Treasury Today Country Profiles in association with Citi

Is your business future-ready?

Two business people developing project using virtual reality

Across the full gambit of corporate operations, the focus on digital has become ubiquitous. Almost every company, in some shape or form, has a digital strategy and is preparing their business for the future.

Many businesses’ digital strategies will fail though; at least this is the view of futurist Rohit Talwar, CEO at Fast Future Publishing. Talwar spoke at a recent FT Live event exploring the Debt Capital Markets and gave a fascinating insight into how the corporate and financial space is being impacted by the evolution of technology.

In what was an enlightening talk he claimed that a number of businesses’ digital strategies will fail because they are “not really thinking digital”. Talwar believes that most companies’ digital strategy simply means shifting the traditional business model onto digital platforms, rather than thinking how to evolve the business as technology advances. “As a result, lots of businesses in the future will look very similar with commoditised offerings,” he says.

Seeing over the horizon

For Talwar, to effectively plan for the future, businesses need to consider three different time frames:

  • Short term: how can operational excellence be delivered in the next 12 months?

  • Medium term: how can the company grow in the next one to three years, what is needed to do this and how might changes in the external horizon help or hinder your strategy or create previously unconsidered options?

  • Long term: understanding the possible drivers of change and disruption on the four- to ten-year horizon and develop scenarios for how they might play out.

“It is at this third step where most businesses fail,” says Talwar. “Most businesses just cannot picture themselves that far in the future, which is understandable, and the speed of change means that practically it is not normally worth trying to think of strategies beyond the mid- to short-term time horizon.

“What they can do is use these longer-term scenarios to drive changes over the next one to three years to ensure the business is sufficiently flexible, innovative and forward-thinking enough to prepare the business to take advantage of developments on the horizon and respond to a wide range of possible scenarios that could emerge.”

A large part of the challenge lies in that fact most current businesses and their leaders have grown up in the physical world, which is complicated and has numerous barriers to entry. “For these people, technology is not the core of the business, it is just a tool that enables them to replicate what they do in physical markets on electronic systems,” he says.

In contrast, these physical world businesses are now having to compete with ‘born digital’ entities that see the world through a digital lens. The people that run these businesses don’t allow themselves to be bound by the mental limitations, decision-making approaches and management models that can often prevent physical world businesses evolving quickly enough to compete with these newer entrants to their markets. Talwar cites Alphabet, the parent company of Google, as a firm that truly gets digital. It is a company that runs two airports, owns the world’s biggest mobile operating system, is working on solutions to extend life expectancy and is creating driverless cars. “These businesses are all very different in what they are trying to achieve,” says Talwar. “But to Alphabet, these businesses are all the same; they are data businesses. Once you start to think that way, you can start to scale new opportunities far faster than a physical world entity might consider possible.”

Simplifying and creating complexity

Companies such as Alphabet are also fascinating because they are not just looking to change the game, they then want to embed a plethora of complexity into the new technology that defines the rules of the game and makes it hard for others to compete.

These businesses and the people with the expertise to do this are few and far between, however. And in finance, current innovation is largely dominated around creating a digital ecosystem based on the existing rule set – although some are trying to simplify their offerings so they can take advantage of the opportunities created by reconceiving the business using a digital mindset.

For Talwar, this is evident by many of the recent announcements from the banks that digitise existing processes. An example of a firm going further is the Commonwealth Bank of Australia digitising bond issuance and a number of companies that are showing that it is possible to crowdfund debt. They are stripping out a lot of traditional complexity and inefficiency to create truly digital products which are easier to promote, book build, issue and administer.

“Although not especially revolutionary, what is exciting about these developments is that they are encouraging a whole new community to enter finance that was previously hampered by the high barriers to entry,” he says. “It is important, however, not to focus on the individual new fintech entrants, because – as with all new technology ventures – most of these will fail. It is their ideas that will hopefully live on – either because bigger firms pick them up or because a handful of new entrants succeed and force change in the rest of the marketplace.”

The most important thing at this stage is that the concepts are being proven as viable. There is nothing that the traditional debt sector does today that could not be done far more efficiently, cheaply and more innovatively by applying truly digital thinking.

Artificial intelligence

In Talwar’s opinion, whilst all the technology that currently exists is very exciting, it will be the continuing development of artificial intelligence (AI) that will be the real game changer – forcing businesses to change their views of digital.

And the technology is coming on in leaps and bounds. Talwar talks about Google’s DeepMind AI project, AlphaGo and how the programme beat the world Go champion by four games to one. “They set the programme an overall learning goal which was to win and taught it how to learn,” explains Talwar. “The programme then watched millions of games and learnt successful strategies. What was interesting, however, was that the world champion wasn’t ever beaten outright but retired in each game because he said that the machine was outthinking him, coming up with more creative options than him, learning from his behaviour and forcing him to make mistakes.”

In the capital markets space, Talwar noted that there are already a few companies making early inroads in this area including alterest, LendingRobot and Numeria.

The power of this technology could be game-changing in many ways. But Talwar is keen to note that this won’t happen quickly. “The revolution is coming, but it will take time,” he says. “And those businesses that will succeed are those that are aware of what is happening and begin to prepare their operations for the world of the future.”

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