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CFO Insights on Inclusive Empowerment through Digital Innovation

February, 2017

CFO Insights on Innovation

B. Sumant, President, FMCG Businesses, ITC Ltd., believes that for countries like India digital innovations will be a boon if it contributes to addressing its critical challenges of poverty, sustainable livelihoods and environment replenishment

The convergence of Communication, Computing, Connectivity, Cloud Infrastructure and Communities in the virtual space has redefined life in myriad ways and created a digital universe with far-reaching implications. Digital innovation permeates every sphere of socio-economic activity today, encompassing consumers, enterprises, governments, and indeed every section of civil society. Perhaps one of the most powerful game changers of this era, the digital world will radically transform the future and irreversibly change the way economic activities are conducted and how social interactions take place.

Technological breakthroughs and innovation in the digital space is already visible today in the growing focus on Big Data, Analytics, Artificial Intelligence (AI) and Internet of Things (IoT) amongst others. The relative simplification of technology is also apparent in the tremendous computing and connectivity power that is resident today in mobile gadgets, available with almost every 2 out of 3 people on this planet. It is therefore not surprising that the first impact of digitisation is more prevalent in the pursuit of economic activity. Today, big data and algorithm-based analytics not only influence product and service designs, but define how products are manufactured, services are delivered, how Just-in-Time needs are met, how products are stored, transported and retailed, as well as how consumers experience the process of search, discovery and purchase, and make consumption choices.

At the enterprise level, product or service designs can take place in one continent, whilst seamlessly enabling manufacturing in another continent and delivery in yet another part of the world – all in real-time and through online interactions. In the marketplace, by increasing the predictability of consumer demand at the aggregate and disaggregate level, digital innovations will reduce uncertainty, enhance efficiency of the supply chain and remove the need for high pipelines and working capital. Physical delivery models from nearest retail to home will create many low skill jobs. Consumers of tomorrow will ‘pull’ what’s relevant for him or her at a point in time, place or mood. ‘Push’ strategies by companies will not only be expensive and ineffective, it would create long term damage to the brand by irritating and alienating its consumers.

Profound changes are taking place with predictive digital applications replacing endless hours of human toil, particularly in repetitive and laborious functions. The bridge was also crossed when digital intelligence entered the realm of creativity, mimicking the creative faculty of the human brain. Today, robots are taking over many jobs, including hazardous ones. Japan has more than quarter million industrial robots employed currently. And now they are becoming increasingly human-like. Since machines don’t get tired, they perform even better in certain situations. They are getting better at listening, processing, and responding like humans in natural language settings. Using large datasets of context and user behaviour, algorithms are getting good at reading the mood of the moment and even suggesting songs and products with uncanny empathy! Today, the Internet of Things (IoT) is creating an infinite array of smart connected solutions. There are almost as many IoT devices today as humans, about 7 billion of them and by 2020, there will be 26 billion connected devices. (source: Gartner)

There is no doubt that digital innovation has changed and will change the way the world functions, and perhaps for the better. But there are also questions raised today on the social implications of such a transformation, and more so in developing countries with large population and multidimensional challenges. The context of development in low income and emerging economies is very different than advanced countries. The key difference lies in the human element or more specifically, the challenge of providing livelihoods to the teeming millions who are often mired in poverty. In such a context, digital innovations that raise the standard of living of people, create livelihoods and empower the poor are far more valuable than technologies that merely replace human effort and interventions.

While consumers and customers are the backbone of any marketplace, it is important to go beyond markets to examine how digital technology can create larger societal value. In a country like India, with almost one-third of the world’s poor, digital technology must empower those at the bottom of the pyramid. More so, it must enhance and sustain livelihoods, in a country where only 2-3 million jobs are generated annually against the 12 million who join the workforce. Therefore, digital technology has to be inclusive, even as it enhances competitiveness of the economy.

