Navigating Digital Disruption Risks 2019 Management Journal

External Document © 2019 Infosys Limited Navigating Digital Disruption Risks 2019 Management Journal | 1 Contents Foreword...... 4 Rising to the digital challenge...... 5 View from the top: how digitization is reshaping companies large and small...... 8 Reap the rewards, beware the risks...... 10 Contributors...... 13

In these times of massive organization representing over disruption and rapid 3,500 corporates, industrial, transformation, enterprises are service, non-profit, charitable and compelled to take calculated government entities throughout risks to survive and create value the world dedicated to educating, for stakeholders. The strategic engaging and advocating for the choices that enterprises make are global risk community. important to mitigate risks from Deepak Padaki The event began with an macro trends, market dynamics, Chief Risk and Strategy Officer, engrossing conversation with business model threats or Infosys Limited Nandan Nilekani, co-founder competitive differentiation. and non-executive chairman, Infosys hosted a risk management Infosys Limited, on digital strategy event on “Navigating Digital risks and the trends that are Disruption Risks” in Bangalore challenging the status quo today. in July 2019. The event brought Next was an engaging panel together strategic perspectives discussion on the perspectives from organizations disrupted of incumbent enterprises trying by digital-savvy businesses and to achieve digital transformation from organizations that exploited and the challenges they face these opportunities to emerge as they navigate through this as disruptors. The event was change. This was followed by an hosted in collaboration with intriguing panel discussion where RMNext and RIMS® and was the disruptors discussed how they attended by chief risk officers, recognized the digital disruption heads of risk and audit functions, risks and successfully converted chief strategy officers and chief them into opportunities. digital officers across industries. The conference was a great RMNext is India’s largest informal success thanks to fascinating knowledge-sharing network insights from Nandan Nilekani and on enterprise risk management the amazing panelists. We share with representation from 70+ with you, the highlights of the companies across industries. RIMS, conference and hope you will find the risk management society®, value in them as you successfully is a preeminent not-for-profit navigate digital disruption risks.

Digital disruption presents first noted that disruptions can occupies a similar position in the companies with existential be induced by new technology, e-commerce space. challenges — and great business models, or regulations. Nilekani explained that winner- opportunities. But what exactly He then described the rise of take-all thinking is fueled by does digital disruption mean? “winner-take-all thinking” as one massive amounts of capital. What are its specific impacts? And critical trend, a phrase referring “They’re not grown the old how can companies thrive in this to businesses that operate like fashioned way where we made altered landscape? monopolies did 120 years ago. profits and ploughed them These and other questions were Back then supply side monopolies, back into the business,” he said. considered during a dialogue like those on steel and railroads, Nilekani described the Silicon between Infosys Chairman had dominant market share and Valley mentality as, “How do we Nandan Nilekani and Infosys Chief used it to increase prices. create monopolies and then Risk and Strategy Officer Deepak make money?” Today we have demand-side Padaki at a risk management monopolies. The business that Noting that 3.5 billion people event at the Infosys campus in controls access to the consumer now have smartphones, Nilekani Bangalore. creates the monopoly. Google and said this development represents Disruptive trends Facebook exemplify this winner- another key disruptive trend. take-all trend. More than half of “When the computer revolution Padaki launched the session by worldwide advertising spend is on moved from PCs to smartphones, asking Nilekani for examples of digital, and 90 percent of it goes so did the leadership,” he said. key disruptive trends. Nilekani to these two companies. Amazon Facebook, Google, Apple, and

