“Similarly now, with the current digital transformation 2.0 providing integrated experience, a small business can have similar capability on the process workflows like a large company. So, the autonomous enterprise could be a large enterprise, an autonomous enterprise could be a one-member enterprise – but still be highly effective.”

Intro:
Welcome to the Agile Digital Transformation Podcast, where we explore different aspects of digital transformation and digital experience with your host, Tim Butara, content and community manager at Agiledrop.

Tim Butara: Hello everyone, thank you for tuning in. Our guest today is Pari Natarajan, CEO of Zinnov, a global management and consulting firm with core expertise in globalization, product engineering and digital transformation. Today we have a great topic for you. We’ll be discussing the transition from digital transformation 1.0 to the next phase, digital transformation 2.0. It’s the phase that we’re in right now and which is characterized particularly by integrated experiences.

Pari, welcome to the show, it’s really great having you here with us today. Do you want to add anything before we begin our awesome discussion?

Pari Natarajan: Thanks Tim, thanks for inviting me for the session, super excited about the podcast.

Tim Butara: Yeah, I’m also very excited. As we discussed in the intro call that we had when we kind of determined the topic, we realized that it’s definitely a topic worth discussing, a topic that’s important to a lot of our listeners, but one that maybe doesn’t really get talked about that much. So, let’s get right down to business.

Pari Natarajan: Absolutely.

Tim Butara: So of course the first thing that we need to cover, Pari, is digital transformation 1.0. And I’m interested in the time frame behind it, the main reasons and objectives behind it; and when we had the intro call, you mentioned the phrase digital plumbing, the term digital plumbing, that characterizes this phase. And I think that we also need to break this term down a little bit for our listeners.

Pari Natarajan: Absolutely. Digital transformation 1.0 started a decade ago. And that’s when IT infrastructure moved from a client server infrastructure to a cloud capability. So, on the back end, you had the cloud infrastructure getting built up. And on the front end, you start to see mobile phones evolve, get better and better. Then you start to see factories get installed with sensors, so IoT got enabled. 

So the back end got enabled through cloud infrastructure, so that, even if you are a small business, you had the same capability and infrastructure like a large company. You can use the infrastructure pay as you go. The business model also changed. So, I’m able to consume as much as I want, I can pay for that. 

So, work in terms of the infrastructure creation, as well as the consumption model, changed because of cloud. And then with mobile phones and IoT sensors and all that on the edge side, the technology got a lot more sophisticated. And that’s what we call digital plumbing. A move from traditional client server model into a mobile, IoT, cloud infrastructure over the last ten years.

And then you can see the benefits of that when we went into Covid. When you’re able to communicate, almost, like, this kind of podcast really started during that period where people are able to communicate, collaborate remotely, and that was enabled by this digital plumbing. And we are now moving into the next phase, which is what we call digital transformation 2.0. But that’s a definition of digital plumbing, the digital transformation 1.0 over the last ten years.

Tim Butara: So, plumbing, in this sense, it kind of means getting rid of inefficiencies, but not really streamlining and optimizing things. And now with the next phase, this is the thing that we’ll focus on.

Pari Natarajan: Exactly. So you’re building a new house and you modernize your plumbing. Now it enables a lot of new use cases. And that’s what we are going to explore over the next decade in digital transformation 2.0.

Tim Butara: Well, we’re also going to explore it over the next five minutes or so here on the podcast. So, yeah, let’s talk about DT 2.0. I’m particularly interested here in why and how this move happened. And we also need to define, obviously, integrated experiences and how we create integrated experiences, and if there are any other main characteristics besides integrated experiences that really mark digital transformation 2.0.

Pari Natarajan: Absolutely. So if you think about technology evolution, I talked about cloud, mobile and all this foundational technology. And digital transformation 2.0 is really about now adopting technology like AI, technology around blockchain, and other technology; convergence of these technologies.

Let’s look at a workflow; I can explain this in a workflow of an enterprise. If you look at the workflow of an enterprise – so, what happened during the last ten years, in digital transformation 1.0? It’s about digitization of processes. So you have companies,like RPA companies, which came in. They would say, ok, now there is a manual process which is being done, I am going to automate it using RPA.

