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The National Business Review / August 25, 2017
Imogen Atkins
Digital transformation is an imperative for all businesses if they are to survive.
But Vodafone New Zealand enterprise director Ken Tunnicliffe says while most leaders are on board with the dynamics of digital transformation, keeping pace won’t be easy.
“Communication and empowerment are critical to digital transformation, so businesses need to be flexible, have easy-to-use technology to stay relevant and be competitive in a profoundly changing world.
“The key is to start with the customer and plan and determine their journey from start to end. They also realise the need to embrace transformation.”
Domain hosting company Umbrel-lar’s head of cloud Dave Howden believes customers need a trusted adviser to guide them through this chaotic world. Digital transformation can be scary, he says, with disruption and disintermediation occur-ring in many sectors.
But will New Zealand’s relatively small size be detrimental to achieving trans-formation successfully? In the latest New Zealand Business Demography Statistics from February 2016, the country had 515,050 enterprises registered, 97% of which are in the SME range
Mr Tunnicliffe believes New Zealand’s size is actually a help.
“New Zealand has always had an inde-pendent mentality. We’ve had to be pretty self-sufficient and think of solutions for ourselves. I actually think this mindset helps us significantly when it comes to innovation.”
However, Mr Howden suggests the real challenge is not innovation but that 97% statistic. Most of those companies employ fewer than five people and a big group don’t rise higher than 20 staff.
“That doesn’t give them the ability to have depth on the bench when it comes to IT and having their heads above the parapet to see what’s coming. There is such a need for partners to bring that to the table.”
Smaller and larger companiesThere is a considerable difference in the way smaller and larger business approach digital transformation.
Smaller companies are more constrained in access to work-ing capital and cashflow and have to be smarter about what they do, Mr Tun-nicliffe says. They tend to steer toward cloud-based applications which are little cost or even free.
Larger companies have been around longer, using systems they’ve invested in over many years, enabling a quick transla-tion into the digital world. The lesson is: Digital transformation works for small and large businesses alike.
“We’re seeing a lot of strategic consul-tancies forming digital transformation strategies for larger businesses in New Zealand.” Especially those with reach overseas, such as PwC and Deloitte, Mr Howden says.
“However smaller New Zealand-owned businesses don’t have that luxury or the budget to spend hundreds of thousands of dollars on a strategy they don’t feel they need. The risk is that we may have a far smaller IT industry in 10 years due to off-shore competition.
“With the introduction of the hyper-scale clouds, there could be a real shift in the market if we don’t embrace it and keep the New Zealand IT market afloat,” he says.
The replacement factorIn the midst of transformation, it’s impor-tant to remember certain attributes can’t be eliminated along with tangible aspects of a company such as sensitivity, empathy, the softer side of people skills.
Mr Howden says these will be more of a commodity in the future as society places far more value on them than it does now.
“Ultimately, jobs are going to change and we’re going to create new jobs on the basis of artificial intelligence, machine
learning and deep learning. However, we’ve been bring-ing automation into indus-tries for the past 100 years.
“We resolved the unem-ployment problems by creat-ing new industries and new careers. It’s human nature to be concerned but his-tory shows we can work and innovate our way through it.”
Mr Tunnicliffe says in the digital world the cost of development isn’t as large
as it might once have been. The pace is certainly faster and more agile but the digital environment allows companies to efficiently try different projects, discard them if they are not right and move on. He believes doing nothing is the biggest risk.
“The important work of implementing and adapting to the major changes in any digital transformation strategy falls to eve-ryone. For this reason, digital transforma-tion is a people issue.”
Embracing digital transformation
18 / The National Business ReviewAugust 25, 2017
Scott Bartley
For many business leaders, the idea of digital transformation will feature heavily in their plans for the future – there is, after all, no escaping technology’s infiltra-tion of nearly every aspect of the modern world.
But what exactly does such a digital transformation involve? Is it updating computer systems and moving everything into the cloud? Is it a project-based initia-tive? How should it be staffed?
