Digital Transformation – Unlocking the players behind and their impacts on the Aluminium value chain

Introduction – What is digital transformation

Digital Transformation is no longer a foreign term by any means to anybody. Over the past three years, it added a lot of fuel to its growth due to the pandemic situation which restricted physical movement to a great extent and compelled industries to go digital to great extent. Amid the slowing economic activity, digital adoption has been increasing at an unprecedented rate. However, all of it may not be branded as Digital Transformation, but rather the acceleration along the path towards that goal. Let us take a step back and understand such a journey for any organization.

Digital transformation is the end goal of a journey which starts with digitization. The traditional definition of digitization is converting any form of physical information into digital information. There are two steps involved in it. The first one involves the digitization of information and the second one involves organizing such information in a database, or a simple table in a software or application system.

The second phase of the journey is known as Digitalization, which essentially comprises two steps. The first one involves automating the processes in an organization and the second one involves streamlining such processes, so that the entire ground for digital transformation may be prepared. And finally, during the Digital Transformation phase, the entire organization gets transformed, whereby the organization accomplishes the following activities:

• Engagement with the customers: The social media and feedback data can now be stored and analysed very easily and insights into customers’ psychographic and behavioural traits may be easily derived. This enables organizations to garner great insight about their customers.
• Operations optimization: Automation of the processes, especially the non-cerebral, repetitive and manual labour-intensive ones helps optimize the effort of the manpower.
• Transformation of product: Empowered with customer insight and improved process optimization enables better product design, performance and better services around it.
• Empowerment of the employees: All the above points along with open and transparent information sharing improves the employee information. They feel more empowered and their effectiveness and efficiency also increase. One pertinent example of this is the online Performance management system which eventually created a strong industry of HRMS (Human Resource Management Systems) industry. Today a number of new-age digital-first companies are getting into this domain and the established ERP (Enterprise Resource Planning) companies like SAP and Oracle are already quite established in the system.

In effect, all the above-mentioned areas contribute towards an ‘Intelligent Enterprise’, with efficient data management and data-driven decision-making capabilities.

Key drivers of digital transformation

As already mentioned, Digital Transformation derived a large part of its double-digit growth over the last few years due to the pandemic, whereby digitization and digitalization had become rather the only way to survive, resulting in rapid adoption. However, the real journey towards digital transformation started about a decade back, primarily thanks to the SMAC and later SMACIT, though the terms came into being a bit later in the timeline.

SMAC or Social-Mobile-Analytics-Cloud, which later got commensurate support from IoT (Internet of Things) and thereby created the term SMACIT, has been a key enabler for digital transformation. Essentially three things changed as a result of SMACIT, or at large over the last decade:

• Data generation and storage: Due to Social, Mobile and IoT a huge volume of data started getting generated and thanks to Cloud, the data was easily stored in a scalable and economic fashion. More data meant more possibility to churn information.
• Computation power: From data to information and knowledge – the journey was possible for the computation power offered by the [major Cloud services providers. This was hitherto unattainable or infeasible due to the heavy costs involved. But with time, better computation power became a reality.
• Analytics: The real-time data and higher computation power made the application of algorithms easy and the world could move towards digital enablement rapidly.

The drive towards digital transformation has also been enabled by a number of new-age and exponential technologies which have been taking baby steps, but with the help of the key enablers those technologies have also been changing lightning fast, hence the name exponential technologies. Such technologies or areas are:

• RPA (Robotic process automation)

RPA enables the non-cerebral, repetitive and manual effort-intensive process to get automated. Automation with the help of software bots helps reduce the cycle time, increase accuracy and higher employee satisfaction and higher efficiency and productivity. RPA may be conducted in two ways – the bots may be triggered automatically or manually. Organizations often go ahead with the manual trigger and later shift towards automated triggering of the bots. With time, RPA vendors are also customizing their solutions for the benefit of enterprise customers. According to the ‘Magic Quadrant for Robotic Process Automation report from Gartner (published in July 2022), by 2024, 95% of RPA vendors will offer automation via both API and UI integration.

· Artificial Intelligence 

Artificial Intelligence (AI) is one of the rapidly growing streams in the family of exponential technologies. AI is not the same as Data Science and there is a significant similarity as well as the difference between the two. Machine Learning (ML) and Deep Learning (DL) are two other areas related to AI. ML or Machine Learning is a subset of AI and DL or Deep Learning is a subset of ML. According to the McKinsey Technology Trend Outlook 2022, a globally $165 Billion investment took place in the field of Applied AI.

· Industry 4.0

Industry 4.0 or the 4^th industrial revolution is a confluence of a number of technologies coming together and revolutionizing the shop floor or business delivery. Industry 4.0 encompasses IoT, data management, cloud computation as well as predictive and descriptive analytics. Various software solutions are available as a package to fit the bill. Could software and the associated SaaS model be the highly adopted model? Interestingly various organizations look at Industry 4.0 in different lights with varied expectations. The Deloitte Insights report on ‘The Fourth Industrial Revolution highlighted the same, as depicted in the image below.