Then there are companies which will digitize your documents. You have all of the manual documents, let’s say you’re doing a loan origination process, you have all of these manual documents. And that got digitized using what we call intelligent document processing technology. Then you had call centers, right, where people are calling in and saying, I have this issue with your product. That was enabled through IVR, natural language processing, and that information got digitized.

So that was the initial part of how digitization happened. Now you have all of this digital information, and you had this information stored on the data infrastructure built on cloud. You had companies like Snowflake, Databricks, which built the data infrastructure. So now you’re able to deliver insights on all the data you captured during digitization of the 1.0 part.

So the second phase of that is, one is digitization. The second phase is now insight creation. Ok, now I know what is happening in the business. I can monitor it and I can make decisions in terms of what to do. But the decision making was manual. So I’d look at the insights, then I’d say, ok, now I need to make a decision, and I will make a decision.

For example, like somebody is calling in to a call center and saying, hey, my flight has changed and I want a refund. So then, they call the call center agent, it gets automated, then it actually goes to a call center agent to physically answer the call. The initial part was digitized, but the actual action was done by a manual agent. But that is not a good experience for the individual. It takes more time, the options are lesser, the experiences defined where the human was on the side depends on how the person is.

And now, going into the next phase with all the technology like LLM and other technology, we are moving into a model where the issue is also going to be resolved. So, the first is about digitization, second is about insight creation, third is about action and resolution. So now the whole process of refunding or even giving them the option, hey, you might not want a refund, but I can give you another option that you can use it in XYZ way, but so, it’s not a refund, you’re also able to keep the money.

So all of this is now dynamically decided by person to person, the insights which are being generated, similar calls which have happened before, based under the mission, is able to make prediction on the action, and able to actually resolve the issue. In this scenario, the customer gets a better experience. The human don’t have to answer this call, they’re able to monitor and maybe come back into the conversation if there is something else they need to do. So, it improves the employee experience while handling the call.

And it also improves the partner experience. In this scenario, let’s say it’s a call travel agent who’s doing this, the partner in this scenario is an airline. So you’re enabling the revenue for the airline as well by providing ultimate for the customer. So in this scenario, the customer experience is improved, the employee experience is improved, as well as your partner experience is improved. That’s what we mean by integrated experience. 

So you moved, in digital transformation 1.0, from pure digitization into an intermediate period, which is more insight generation, digitizing and generating insights. Now we’re getting into a period of resolution and action. And that’s the interesting part. Right now, call center agents could be completely automated, your loan origination process could be completely automated.

So, you are moving into a mode where at least parts of the processes of the organization can be autonomous. And the future is in what we call autonomous enterprise, when all of this process could be completely automated. If you think of, if you’re a small business. If you’re a small business, you need help with your CRM, you need help with your supply chain, you need help with your e-commerce site. You need help with a lot of this. So you need to hire, let’s say ten people.

But if somebody has an idea, a lot of this could be completely automated. So, individuals now can operate a small enterprise without hiring a lot of people. So then, extend that, like what happened during cloud – during cloud transformation, a small business had the same infrastructure like a large enterprise.

Similarly now, with the current digital transformation 2.0 providing integrated experience, a small business can have similar capability on the process workflows like a large company. So, the autonomous enterprise could be a large enterprise, an autonomous enterprise could be a one-member enterprise – but still be highly effective. That’s a world we are moving in, and it will have massive implications around employment. The whole industry revolution is really recent, right, 200, 300 years, when people have to go to work for somebody else and follow a set of process to be able to deliver it. 

But now, if I can enhance my experience, augment it with digital capabilities around me and make it automated, then the number of people who are required to work for other people might reduce. And they can enhance their skill and be their own employer, right, owner of their own business. That could have a fundamental shift in terms of all our economics in different countries. That’s why I’m super excited about, it’s not only a technology change, it could also be the start of a massive societal change across the board.

Tim Butara: I think a phrase that you used when we were initially discussing all this, or the way you phrased it, was that we’re moving from a system of records to a system of experience, if I remember correctly, right? Can we talk a little bit more about this and what other new best practices people and businesses will have to follow in this new system to succeed?

Pari Natarajan: Exactly. So, if you look at system of records – system of records is about capturing your organizational truth in data. So you have a CRM system, you could use HubSpot, or Salesforce, SAP, which has been running your supply chain and merchandising, your different system that could be an internal system. So you have all of this data in the organization.