Microsoft New Zealand direc-tor of DX (Digital Transforma-tion) Chris Auld believes the biggest challenge for companies is balancing a big strategic vision for the business with the need to get things done. What’s more, it needs to continue, rather than a one-off project that ticks the right box. That means embedding the idea of digital transformation deep within the business.
“Organisations need leaders who can chart a long-term vision for their business but those lead-ers also need to ensure a process and culture to encourage rapid
experimentation, and an invest-ment prioritisation model that ‘scales-in’ to projects as they prove their success,” he says.
David Leach, chief executive of specialist data and analytics company Qrious, says the pro-cess must be a “people thing.”
“A digital transformation needs to become part of the DNA of a business. It needs to be embraced by the executive team and everyone right down through the ranks to buy into it,” he says.
Indeed, Mr Leach views the process as being as much about creating a culture of learning as it is technology, and for many busi-
nesses, this will mean a degree of upheaval.
“Jobs may need to be rede-fined. Or you may need to rede-ploy people to create a culture of learning. People need to get used to jobs that will change, and gone are the days of having the exact same job description for decades. People that can learn and adapt throughout their career are more likely to thrive in this changing world,” Mr Leach says.
The idea of a successful digital transformation requiring business-wide engagement is echoed by Eduard Liebenberger, head of digital at Jade Software.
Mr Leibenberger has, over the course of his career, overseen digital transformation across a number of organisations from an in-house perspective and as an external consultant.
“In virtually all transforma-tions considered to be successful, the one common denominator is objectives and incentives across all levels of leadership were aligned to make digital transfor-mation a priority.
“Equally, every failed attempt also failed to align the business. Simply installing a chief digital officer or a head of transforma-tion isn’t enough.”
He suggests organisations looking to avoid failing at a digital transformation should stay away from “band-aid solutions.”
“I frequently see companies investing in a ‘pet digital initia-tive.’ This tends to be driven by only a part of the business, mar-keting, for example, and often has no support outside it.”
His advice is to start with small investments and not be afraid of failure. A sentiment echoed by Chris Auld at Microsoft.
“I think the trap many organi-sations fall into is they see DX as needing to be about large, revo-lutionary change. Big projects break agility, it’s important to be making change regularly and testing the impact of that change within the business. You’re as likely to be disrupted by a com-petitor’s nibbling change as you are by a market redefining entity like an Airbnb or Uber,” Mr Auld says.
NBR asked Messrs Lieben-berger, Auld and Leach if a busi-ness is best to hire someone to handle digital transformation in-house or to use an external consultant – all three offered the same opinion.
“I think you have to do both,” Mr Leach says.
“It’s really helpful to hire help because they’ve seen many other businesses that have been there and done that. But in the long run, you may not need a consul-tancy for the idea of digital trans-formation, which is a continuing process.”
KEN TUNNICLIFFE: ‘New Zealand’s size is actually a help’
Invest in people to capitalize on digital disruptionThe digital transformation of business is shifting the balance of economic power between industries and countries. New Zealand can benefit greatly from this, but we need to up our game.
Microsoft’s Asia Digital Transformation Study released earlier this year reported that three-quarters of the NZ business leaders surveyed agreed they need to transform to a digital business to enable future growth, but only 36% had a full digital transformation strategy in place for their business.
Fewer than 10% are focusing on how digitization can transform products and enable new business models, which is a key to growth and expansion especially in global markets.
New Zealand is in the middle of the pack against our regional competitors, and moving up the league table requires investment in the development of business leaders and employees.
Three of the top six barriers to digital transformation cited in the Microsoft study relate to a lack of knowledge and skills. To benefit from the digital transformation, New Zealand needs a digitally skilled workforce, technology leaders who are business savvy, and leaders who can creatively ideate, plan and execute digital strategy.
This is one of the core insights driving our strategy at the University of Auckland Business School. To achieve our mission of enhancing New Zealand’s economic growth and prosperity, we are investing in research into digital marketing, digital currencies and other blockchain applications, collaborative innovation, management of change, entrepreneurship and in many other areas that will help businesses benefit from the digital transformation.