External Document © 2019 Infosys Limited Navigating Digital Disruption Risks 2019 Management Journal | 5 Amazon have displaced the old that advertising drove Big Tech’s Drawing references from the guard of Microsoft, Intel, Oracle, rise. The move from advertising writings by Sajith Pai, a long- Dell and HP with 10 times the on linear TV and in print time media executive turned VC, market size in terms of units sold. publications to digital platforms Nilekani explained that India is enabled far more targeted ads, not just one market, but four. Nilekani also talked about the rise first on the internet and then on The top market, India 1A plus, of Netflix, which brought content consumers’ devices. covers “the guys who eat avocado directly to consumers using toast,” he said. About 10 million internet access. This disrupted the To make this model work, Indians fall into this category. old model in which companies companies had to capture and use Next comes India 1, a group of like MGM and HBO sold content consumer data. They also had to about 50 million people who buy to pay TV and DTA channels. find ways to keep the data. New from Flipkart and Amazon. Many To address this trend, AT&T is ways of sorting data arose, all of it startups focus on this group. India buying Time Warner, gaining open source in the cloud. 2 includes the 300 million people access to content, and Disney is Beginning five years ago, the who use smartphones. And India going direct. rise of deep learning accelerated 3 covers the people who don’t Direct to consumer is also an the application of AI to data. even have phones. important trend because it As a result, we’ve seen rapid In addition, Nilekani noted that allows companies to monitor and improvements in image and India is diverse in terms of regions, understand consumer behavior, speech recognition, natural languages, and cultures. But savvy such as who is watching, for language programming, and companies have figured out how how long, and how often. “The newer machine language to finetune a common platform telemetry that Netflix has is translation. Because Big Tech for each sub-market. amazing,” Nilekani said. already had massive amounts of data, it was perfectly positioned to This trend is also transforming Government and regulation apply deep learning to that data the consumer packaged goods Padaki next asked about and reap the benefits. Without industry. “In the old days, you government’s role in helping access to that type of consumer made the soap, sold it to Walmart, industries transform. “It’s not interaction data, incumbents can’t Walmart put it on the shelf and government’s job to make generate new insights, products sold it,” he said. “But today the industry transform,” Nilekani and services on the same scale as soap is being sold online.” answered. “That job is for the Big Tech. Looking ahead, Nilekani said leadership of companies. But the shift to battery technology The Indian market government should build digital public platforms accessible to will have a massive impact on Padaki pointed out that the Indian all and then it’s up to individual the auto, utilities, and oil and market is much more diverse companies to innovate on top of gas industries. The auto industry than Western economies. Given that.” will face the triple challenge of this fragmentation, he wondered automated autonomous vehicles, how incumbents are affected Turning to the topic of regulation, electric cars and ride hailing. by digital disruptors. Nilekani Nilekani said it plays a huge role Shifting gears, Padaki asked said it depends on the industry. in market creation. For example, whether digital natives have Some will be more susceptible to if the Indian government says all an advantage over incumbents rapid disruption than others. For cars must be electric by 2030, the when it comes to data and example, if you’re in advertising, impact on the auto industry will analytics. They definitely do, publishing or entertainment, be massive. replied Nilekani. He explained your business has already been affected.

6 | Navigating Digital Disruption Risks 2019 Management Journal External Document © 2019 Infosys Limited Big Tech was a beneficiary of Incumbents look forward Shareholders are saying, “If an regulation. Net neutrality and the incumbent has to take on these Wrapping up the session, Padaki Communications Decency Act, the challenges, we’ll give them the asked how incumbents can deal US law passed in 1996, enabled space to do it,” Nilekani noted. with these changes. “The big guys the internet revolution. Section have realized the existential threat Many companies with physical 230 of the CDA says that providers of these new technologies and are assets are figuring out how to of interactive computer services much more aware of the risks and best combine them with digital will not be liable for the content willing to act faster,” Nilekani said. offerings. Walmart bought that appears on their platforms. “And technology is now seeping Jet.com and is leveraging its So, while the publisher of a into the incumbents, so it has physical stores and warehouses. newspaper that runs a slanderous become commoditized.” Consumers can shop online article can be sued, an internet and pick up their purchases at a platform can run “any kind of fake While it is still a big journey to store. Given such developments, news” without repercussions, move from legacy to digital- Nilekani is confident that global Nilekani said. “We have built this first thinking, it can be done. incumbents can rise to the digital content disaster. Big Tech got a For example, Disney, which challenge. free pass under section 230.” has built a massive content powerhouse, once sold its Nilekani also stressed on the But Nilekani believes new products to Netflix. Now it plans role Risk Officers have to play in regulations are on the horizon. to launch its own channel, Disney navigating from static to strategic “I think there’s a backlash, or Plus, in November. The channel risk management by equipping ‘techlash’ as it’s called,” he said. will be priced cheaply with no themselves with emerging risks, “Liability for content is going expectation of profitability at first. technological trends, geopolitical to come.” And still, Disney’s stock price rose factors, regulatory developments, following the announcement. changes in business models, competitive dynamics and capital.