· Blockchain

Blockchain technologies are not only used in more trusted payment frameworks or crypto-currency environments, but also in carrying out transactions in a more trusted environment, and in incentivizing customers in various fashions. It is also used increasingly in the domain of digital marketing by name of web 3.0.

· VR-AR-MR

Virtual Reality, Augmented Reality and Mixed Reality (VR-AR-MR) are actually revolutionizing the user experience, prototype development, machine health monitoring and many other facets, starting from shop floor to customer management to the functioning of R&D. Many organizations are already working in this domain. Metaverse is also a big leap in this direction. According to the McKinsey Tech Trends Outlook Report 2022, the overall market size of VR-AR-MR or Immersive-reality is going to be $1.2 trillion by 2035.

· 3D-printing or additive manufacturing

3-D printing is again bringing significant improvement in prototype building and reducing R&D time and expenses. Many sectors have already started deploying 3-D or Additive manufacturing as a part of their regular activities. A number of technology companies have already joined the race to get a significant pie in the industry which is supposed to grow manifolds in the days to come.

Challenges for Digital Transformation

Globally Digital Transformation has been cheered across various sectors and industries. While a new breed of digital-native businesses has come to the forefront, a number of traditional businesses have also demonstrated quick adoption and reaped handsome benefits and the trend is continuing. However, like any other changes, digital transformation is not void of pangs as well. A few major hindrances towards achieving the aspired objectives in digital transformation are mentioned below:

· Business Alignment

Right alignment is essential for any digital transformation project to be successful in any organization. The strategic benefits should be mapped in advance, so that 360-degree stakeholder alignment is ensured. This ensures that there is no mismatch in terms of expectation later during the lifecycle of the project, resulting in time or cost over-run. A detailed cost-benefit analysis is very important and the same should be a part of the project proposal itself.

· Cultural shift and change management

Digital transformation results in a significant change in the way businesses are done. It may encompass client or customer touchpoints, data analysis or people management. When several activities are done with digital intervention, then things are carried out differently. As human beings are usually resistant to changes, such a situation naturally results in inhibition and perception of threat. A well-researched and orchestrated change management program needs to be in place so that the solutions built are also leveraged to the extent possible by the stakeholders.

Obtaining the right resource and knowledge is also difficult. Often the technologies change quite significantly over just a few years and such a leap-frogging makes the right resources very scarce. The supply-demand mismatch eventually results in higher costs and creates challenges for the cost-benefit analysis to hold true.

Globally organizations are experimenting with various hybrid models so that resource-related challenges may be tackled more effectively. Building a multi-lateral collaboration model for knowledge often supports such goals.

· Cybersecurity

With more digitization, the threats of data privacy breaches and data security are also imminent. Hence globally cybersecurity has become a major area of concern and often the same has been associated with digital transformation as a whole. However, given the immense benefits of cloud adoption companies are not shifting from the path but the projects are often taking a slower path.

What these mean for the Aluminium industry

Aluminium is the only green metal having a recycling potential of up to 100%. Furthermore, thanks to the likes of the Aluminium Stewardship Initiative (ASI), the adoption of green technologies and energy reduction techniques are on the anvil for primary aluminium production. Industry 4.0 can go a long way to support such a mandate. Also, more adoption of the virtual ecosystem means less travel ensuring a significant reduction in carbon footprint by the various companies.

For the companies, there are many other additional areas to unlock significant efficiency and achieve higher effectiveness. For example, there are already many examples of successful implementation of Industry 4.0 and implementation of use cases around predictive maintenance, energy consumption reduction, enhancement quality, etc. Not only on the shop floors, but the leaders in adopting digital transformation are also achieving higher manpower productivity and efficiency thanks to the implementation of RPA (Robotic Process Automation). They are achieving accurate product placement by assessing the web-crawling of the customers or the visitors who are coming to their virtual touchpoints. They achieve better marketing efficiency through the successful deployment of web3.0 techniques in digital marketing.

Thanks to this rapid global adoption of digital transformation across the aluminium value chain, the service providers and OEMs are also taking a deep interest in the Aluminium sector now. The cloud services providers are focusing more on offering hybrid models to the companies in terms of storage of the data and offering better online computational powers so that the predictive analytics engines may become easier to build and run in a dynamic conditions. The SI (system integrators) are also focusing on the sector and offering more cost-effective solutions.

Globally there are many such use cases of successful adoption of digital techniques resulting in better effectiveness and efficiency for the organization, no matter which part of the value chain the company belongs to. According to the recent IDC report, direct investment in Direct Digital Transformation by up to 16.5% CAGR for 2022-24. We, at AlCircle also, firmly believe that this upward trend is only going to accelerate in the years to come.