03 Aug
2018

Suppliers Serving The Digital Economy Requires Disruption


fourth industrial revolution

 

Enabling suppliers to serve a digital economy requires a disruptive take on development

The digital economy is an increasingly pervasive concept within the global, African and South African business world. It seems like you cannot cross the street without being overwhelmed by the hype around machine learning, artificial intelligence, or the Fourth Industrial Revolution. Setting cynicism aside, the shift towards a digital economy is a wave business will have to learn to ride. Concepts previously limited to startups, technocrats, and nerds (today’s CEOs and billionaires) are the new enablers for business to leverage efficiencies and improve customer experience.

Sectors of the South African economy are early adopters of many digital tools, relative to their emerging market peers. Outside of the usual technology-intensive sectors (ICT and manufacturing), digital integration in financial services has enabled South African banks to be among the most innovative globally. This is just the start, however. As the need to do more with less grows, the natural inertia of the public sector and other legacy industries will be overcome and the need for digital skills and suppliers will grow.

What does this mean for ESD?

As business changes, so must our approach to Enterprise and Supplier Development (ESD). Historically the complexity of the digital domain has been restrictive to ESD, because of the associated business risk. Instead, the focus was on the incubation of resellers or low complexity service providers which achieved an ideal balance of risk mitigation, localization and transformation.

Unfortunately, the digital economy does not allow us to avoid complexity for too long. As digital is embraced by the broader business environment, so will pressure increase for digitally transformed local supply.

Even worse, our current development approach may not be fit for digital purpose. The digital economy has driven shorter and more frequent product cycles. Not only do you need the best technology, but you need it now. Currently, the way to incubate technology suppliers is to support IP and skills transfer agreements but doing so takes time and may not fit the requirements of a digital supply chain.

A disruptive take on development

So, what can we do to create real local value-adding digitised supply? We start by examining what makes the current development model successful. Incubating businesses to resell commodities is less risky because it is well understood. The buy-here, sell-there business model is ingrained across all levels of society. Identifying capable entrepreneurs and successfully supporting them becomes easier because they inherently understand the reseller business model.

We need to create the same ingrained business understanding of the digital economy. Doing so provides the scale required. Not to artificially create, but to identify and support digital entrepreneurs, those who can identify and solve digital problems. This is the only way we can integrate and sustain local digital suppliers into future South African supply chains.

“In the same way that it takes a community to raise a child, it will take an industry to create digital entrepreneurs.”

Given its importance, we need to accelerate this learning. Already, there have been significant commitments, through skills development and corporate social initiatives, from participants in the ICT and financial services sector to introduce digital curriculums within disadvantaged areas. However, given the scale of the problem, it will take increased effort and collaboration to reach the desired outcome. In the same way that it takes a community to raise a child, it will take an industry to create digital entrepreneurs.

It is time for corporate introspection. There is a present need to support and comply with localization and transformation objectives, which cannot be ignored. But, this must be balanced with our drive to organically create the digital supply of the future. Walking that tightrope is today’s challenge for enterprise and supplier development.

Fourth Industrial Revolution
Theran Naidoo is an Engagement Manager at Letsema Consulting

 

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