These are trying times for senior Datta, Chief information and the scale of the change, he reeled executives. At big, traditional digital officer at Bajaj Allianz off some striking numbers. companies, the challenge is Life Insurance Company, Raj Pai, In 2000, the median age of a top executing digital transformations Founding partner and Co-head 10 S&P company was 83 years. By that can take many years. At of the South Asia investment 2018, the age had fallen to 35 years. smaller, nimbler companies, practice at GEFCP, Atanu Roy, By 2027, it is predicted to be just it’s a race to build market share Chief information officer at Sun 12 years. before the big companies have Pharma, and Nivedita Basu, transformed themselves. So, how Founder and creative director at This dramatic turnaround in the are the leaders on both sides of The House of Originals. fortunes of the world’s biggest the equation responding? companies has been caused by Kicking off the discussion, Das the rise of digital technology. So, To find out, Infosys organized Gupta asserted that although what impact is this revolution a panel of senior executives many commentators have having on various industries? And from big companies and compared the digital revolution how is it changing their business small disruptors in a variety to the first, second and third models? For answers, Das Gupta of industries. The moderator, industrial revolutions, he turned to the panel members. Ambarish Das Gupta, Founder considered the digital revolution and Senior partner at Intueri to be far more transformative than Consulting, was joined by Goutam previous ones. To give a sense of

8 | Navigating Digital Disruption Risks 2019 Management Journal External Document © 2019 Infosys Limited Turning ordinary into Digitizing pharma Why the revolution isn’t over extraordinary The need for India’s major Although the digital revolution is Raj Pai, taking an investor pharmaceutical companies to transforming many industries, life perspective, said digital comply with strict US regulations insurance companies are yet to technology was having an led to a wave of digitization – feel its impact. Yes, technological energizing effect, “converting an effort that produced some advances have helped more ordinary industries into unexpected side benefits. “People customers access life insurance, something above ordinary.” His found they could significantly but digitization has not yet company focuses on the energy improve productivity in their transformed actuarial science. sector, and he is especially operations and manufacturing “When I’m trying to underwrite interested in the ways technology processes,” Atanu Roy said. a life, am I trying to underwrite a can help companies become more Drug companies also found ways life based on behavioral factors, resource efficient — “doing more to improve the quality of their life expectancy, or other social with less to achieve more.” products because digitization factors?” Goutam Datta explained. Technology’s biggest impact enabled them to collect a wealth There could be an AI-driven has been bringing down costs, of data they could then analyze. answer to this question, but it making products and services It’s also changing the way drugs hasn’t been developed yet. The less expensive. “It’s a great are distributed. “The traditional response to the developments paradox: but it’s now cheaper to distribution model is where that arise from the digital go with renewable power than the doctor gives a prescription, revolution may not always be conventional power, purely on people go to the chemist store positive. But as the experiences of a non-subsidized cost basis,” and buy the drug,” Roy said. But the panel members demonstrate, Pai said. a growing number of online the power of its ability to Digital transformation is also pharmacies like Netmeds.com are transform industries will no creating new opportunities changing that model. doubt continue. for media executives like One sign that traditional panel member Nivedita Basu. companies may have to do far Independent TV producers can more than simply digitize their now create programs for a wide processes is the fact that some range of channels that have a disruptors are busily trying seemingly insatiable appetite to introduce 3D printing of for new content. For example, medicines. ALTBalaji, an Indian subscription- “When that happens, it would based video on-demand platform, only require small plants where now offers more content hours the demand is, rather than the than the three big TV channels — large plants where pharmaceutical StarPlus, Colors and Zee — put companies currently manufacture together. their products,” Roy said, creating “Netflix doesn’t say, ‘We only want implications not only for their six programs from 8 o’clock to 11 manufacturing and distribution o’clock,’ so you can make as much processes, but also staffing levels. content as you want,” Basu said. “As a result, somebody like me actually stands a chance.”