Universities are also facing disruption, and are having to rethink what they teach and how it is taught. Predictions that more than half of the roles young people are training for now will be replaced by automation within a decade are daunting, but job losses will be offset by new opportunities for those with the mind-set and skills to exploit them.
Thus, business school curriculum is shifting to include data analytics, digital marketing and communications, social media, business modelling, change management, innovation and entrepreneurship. A focus on gaining knowledge is giving way to helping students prepare for an uncertain future by developing their creativity, emotional intelligence, adaptability, communication skills, teamwork, and cross-cultural understanding.
Traditional lectures are being replaced by team-based learning and more experiential approaches to learning, and instructors are both bringing technology into the classroom, and going online to support students outside of the classroom. For example, the University of Auckland Business School, in collaboration with other New Zealand universities, will soon launch its first ever fully online Master-level programme.
The School is also increasing engagement with students outside of the classroom, and encouraging them to collaborate entrepreneurially with businesses. The Centre for Innovation and Entrepreneurship, hosted in the Business School, is poised to open a new maker-space to foment creativity and collaboration among students, staff and businesses.
Disruption does not mean destruction. The digital transformation is challenging New Zealand and the world to think differently and reimagine the nature of work and how business is practised. New Zealand can benefit from this, but to win, we need to work together to up our game.
By Professor Jayne M Godfrey, Dean, University of Auckland Business SchoolProfessor Rod McNaughton, Deputy Dean, University of Auckland Business School
SUPPLIED CONTENT
www.auckland.ac.nz
Let’s get our game on NZ!
The Time for Digital Transformation
is now
find out more: aka.ms/transformnow
DAVID HOWDEN: Risk of smaller IT industry in 10 years
Perhaps the best example of digital transformation is a phone booth refitted into a wifi access point. It shows how businesses are transforming but so is society. Sometimes this is called “Industry 4.0,” which includes blockchain, artificial intelligence, deep learning.
Special Report
Digital transformation
Digital transformation is a team sport
DAVID LEACH: Jobs may need to be redefined
EDUARD LIEBENBERGER: stay away from band-aid solutions
To P22
Nathan Smith
“Data gives you the truth.”But truth isn’t exactly what
University of Auckland innova-tion manager Arron Judson is looking for in the seven-year, $38 million project called Preci-sion Driven Health (PDH), in partnership with MBIE, Orion Health and the Waitemata Dis-trict Health Board. He is looking for “insights.”
“The more data you have, the more likely you are to get insights. Healthcare can be reduced with better data, genomics, wearable technologies and whatever other sources we can find.”
Formally launched in April 2016, PDH has been active as the largest ICT-related research project ever in New Zealand since October last year, trying to pool together patient and clinician data to build patterns and find cheaper healthcare pathways. And it couldn’t come at a better time – for the first time in recorded human history,
elderly people outnumber young people.
“If we keep going down this route, the costs of healthcare in this country will not be covered by tax income. So knowing that this sector was going through a forced change, the initial idea was to start planning for this change by using science and technology,” Mr Judson says.
One of the projects generat-ing impressive insights is called HOPE (Health Outcome Predic-tion Engine). It uses data to bet-ter understand what happened to stroke patients in Waitemata DHB and predict the need of additional treatment.
“The HOPE project has gone through a data science phase and is now entering a clinical review phase in which stroke specialists are starting to use a calculator tool to see at the time of treatment the patient’s background records, along with a percentage likelihood of things happening,” says Precision Driven Health research director Kevin Ross.
“They can use that knowl-edge in their conversations with a patient or their families and improve the care,” says Mr Ross, who also works as research director at Orion.
People have about 15 min-utes with a doctor during which the specialist must absorb as much information as possible. Mr Ross says PDH will give doctors the tools to quickly get to the bottom of that informa-tion because doctors can’t be expected to keep up with the enormous volume of data avail-able and all the studies.
