“There is a lot of digital washing in companies”

Posted Dec 16 2022 at 7:10 am

Isn’t the digital revolution in the economy running out of steam?

On the contrary, this revolution is accelerating. From agriculture to the supply of drinking water, via pharmaceutical research or paper production, the fields of application are endless. Not with a single technology, but by deploying a range of technologies. On the other hand, it is true that the ability of companies to transfer innovations from laboratories to their production processes is weak. They are aware of this, since 70% of them say they are disappointed with the results of their investments in digital technology.

Where is the problem ?

A link is missing between the proliferation of innovations and the daily life of the consumer. Businesses fail to scale. And the problem is in our very conception of the technological revolution.

Take the example of artificial intelligence. The enthusiasm of recent years often gives way to disappointment in many companies…

The progress, however, is impressive. In terms of information: artificial intelligence devices now know how to write texts that readers find it increasingly difficult to distinguish from those written by human beings, create pictures gorgeous, making perfect videos – hence deepfake issues.

In terms of biology, it is now possible to encode information in DNA. Artificial intelligence has of course been invaluable in accelerating the development of vaccines against Covid. In order to better treat dermatological diseases, twenty years of research work have been absorbed into an AI system that identifies “action driving” molecules and tests them in new uses, much faster. Artificial intelligence also makes it possible to test bacteria to optimize their conditions of use much more quickly for a wide variety of purposes.

What can these bacteria do?

The papermakers will soon be able to halve the water consumption for the manufacture of paper by separating the plant fibers from the wood using bacteria, with less need to wet and dry them – the process is now at its pre-industrial stage. Water suppliers will be able to employ other bacteria to filter their supply at a lower cost. Many other avenues will be explored. The mixture of AI and life is a very promising field.

Let’s take another example: the metaverse. A year ago, it was billed as the “new” new world. Today, it looks like a dead end…

We passed without transition from the time of infatuation to that of mockery. But on this subject, we must take a step back. I started as an intern at Peugeot-Citroën thirty years ago, on an electric car project. Like today for the project facebook skyline, the sarcasms were numerous. At the time, there were also many people when California announced that it would ban cars emitting greenhouse gases in 2005. But finally, today, things are going very quickly!

And beyond the playful or commercial aspects, the metaverse already has valuable uses for industry. It becomes possible to test assembly lines involving operators, robots, machines, etc. In the physical world, it takes a long time to get these production lines running at full speed, because the interactions are numerous and difficult to predict. In the virtual world, things go much faster and the “in silico” result can be transposed as is to the real factory.

But then, what is the missing link between innovation and business offerings?

It is found within companies themselves! Start-ups know how to build new offers and convince us of their usefulness. But most can’t afford to scale. Large companies have large data infrastructures, powerful centers of expertise, but they have great difficulty in exploiting laboratory technologies.

And it’s no wonder, because they often start by choosing technologies before deciding what to do with them. What is needed is to build disruptive solutions in large companies. Artificial intelligence in business is 10% algorithms, 20% technologies and 70% implementation. And this implementation requires enormous managerial energy.

Do some large firms still manage to transform the test?

Yes of course. According to our work, a quarter of large traditional companies now have performances close to firms born in digital technology, “digital natives”. But the others have not moved forward, despite rhetoric promising to become data-centric firms. Just as there can be “greenwashing” in some companies, there is a lot of “digital washing”.

Large companies are therefore not condemned in the face of players who were born and developed in the digital world?

No. In large companies, the pandemic and the changes in use it has fostered have made it possible to speed things up. And tech giants gradually lose momentum. As they grow, they are overtaken by gravity and the exhaustion of their initial income. the strategic shift started by the parent company of Facebook towards the metaverse marks the group’s desire to escape this fatality.

Should we multiply experiences in all corners of the company?

On the contrary, efforts must be concentrated. In a large company, it is better to have two well-executed projects at 50 million euros than 50 projects at 2 million. To innovate, you have to take risks! However, in management teams, the reflex is rather to “de-risk”, to prepare for all eventualities. We often prefer to look for the flawless there than to risk a smash.

Isn’t this a leap into the void?

You have to dare to innovate, and it’s not easy. But without dramatizing. Before, there was often a staging around the day of the changeover to a new system. Today with agile organizations, it is possible to move forward much more gradually, starting by evaluating the change in certain functions of the company, certain customers, certain regions.

Shouldn’t digital transformation be company-wide to be successful?

Yes, but it is possible to test. This is what we are currently doing at BCG with a major German car manufacturer on a key moment in the purchase of a car: the negotiation of the discount. Previously, the dealer’s sales representative took care of this alone. Tomorrow, it will do so with the support of an artificial intelligence system that will not only be able to better detect the options that could please the customer and his willingness to pay, but also compare his demand with the company’s stocks.

The stakes are colossal. On 30 billion euros of sales, a one point improvement in profitability immediately makes a lot of money… But to transform the commercial model by going to seek information held centrally, in order to go to the end of the potential of new technologies, the company must change in depth.

What skills are needed for companies to move forward in this revolution?

You have to be as strong in digital as in business. At BCG, we set up teams of technology experts – within BCG X, our new tech entity (3,000 people) – and we make them work with our business teams. We are no longer just consulting, we are building innovative solutions together with our customers and technology partners.

What are the bottlenecks in business?

Only one in six companies believe they have a strong culture of innovation. Only one in three has a clear digital strategy. No progress is possible without changing the mindset. Not only at the digital management level, but also on the commercial side, on the production side… The entire executive committee must be involved in the transformation. The leader must show courage to help the rocket take off.

Can companies really expect gains commensurate with the colossal efforts to be made?

I will answer you with the example of an agricultural products trading firm in Southeast Asia. She asked us to create an application giving technical advice to the crowd of farmers with whom she is in contact: when to plant? when to water? when to treat? We work with satellite images, weather forecasts, photos of the fields sent by the farmers.

Now 150,000 people are online. At the end of the first crop cycle, farmers who used the application had yields 30% higher than their neighbours. The trading firm also noted better product quality.

Isn’t this digital revolution likely to encounter strong social opposition?

There is indeed a lot of stress. Many employees feel threatened in their jobs. But the experience of employees working with artificial intelligence systems is very different. In companies that have integrated such processes, our studies have shown an improvement in employee morale, collaboration, and information sharing.

I do not believe at all in the American gurus who predict the end of employment by robotization. Companies that want to get people out of the loop run into serious difficulties.

His journey

A recognized tech expert in France, Sylvain Duranton has spent his entire career with the Boston Consulting Group (BCG). A member of BCG’s global executive committee, this graduate of the Ecole polytechnique and the Ecole des mines de Paris has been supporting the management teams of large global companies in their technological and digital transformation for years. He founded and directed between 2015 and 2022 BCG Gamma, the firm’s entity specializing in artificial intelligence. At fifty-four, he is also treasurer of Aurore, an NGO that supports vulnerable groups in France.

Its news

Sylvain Duranton has just been appointed global director of BCG X, the consulting firm’s new “build & design” tech entity. This new center from BCG Gamma brings together 3,000 experts. Its ambition is not to limit itself to a consulting activity, but to build innovative solutions with customers and technological partners.

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“There is a lot of digital washing in companies”

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