Be careful what you wish for. Reflecting this double-faceted network supplier; and Signzy, That was one of many takeaways situation, the day-long Infosys a specialist in AI systems for from a panel discussion at the risk-management event brought banking. Founder/ CEO’s of these risk-management event hosted together perspectives from both three companies have joined the on July 16 by Infosys on its organizations that have been panel discussion. Bangalore campus. disrupted by more digital-savvy Adoption rate issues businesses and those that have Participants in the discussion, exploited the opportunities The challenges of going digital entitled “Recognizing and themselves and emerged as were high on the mind of the first exploiting digital disruption risks industry disruptors. speaker, Khadim Batti, CEO and by being a disruptor,” described co-founder of WhatFix. how digital disruption can be The digital-disruption panel a double-edged sword. On was moderated by Alok Goyal, Digitizing processes can involve the one hand, digital leaders a managing partner at Stellaris hundreds of applications and cost can reap the benefits of the Venture Partners. His company, an hundreds of millions of dollars, yet opportunities to transform their early-stage venture capital firm, the average adoption rate of the business models and disrupt invests in technology startups that new systems by employees in the their industries. But on the other, aim to disrupt their industries. first year is ~35%. digital transformation projects Stellaris’s recent investments “Why is that?” Batti asked, can be costly and challenging, include WhatFix, a digital- answering, “Because the training leaving digital laggards to face adoption platform provider; methodologies are very legacy. tremendous risks. LoadShare Networks, a logistics- They’re offering instructor-led

10 | Navigating Digital Disruption Risks 2019 Management Journal External Document © 2019 Infosys Limited classroom training and manuals, Yadunath “Yadu” Bhargavan [one-time password] and open an but we’re in an on-demand Karambil, an attorney who’s account.’ That allowed everyone to economy. Everybody wants worked in both India and the feel there is a different way.” training at the point-of-problem.” United States. Most recently, he’s Digital services may also be (Not incidentally, it’s this precise the founder of A2JTech (short for used to improve operations problem that WhatFix’s main “access to justice”), which aims in the physical world, Talluri product aims to solve.) to use technology to help Indian of LoadShare stated. “There’s citizens exercise and protect their Another reason adoption rates a supply-chain revolution legal rights without litigating can be low is because the user happening even at the through the courts. The startup’s experience involves “a lot of conventional companies,” he first offering, called Sarvadhikar, hassle, a lot of pain,” said Ankit said. “They’re wondering why is a free service that time- Ratan, co-founder and product they’re not yet reaping the cool stamps artistic works on a public head of Signzy. His company things that are happening in blockchain to establish a record helps banks persuade consumers e-commerce. When you order of who created the work and to adopt and use financial services from Amazon, you know exactly when, so the creator can prove on their mobile devices. As Ratan when it is coming. Everything is ownership. “This is an attempt at explained, it’s not that banks don’t digitized.” re-imagining your conversation understand the need to go digital with the law,” Karambil said. In fact, some are reaping the — in fact, one Indian bank offers benefits. As Talluri explained, 60 versions of its mobile apps. The When the fish don’t bite one of LoadShare’s customers challenge is that some important One challenge facing nearly any has used his company’s logistics processes, such as authentication, digital transformer is adoption. platform to improve its service at are still performed manually An organization can create a no additional cost. Previously, the and that’s too slow for today’s great digital solution, but what customer needed four or five days consumers. happens if users — whether to fill a five-ton shipping container The next speaker, Raghuram internal employees or external with its products. During that “Raghu” Talluri, CEO and co- customers — won’t use it? The time, the packed products founder of LoadShare, described way to avoid this issue is to make would sit, leaving the next link digital disruption as both alpha sure the solution solves real, in the supply chain waiting. With and omega. “We provide the same day-to-day problems. “Of course LoadShare’s help, the company services that any large logistics people will buy you then,” Ratan of can combine its first ton in a company in India can provide but Signzy said. smaller truck, along with loads we provide it in a very different from other LoadShare customers. By way of example, Ratan manner,” he said. That different The goods ship faster, and the discussed Aadhaar, 12-digit manner involves creating a supply chain is replenished identity numbers offered by national distribution network by sooner. “That’s a win-win for the Indian government to the partnering with more than 100 everybody,” Talluri said. “The country’s residents. The advent of small, entrepreneurial suppliers client gets better service at the this ID number, Ratan explained, with over 650 hubs throughout same or better cost, and I make caused the financial-services India accessed through one more money.” industry to have a change of technology platform. That allows heart. “The industry assumed Training gains LoadShare to provide greater that things would always remain reach, high-level service and Although technology should physical,” he explained, “but discounts of up to 30%. make life easier and simpler, some suddenly the regulators said, ‘No, technologies can be complicated A contrasting perspective was you can now just take an OTP to use. Many digital services offered by the fourth panelist,