“We’re simply using data to make better decisions. If that
decision is that reactive care is better than proactive care, then that’s fine. Targeted proactive treatment would more often make sense in this calculation, rather than waiting for people to develop a condition,” he says.
In quiet moments, people may worry about how their data is used. They would justifiably
question its use in surveillance and marketing, for instance, but Mr Judson says when people see a personal benefit they are happy to hand their information over.
“We freely give out data all the time in navigation apps, for instance. Individuals will pro-
vide data when it supplies better health treatment to keep them alive. It’s going to be interesting to see where data comes from in the future. If it supplies an early indication of a precursor to can-cer, then thank god,” he says.
Data ownership and privacy are taken seriously by the pro-ject. Mr Ross says one of the 20 concurrent PDH projects deals with these exact issues of ethics, privacy and consent.
“The bottom line is the patient owns their data but the question remains about what patients think is appro-priate to do with the data and how it plays out in practice. Just because it’s possible to do something with the data doesn’t mean something should be done,” he says.
The PDH project has at least six more years of insights to come, says Mr Judson. Simply put, there’s a lot more “healthcare money could be spent on but presently we can’t afford.”
“We are trying to transform the industry to give it a way of sustaining itself. We’re not going to see the benefits until maybe a few more years.”
20 SPECIAL REPORT: DIGITAL TRANSFORMATION SPECIAL REPORT: DIGITAL TRANSFORMATION 21The National Business Review / August 25, 2017 / The National Business ReviewAugust 25, 2017
Nathan Smith
Although it may not be mature yet, cyber insurance certainly appears to be maturing – and just in time.
It is more than clear compa-nies are under increased threat from the cyber-criminal world. AIG recently reported requests for policies have jumped by 87% in its Asian market over the past year, while globally requests have increased 38%.
NZI national manager for liability Ryan Clark says New Zealand’s companies are equal-ly interested, and for good rea-son. He says a claim for a cyber breach is made every seven to 10 days for an average value of $20,000-26,000 and, without insurance, an SME may not recover at all.
Closing every cyber gap isn’t possible but more than 90% of
breaches involve an employee carelessly clicking on nasty email links, plugging in a com-promised USB stick or connect-ing a laptop or mobile phone to the company network. Better staff education, Mr Clark says, will be integral to limiting these kinds of compromises.
“New Zealand companies need to educate staff on the
inherent risks of digital trans-formation. It’s not necessarily intentional on behalf of the employee, it’s just that they contribute toward the attack.”
Delta Insurance chief execu-tive Ian Pollard agrees with upskilling staff and adds that
good risk management will help limit the threats.
“We have to look at what employees are doing, what peo-ple are doing with their devices, where information is stored and focus on what’s critical to the business,” he says.
“At the moment a lot of peo-ple know they have a problem but don’t know where to go to
get it fixed. At the very least, there needs to be some sort of health check once a year. That’s more than a penetration test or kicking the firewall tires, so to speak.”
Cyber health-checks are a critical step, Mr Clark confirms.
Yet he warns a common mis-understanding is that the IT department is capable of con-ducting a cyber threat analysis when in reality the two are cat-egorically different. Both deal in computers but that’s about it.
“The fact is, the average IT company is not a cyber-securi-ty specialist. They are very dif-ferent. In the same way, if you need surgery, you don’t see a doctor, you see a specialist.
“It’s easy to throw away an infected computer and buy a new machine but in a ransom-ware attack, for instance, that
response isn’t good enough. They may lock up the primary and secondary backup files too. Besides, knowing how an attacker entered a network will prevent further attacks. IT com-panies aren’t likely to be able to perform those tasks,” he says.
Practically, knowing which cyber-security product to use can be confusing for most com-panies, and there are dangers in mixing different defence solu-tions. But insurance companies shy away from recommend-ing solutions, preferring to champion minimum standards instead.
