Digital Transformation Strategy in the Era of AI

[Music] Hello folks this video is on digital transformation strategy in the era of AI. The video is designed for Business Leaders managers  and decision-makers it's also very good for technologists and those who are in charge of  transformation as well as consultants that want to steal our ideas and pass them as their own. The video will be broken into three key areas The first is these critical understandings, I ask  you to be patient with me the reason I've put in critical understandings and definitions here is  because most digital transformation strategies fail and it's because of critical understanding  or misunderstanding so I just need to clear up some very basic stuff, and I do think there's  something in here for everyone no matter how experienced you are The second phase of the  video we're going to be taking a look at AI in particular generative Ai and how it is massively  transforming that whole space of strategy, strategy framework, strategy planning and the  speed of which strategic decisions can be made and changes made to a business and the third phase  we're going to be taking a look at is a use case.

A quick case study of Gareth Walsh and his  engineering firm It's a wonderful story, I love to tell it and it's completely true. Enough of this tomfoolery. Let's get on with the show.

Modernising isn't the same as transforming in 1810  The Amusce Manufacturing Company a textiles firm in New Hampshire in the United States decided  it was going to supply the land with all of the textiles needs having been influenced by  what was happening in England at the time the company grew 17,000 employees, 30 different Mills  it did very well Frederick Smith who was the CEO at the time decided that he wanted to modernise  the organisation he had heard of this wonderful groundbreaking technology called electricity.  He decided that he was going to remove the old turbines and put in electricity powered motors,  now the way manufacturing worked was that a large drive shaft ran through the factory floor  and belts then turned to power the looms. The problem was is that Smith's Company still made  the exactly the same products for exactly the same customers using exactly the same processes the  same people using the same machinery just powered by a new technology.

They modernised but they  didn't transform and by the 1930s the business went bankrupt the same thing is happening with  many businesses right now they're calling it a transformation but it's some kind of digitisation  and modern modernisation AI is as ubiquitous and as easy to access as electricity itself it's  not the ability to take on the technology it's what you decide to do with it, and that's  where the strategy really plays its part How do you get five widely different definitions  of the term digital transformation? Easy go into any corporate boardroom and ask five Executives  they'll all give you their own version and I believe that most businesses need to start  defining what it means in order to stop the proliferation of Random Acts of digital the  purchase of random technology in the belief that it will create transformation digital  transformation is the deliberate strategic repositioning of your business in the digital  economy leveraging emerging technology. What we're saying here is that three things are at play  one your industry is changing and you've decided to strategically reposition in it you're going  to innovate and create new products and services and make sense of that future State before  it arrives.

You have decided to do this as a strategic imperative with inside your organisation  that is going to lead to transformational change and you're going to do it leveraging the emerging  technology and AI is the big one at the moment. These things need to come into confluence before  successful digital transformations can happen. But start with the definition  it's a good place to [Music] Okay digital transformation strategy in the era of  AI what does the word strategy actually mean here, most organisations say they have a strategy,  but they don't they have a sequence of plans; what's the difference between a plan and a a  strategy?

Well a plan you typically know the outcome before you start we're going to migrate  to the cloud, we're going to build a new team, we're going to launch a new product, we're  going to rent more warehouse space. Whatever it happens to be and you know the plan of what it  is that you're trying to achieve that's a plan and they're important. Strategies are different in  the Greek term strategy it meant the way of the leader in war times, and in the six Century this  was adopted by the Romans and I know what have the Romans ever done for us, but that's a different  video, the Romans took it to mean the Playbook of how you plan to defeat a competitor how you  plan to win the war again in Napoleonic Wars this was adopted again as a term to mean how do  you defeat competitors look put simply a strategy is How do you plan to win?

and yes you may need  operational plans in order to aid the strategy but the strategy itself has to define who it is that  we are going up against in what arena, what is the sport that we're playing here how, do we plan to  beat the competitors and ultimately how do we plan to win more customers and please more customers.  Now the primary difference between these two is you don't own the customer, you can't bring the  customer and pay them enough money to become loyal you've got to add value and that's a tricky game  because when you enter into strategic planning you don't know the outcome until you get stuck in  and try it. Where with almost every plan you do, there is a defined outcome.