External Document © 2019 Infosys Limited Navigating Digital Disruption Risks 2019 Management Journal | 11 require both changes in the intervention by the legal system. “That’s real risk,” admitted Talluri organizational culture — the way “If an Uber driver tries to charge of LoadShare . “As we work with people work together — and you but doesn’t show up, you just the larger guys, at some threshold additional information. Both, in hit a button,” Karambil explained. they may ask, ‘Hey, why do I need turn, require training, raising a “You don’t need a judge to to pay this guy? Why don’t I in- question: Since so much data adjudicate whether the driver source it?’ So, we’ve diversified and so many applications are showed up. It’s an algorithm.” and looked at other segments to already in the cloud, why not use play in.” Lawyers may seem like a stodgy that technology to disrupt the barrier to digital transformation, Ratan of Signzy agreed. “I do not way training is done? “If I’m an but Karambil says at least some believe we are doing anything end user, I need training to be firms are on board. He described that cannot be disrupted,” he said. quick, and I need it to be able to one law firm that goes so far as to “The only thing you can do is be understand what I need,” Batti of hold hackathons with its lawyers ahead. If I can close customers WhatFix explained. It’s an idea and technologists. “They say, before a big incumbent figures that seems to have struck a chord. ‘Identify a problem, and then let’s out our product, then there’s no WhatFix has been attracting new, make a POC [proof-of-concept] disruption threat.” big-name customers at the rate of and see if we can elevate this,’” at least five every quarter. But how can disruptors stay ahead he said. of the competition? “Your main One area where technology But aren’t small startups also job,” replied Talluri of LoadShare, promises to make the “real at risk, moderator Goyal asked “is to navigate all of these risks world” easier to navigate is the panel, especially if a big one by one.” the law. Digital systems can be competitor decides to strike back? used to eliminate the need for

Infosys would like to acknowledge the contributions made by each of our esteemed panelists. Their insights and thought leadership are greatly appreciated and helped make “Navigating Digital Disruption Risks 2019” a richer experience for all participants.

Alok Goyal Khadim Batti Managing Partner, Stellaris Venture Partners CEO & Co-Founder Whatfix

Ambarish Das Gupta Nandan M. Nilekani Senior Partner and Founder Intueri Consulting LLP, Chairman, Infosys Ex-Partner KPMG and PwC Nivedita Basu Ankit Ratan Creative Director and Producer, Co-Founder & Head Product, Signzy Founder of “The House of Originals”

Atanu Roy Raghuram Talluri CIO, Sun Pharma Limited Co-Founder & CEO of LoadShare Networks

Deepak Padaki Raj Pai Chief Risk and Strategy Officer, Infosys Founding Partner, GEFCP & Co Head of South Asia Investment Practice Goutam Datta Chief Information & Digital Officer, Yadunath Bhargavan Karimbil Bajaj Allianz Life Insurance Co. Limited Senior Lawyer, TEDx Speaker and Founder of a2jtech. com & sarvadhikar.com

Ramesh N Infosys Knowledge Institute [email protected]

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