“We don’t do penetration tests to assess. But our proposal form asks whether a company has anti-virus software that is updated weekly, along with a handful of other questions. That’s as far as we go. You wouldn’t insure a house if it didn’t have front door locks,” Mr Clark says.
The cost of premiums doesn’t necessarily depend on a particular company’s defences but on the overall vulnerability of a particular sector – such as
The rise and rise of cyber insurance
RYAN CLARK: NZ companies need to educate staff
Transforming healthcare with ICT
KEVIN ROSS: using data to make better decisions
ARRON JUDSON: More data, more insights
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Whether artificial or real, the future is digital.
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At the very least, there needs to be some sort of health check once a year – Ryan Clark
/ The National Business ReviewAugust 25, 2017
Calida Smylie
Initial coin offerings are becoming more popular here following successful raises overseas but are in a regulatory grey area.
ICOs are like initial public offerings but offer digital “tokens” that are usually crypto currency, such as Bitcoin.
Russell McVeagh says tokens issued in an ICO may be regulated by the Financial Markets Conduct Act (FMCA) if the offer is received by a person in New Zealand, even if the ICO is based outside the country.
“The wide territorial scope of the act, which may subject a sig-nificant number of ICOs to New Zealand regulatory requirements, raises important questions about the how these legal obligations can or will be enforced,” finance part-ner Deemple Budhia says.
The FMCA regulates four types of financial products – equity securities, debt securities, managed investment products and derivatives – and it is not clear whether a token would fall within these definitions.
“But it’s fair to say, just because a token doesn’t fall within those particular categories, that doesn’t mean you won’t be regulated,” as the Financial Markets Authority has the power to declare a token a financial product if need be, Ms Budhia says.
Because of this, the government doesn’t need to step in to form more regulations at this stage, she says.
“The FMCA has sufficient flex-ibility built within it to let the market develop and see where things are going in this area because it’s obvi-ously fairly new but clearly a grow-ing area in terms of capital raising.
“The important thing is to keep watching the developments in this area and keep an open mind as to how and what is appropriate.”
In the US, the DAO – an unincor-porated virtual organisation – was found to have violated US federal securities laws by failing to file with the US Securities and Exchange Commission a registration state-ment for the tokens it issued.
Russell McVeagh thinks DAO tokens could be regulated under the FMCA as a managed invest-ment scheme, and the tokens issued regulated as managed investment products.
Increasing interestMinterEllisonRuddWatts partner Jeremy Muir says it’s difficult to generalise about the regulatory impact of ICOs because the tokens offered can be quite different, and there’s no real market practice or
regulatory guidance here yet. “ICOs are fascinating and,
through success offshore, have moved from being a mere conver-sation starter here to something we are actively advising on.
“The FMA is looking at tokens and ICOs generally and grappling with these issues – drawing on the position taken by the Securities & Exchange Commission in the US in its recent report on the DAO token offering, and the other jurisdictions – such as Singapore – which have started to take positions.”
Some tokens offered under an ICO promise a share of the profits of a business – similar to shares in a company – and these are likely to be financial products under FMCA but generally won’t be ‘equity secu-rities’ as they are not shares issued by a company, Mr Muir says.
“More likely, however, they will be ‘managed investment prod-ucts,’ which will make it difficult to structure a simple IPO-style ‘ICO’ for retail investors without need-ing exemptions from licensing and supervision requirements.”
One option would be to limit ICOs to qualifying or wholesale investors in New Zealand. In this case, the exact class of financial product largely ceases to matter, Mr Muir says.
“[Another] approach would be for the FMA to consider either specific or general designation of equity-like tokens into the ‘equity security’ category, rather than treat-ing them as managed investment products.” [email protected]
Initial coin offers fall in regulatory grey area
DEEMPLE BUDHIA: Says investors should keep on top of developments if they’re participating in ICOs
The IT challenge facing New Zealand companies is not to be left behind as global competition digitally transform their businesses to gain competitive advantages.
What will IT look like in 10 years’ time? How do Kiwi businesses adopt new technologies to remain relevant?