Plans contain little  in the way of risk strategies are all about risk, adventure winning new wars against new competitors  to win new customers and win that prize. [Music] The famous Russian author Leo Tolstoy was famed to say  that everyone wants to change the world but no one wants to change himself. I find that when  we go to do digital transformation consultancy projects unless the senior leaders this  C Suite have spent at least one week in education of themselves it just doesn't  work because digital transformation is fundamentally a political process it's much more  difficult politically than it is even technically and so when we ask the question who wants change in the organisation?

everybody's eyebrows go up and go ME! And then we ask how do you plan to change? Eyebrows go down me?

me have to change? Education is the Cornerstone to starting transformation if  a senior leadership team do not have one week to dedicate to their own self-improvement they're not  serious about transforming their organisation and I know it can be difficult to get out of the  office but out of the office you must! start with education before you go to strategy if the  senior leadership are not on side and they don't understand their role and the implications  of what this transformation means it's never going to work no matter how good the strategy is.

Educate, innovate activate that is our philosophy at Ionology and to get you educated, we have two  different offerings one is a consultant course where you can become that trusted adviser  inside your organisation or a consultant yourself. It's designed for individuals, and it's  delivered on Zoom. You can check out our website for more details The corporate workshops are  designed for larger organisations who want to bring together their senior leadership team to  help them work on their own business problems understand digital transformation and learn how  to build an AI-powered business of the future.

It's not uncommon that after workshops we move  into consultancy where we help organisational leaders understand their current situation, the  diagnosis, their ambition, and set out a strategy and plans of how they're going to achieve a  digitally transformed organisation that wins in the digital economy if you're interested in any  of this please check out our website at Ionology. com Okay generative AI is impacting the world  as everybody knows but where is it impacting transformation it's really speeding things  up in particular in three areas the first one for me is leadership and their ability to make  decisions if the leadership have been trained in modern digital transformation Frameworks and  strategic planning Frameworks there is cause and effect modelling that can be done using data  it used to be that you had to understand data to be able to understand how to do the cause and  effect modelling but no more we just pour the data into the large language model and then  start to ask a questions in context with the Frameworks and we'll see that it does most  of the hard work, this rapidly changes how we're going to make decisions and gives us  better guidance from an expert which is the large language model. The second area is in the  area of innovation, Innovation is critical for digital transformation especially if we're going  to reposition ourselves in a digital economy we're going to create new product services and  business models that usually starts with a test hypothesis we have an idea even writing a  test hypothesis can be difficult large language models take care of it ask the large language  model to define the riskiest assumption in your hypothesis it will do it ask it to prioritise  where you should start at points the way this used to take weeks of work and debate it's now  been completely neutralised by large language models and last but not least is the skills gaps  that always exist within businesses you still need skilled people I mean the technology is still  complex the strategies are still difficult and the business and political decisions that need to  be made they still all exist however the skills that are typically needed at lower levels in  data entry data understanding data wrangling processing putting it into the right formats  being able to visualise it being able to add it to strategic plans being able to measure outcomes  that's all been done away with the large language models now just make that quite simple this allows  people more time to keep their eye on the horizon the vision that we're trying to achieve rather  than the project we're trying to roll out and transformation in general is only speeding  up, businesses will have to change, create and innovate faster than ever before and those that  can Leverage The Tool of AI and large language models in particular and integrated into how they  work will definitely outpace those that don't!

Meet Gareth Walsh Gareth is the CEO of a mid-sized  contract engineering firm, what they do is they take product schematics from their clients and  they'll turn it into machined outputs metal, stuff that you use, products that are tangible he's  getting kind of tired of the business because it's very much peak and trough many of the clients  may need to demand rush jobs quickly and it stretches their resources and then there's other  periods when their line follow and they still have the cost to carry Gareth also sees many of the  components that are going into products that his customers are making are way more profitable than  the engineering work it took to make the products he wants to try to change things up and he goes  to see one of his local Enterprise agencies about this new technology around industry 4. 0 and how  they can help. The local Enterprise agency says we will do a digital transformation strategy for  you they talk in detail about IOT the collecting of large volume of data that data being used  to optimise workflows using machine learning and artificial intelligence it's industry 4.

0  it's automation it's fantastic Gareth makes the investment in all of this technology and you  guessed it nothing changes in his business it's the same business with the same products trying to  deliver to the same customers the problem wasn't necessarily the advice that he got to automate and  to try to improve his systems it was that it was mistaken as being strategic it wasn't a strategy  when we take a look at Gareth's strategy that he has written he does talk about industry 4. 0  further automation moving premises launching a new website maybe even moving into a new Factory as we  know they are not strategies they're operational upgrades which he should conduct if he wants  to stay in business but if he wants to try to pivot and make a move into the product world  he's first got to find a customer problem to solve. Gareth now understands that he must ride a  wave of Industry change, that's where he's going to play.

