cost – to acquire, store, protect, manage and distribute it – into an engine of value.
The next-generation value chain
In their pursuit of digital transformation, companies are, to differing degrees, adopting data-enabled technologies. These technologies, including natural language processing, voice recognition, virtual or augmented reality and computer visioning, are based on machine-learning algorithms and supported by the limitless computing capacity offered by cloud computing.
However, this drive to become an “intelligent enterprise” requires more than technology. It is a fundamental transformation that sweeps across an enterprise’s value chain, its people and its culture. Harnessing the power of data to create value is a balancing act, one that can be captured in what we call an intelligent value chain. This framework starts by identifying the value the company aims to create, then defines the business model needed to achieve this value, along with the intelligence, data and technologies required to power the business and create value. All these elements need consideration and investment to create a data-driven enterprise.
These five elements – value proposition, business model, intelligence, data and technology platform – are linked and validated by a sixth essential element: trust. Companies that aim to digitalize in this way must design every part of their intelligent value chain in a way that creates and promotes trust among their stakeholders, so that everything created along the value chain can be trusted.
This digital transformation of the corporate world has profound implications for audit professionals. Evolving business models, the digitalization of companies’ operations and the ability for auditors to gather and analyze huge quantities and depth of digital information will further change the way audits are carried out.
As they digitalize, the businesses of audited companies are transforming to resemble increasingly fluid ecosystems in which value chains are broken up, with key elements sourced in real time from external service providers and sub-service providers. Corporate distribution channels are also extending and diversifying across B2B, B2C and B2B2C. Being able to embed trust across these ecosystems will be key. Arguably the biggest question will be where the boundaries of the scope of the audit will lie in the future.