Umbrellar is a relatively new brand, but a culmination of companies that have operated in New Zealand since 1997. We represent over 85,000 kiwi customers and 300,000 domain names, which include some of the largest businesses in the country. So, our finger is on the pulse of the local IT market; working with business owners to keep up with the global market and help them navigate through the ups and downs of operating IT.
Cloud technology has moved on Business technologies are evolving so rapidly that businesses simply can’t adapt their digital strategies quickly enough.
Digital transformation is more than just moving your servers to the Cloud. The substantial benefits come from AI, ML, data analytics and PaaS that drive business intelligence.
New technologies are being adopted with extraordinary speed. When credit card technology was introduced, it took decades to reach 50 million users. That technology evolved to PayPal; adopted to the same scale in under 2 years. Now it’s bitcoin and crypto-currencies.
For customers we work closely with at Umbrellar we are hosting consultations. These deep dive into the current state of their environment and the changes taking place in their industry. With this information, we’re enabling businesses to keep up with the speed of change in technologies and shake up the status quo in their industry on a local and global scale.
How to innovate if your IT staff lack the DNA to orchestrate new technologiesMany SMBs out there, have an IT environment that hasn’t evolved over the past 5 years.
It’s a whole different skill-set to move your IT to a digitally transformed environment. With the evident skills gap in this country, businesses may simply be unaware of the skills they need.
The best strategy is to utilise problem solving IT partners that can foresee change, communicate that change, risk or opportunity to your business stakeholders, and keep agile in terms of how they manage your environment.
It’s a subject that Umbrellar has addressed internally. We’ve undergone a digital transformation process ourselves; consciously changed the DNA of our business to work smarter. The changes include, bringing in DevOps to streamline our feature releases, adopting Agile project development as a critical part of our work management, and investing heavily in CI/CD to drive end to end efficiency.
Umbrellar exists to provide service in a modern, methodical and automated way. It’s what our customers expect from us, and that’s what we deliver for both ourselves and our customers.
The conversation around digital transformation starts with asking, where is your business going and how are you employing the latest technology and insight to get there? This allows a company like ours to identify the gaps, and create and execute strategies that allow you to remain competitive locally, whilst continuously steering your business to being always on.
IT not in the DNA of your business?
Supplied content
How to stay relevant with technology in a digital society
David Howden, Head of Cloud, Umbrellar
UMBRELLAR TEAM (L-R): Brendan Wilde - Marketing Director, Sheri Oerder - Cloud Project Manager, Dave Howden- Head of Cloud
Insurers plug standards
finance or healthcare – based on historical attacks. Other metrics include the size of the company and the value of the data it holds.
“The value of a credit card on the Dark Web is only about $1 per line because the cards can be cancelled quickly. But the value of medical records on the Dark Web is $50 a line. So for us, a healthcare provider is higher risk,” he says.
Even as attacks and claims drastically increase, Messrs Clark and Pollard do not believe cyber-threats will become an uninsur-
able risk. But a prudent approach to underwrit-ing by insurers is need-ed, Mr Pollard says.
“That includes access to risk management, strong disciplined underwriting and assessing individual exposure. Setting up an ecosystem of cyber first-responders, recovery
firms and data protectors around the insurance provider is absolutely
critical,” he says.“I do think, however, people
getting into cyber insurance who aren’t really doing their homework or don’t have those networks of support will run into problems over time.” [email protected]
IAN POLLARD: cyber-threats won’t become an uninsurable risk
From P20From P18
He says the fresh and critical thinking provided by an outside player is often essential in kick-start-ing the necessary change, especially if there’s some initial resistance.
Mr Liebenberger recommends hiring a person to champion the overall transformation (ideally in a senior capacity, like a CDO) before possibly bringing in a consultant for a period of time to cover a specific expertise.
He candidly adds that as a con-sultant he never had the same stake in the transformation as most of the staff who had to live with the out-comes.
Microsoft’s Chris Auld says it’s more about ensuring business lead-ers build their digital capability over time.
Continuing process