Industry changes can present themselves  as political legislative demographic shifts adjacent movements and other industries that are  impacting you in fact anywhere where there is fog and confusion there is an opportunity to innovate  and bring Clarity the second wave that Gareth needs to follow is the wave of technical change  this is how he's going to play how he's going to bring a new lens to existing or new problems  new ways of doing things and this is where his industry 4. 0 investments will definitely help  the third thing Gareth needs to understand is the customer pain the problem or unmet need this is  whom he is going to play with this is where the problem exists right now or in the near future and  the pain is linked to Industry change and it's usually a Hot Topic at that moment what happens  next is that Gareth needs to practice a focus sessions of exploration Innovation and ideation  to come up with possible solutions to the customer pain problem or unmet need there's one other  thing that needs to be in place he needs to be able to leverage the existing expertise and assets  and skills that exist within the business if the idea is to take off Gareth has no intentions  of pivoting his business and repositioning a digital economy at this stage he's still got a  long way to go before that happens but what he is doing is he's signalling his intentions what's  more surprising for him is that he's not writing strategies that are a couple of pages long they  are short term in nature and most first of all they've got lots of areas that say I don't know  the answer this took a large cup of humility for Gareth to write this down but in reality what he's  doing is he's signalling to his team that; I don't know, I need you to find out, here's some exciting  places where we could go, let's start experimenting innovating and finding a new way leveraging  these emerging Technologies and in particular as we will see large language models and AI while  Gareth's firm is a mechanical engineering firm he works very closely with civil engineers in order  to produce products that work in construction of roads and heavy industry he's gotten to understand  that industry and he's deciding that he wants to leverage that knowledge with an expertise within  the business to be able to build something in that civil engineering space he looks up the latest  trends and he can clearly see that climate change is the hot topic of the day he looks at  climate sensitivity models and the some of the predictions are harrowing meaning floods are  going to extend in particular in the Northern Hemisphere okay so our model starting to look good  right now we know the wave of Chang in an industry in civil engineering it's R sustainability  climate change floods and making sure that we protect our infrastructure we know the technical  wave of change around AI large language models predictive models,machine learning and data and  IOT, and we also think we know what the customer pain is that they are going to have to protect  their land that part's pretty obvious right so they ideate around things that excites the  engineers around creating the most effective product how they're going to build this thing the  supply chain that goes along with it even into funding but we've got to roll back a second here  those things are not the riskiest assumption in this situation those things they're qualified and  understand and they already know the answer to it the riskiest assumption in this situation is how  do you know this is what the customer wants How do you know this is where the money lies how do  you know someone is going to pay for a product or service in this area that you are going to create  now the best way that I have ever found to do it is make a brochure a brochure of the future  State get those involved in the Innovation to actually start to imagine what the scenario is  going to look like as if you're going to pitch it to a customer then then create the written  brochure and maybe a pitch deck that will go along with it, try phoning a few customers and  seeing if you can get a meeting with them and usually when they you tell them that you're  in some kind of Investigation area around an innovation and you would like their feedback  and it's not necessarily a commercial pitch they're much more open. The creation of temporary  collateral stuff that you use to test hypothesis used to take weeks if you wanted to design a  brochure you would have needed the designers and the copywriters you needed the logo designed  you may have wanted to set it separate from your business as not to infect or cause any impact on  your own brand but nowadays with large language models and generative AI we can create all of  this within hours the other part that I really enjoy about generative AI in these early stages  is that it keeps you strategically focused take a look at this example, this is a prompt created by the team in Gareth's organisation.

I want to start a new division of our engineering business  it is a sea and River defence system, our test show we can build mobile Sea and River defences that can be  easily stored deployed quickly and automatically and will be an essential part of every town built  on a river or city near the sea over the next 20 years What's the riskiest assumption surrounding  this plan? Now tackling the risk assumptions and even identifying the riskiest assumptions  usually takes a substantial amount of work you have to deconstruct your test hypothesis what  it is that you're trying to test break it down into all of the assumptions and then rank those  assumptions however chat GPT in this case says given that you're confident with the technical  feasibility of your sea and River defence systems the most critical assumption to address will  most likely be the market need and acceptance I find it hard not to get excited about this  stuff why because it used to take weeks to do all of this and now it's taking minutes if we  had left our Engineers to their own devices they would have been a way of Designing flood defences  and looking at hydrodynamics and forces and all the things engineers get enthused about but what  the large language model did was pull us back to the reality and say that's not your riskiest  assumption if you're wanting to be strategic you've got to understand the customer and the  market first now we can apply this into larger Frameworks that allow us to ask broader questions  the seven principles of digital business strategy is an Ionology framework, it has been custom  made for digital transformation and it is data powered.