When digital technology is leveraged to empower the weakest in society, it transforms lives. A defining moment was when ITC pioneered the e-Choupal, bringing the power of the Internet to 4 million poor farmers thereby raising rural incomes. Rural India faces a plethora of challenges that feed on the vicious cycle of poor knowledge and information, poor infrastructure, barriers to market signals, low risk-taking capacity, low investments leading to low productivity and lower incomes. Any solution to address this challenge would need to connect the digital, physical and social world through an orchestrator who would bring in the required synergy.

The ITC e-Choupal initiative, the world’s largest rural digital infrastructure, leveraged information technology with on-ground sustainable agricultural practices, customised extension services as well as the creation of common assets like watershed development, bio-diversity and so on. Its network of village internet kiosks ('e-Choupals') managed by farmers themselves, called ‘sanchalaks’, enable even small and marginal farmers who are otherwise de-linked from the formal market to access ready information in their local language on weather forecasts, best practices, and on prices. The knowledge enables them to make informed decisions, improve risk management and implement best practices in agriculture, thereby improving productivity. This enables them to command higher prices at the marketplace and improve their competitiveness.

The globally awarded e-Choupal model, also taught in business schools across the world, is a unique example of the synergy of digital technology, on-ground physical and social infrastructure as well as private-public-people partnerships. The key objective of the e-Choupal model was to create and enhance rural livelihoods, thereby creating fortune for the bottom of the pyramid rather than trying to only exploit the fortune at the bottom of the pyramid. Therefore, instead of fighting for a larger share of a smaller wallet, the objective was to increase the size of the wallet through digital, physical and social innovation. Innovations like the e-Choupal become the digital highway connecting, enhancing and contributing to rural income growth, thereby improving the quality of life of the rural and marginalised communities substantially.

When digital technology is used to provide much needed healthcare and education to those deprived, it creates secure generations for the future, critical for growing markets and economic stability. The future will see a larger proliferation of web-based telemedicine, skill building modules and provision of services. The mobile phone revolution will make such gadgets and apps the centrepiece of inclusive development. How can artificial intelligence, big data, analytics and the scale and speed of computing help empower the weakest in the value chain, and ensure sustained livelihood creation is the challenge. In that also lies infinite opportunities for innovative and future-ready enterprises. Whether it is opportunities in education through virtual classrooms or primary healthcare through a combination of digital and paramedical infrastructure, or the use of data to improve agricultural productivity and produce according to market signals, or in logistic solutions that increase access to rural areas and reduce costs, or in the expansion of forms of e-commerce, or in providing e-governance and other services to rural areas, digital technology can shape the destiny of tomorrow’s rural India.

It is heartening that the Government of India has launched significant interventions to use the transformative power of ICT (Information and Communications Technology) in every sphere of society. The journey towards building a ‘Digital India’ has begun with determined steps in the right direction.

The Government of India's ‘JAM’ initiative (Jan Dhan Yojana, Aadhaar and Mobile), envisioned by Hon'ble Prime Minister Shri Narendra Modi, is aimed at achieving maximum value for every rupee spent, maximum empowerment for the poor and maximum technology penetration among the masses. To roll out its ambitious JAM trinity plan to directly transfer subsidies to intended beneficiaries and eliminate intermediaries and leakages, the government has started linking the Jan Dhan scheme, Aadhaar numbers and mobile numbers of individuals. The government has also brought about several reform measures for the promotion of payments through cards and digital platforms. All this will no doubt bring the benefits of digital technology to the masses.

For countries like India, digital innovations will be a boon if it contributes to addressing its critical challenges of poverty, sustainable livelihoods and environment replenishment. While there is no debate on the levels of efficiency and competitiveness that can be achieved through digital interventions in a connected world, such innovations must be designed not just to replace human effort, but to enable larger value addition and productive usage of human talent. It is essential that the power of digital technology is leveraged to create larger societal value. Otherwise, as history has shown, in spite of an era of industrialisation, globalisation and modernisation, social inequity and unsustainable growth can completely derail societies despite radical technological breakthroughs. It is only when there is a harmonious amalgamation of digital, physical and social innovation, that true transformation will take place to build a better, secure and happier future.

Opinions expressed in the article are the author’s own.