A system of experience is, now, stop thinking about your infrastructure as a system which records the data, but a system that manages the experience. So, the way you think about IT is, what are the different ways a customer touches my organization? Every touchpoint is an experience. How does an employee interact with the company from onboarding, engagement, learning and development, and offboarding them from the company – all of them are touchpoints of an employee. Similarly, a partner, a vendor or supplier, how they integrate.

So, technology systems, do not think about, ok, I’m going to look at sales system to capture all the data and store, but I’m going to now think about experience across all of this and bring it together. So that’s what we call a system of experience. And driving automation, and also creating new experience, an experience which is not possible before. Where you are able to create new experiences using some of the newer modern technologies, which are built on the digital plumbing which happened during digital transformation 1.0.

Tim Butara: So, basically, if you want integrated experiences, a system of experience is the basis for that.

Pari Natarajan: Exactly.

Tim Butara: And another thing, returning back to the societal aspect that you were talking about before. I’m interested, because so many of the younger generations such as millennials and generation Z are now huge parts of the workforce and are making all of these business decisions and driving digitalization, what’s the role of something like, for example, sustainability in the current phase of DT?

Pari Natarajan: Let’s step one level back and look at what does the current generation look at and what the generation before looked at. Generation before looked at a job as a way of making a living. And they were not necessarily tying that to the passion of what they want to do. A job is something that gave me a living, I might do something else. So that’s an expectation set on what would they do.

But today, gen Y and gen Z, they are looking at, how do I get satisfaction from the job I do? What is the purpose of the job I do? The way they think about a job is a lot more holistic. So you’re right, so sustainability becomes very important, and are they working for somebody that has a strong purpose.

A lot of this becomes very important. And that’s why this whole integrated experience allows an employee to augment that, so you’re not doing some just manual work. Because manual work is being automated; so you’re able to use your empathy, you’re able to use other capabilities you already have when you’re interacting with a customer. So the job satisfaction is much higher.

The second is, if you are a gen Z employee, they are able to do multiple things. Think of an employee during 100 years ago, you go to an assembly line and all you’re doing is screwing something up, and that’s all you do the entire day. And people are doing time studies and they are making you more efficient doing one thing. But, going forward, our expectation from the Gen Z workers is they will play a variety of roles in an enterprise. And they’ll be augmented with a mission to enable them to be successful across all of these. So the level of satisfaction they will gain will be very high.

Those are things around that. And I’ll talk a little bit about sustainability. And the studies we have done with the customers, what it says is, about 10 to 15% of efficiency can be brought into an organization by just managing your digital operations better. Like, for example, if you have a mission, if you’re working very close to the tolerance of the mission, then the amount of fuel the mission will consume, electricity it will consume, will be lower.

So if you could monitor the end-to-end factory, if you could monitor all of the assembly line, when you’re able to operate it at a very low tolerance level, that will improve efficiency, that’s sustainability. So digital transformation 2.0 also allows you to drive sustainability. It is also allowing companies to make decisions on what kind of product– let’s say I’m designing a product. 

It is able to give you material decisions in the time you’re designing the product, and then say, hey, here are the materials available for you. It also provides you a list of vendors from whom you can buy these materials to certify your level of sustainability. So the supply chain understanding is in the tip of a designer who’s making a decision on a product they need to build, and they can build it for circularity, they can build it for sustainability. That also leaves the purpose of the designer. So a lot of this is going to be enabled by digital transformation 2.0.

Tim Butara: And also, in the context of connected experiences, the reputation of a sustainable brand will also translate into a more positive customer experience, because gen Z and gen Y aren’t just major parts of the workforce, but also major parts of the consumer force, basically.

Pari Natarajan: Absolutely. They are very aware about the kind of product they need to build. And also the linkage, right. If you’re a gen Y and you’re a customer, you’re buying a particular product, you want to know what happens after you not use a product, you return the product. And then what happens to the circularity? What happens to the material which were released? It’s not junk, it’s not going somewhere else.

So they would want higher level of transparency around this lifecycle of the product. And that is going to be enabled through digital transformation 2.0. You’re able to track the circularity of the product through the lifecycle of the product as it goes back into being part of some other product. So that’s a very interesting part. You’re exactly right. They’ll be a lot more aware in terms of what they want to buy, and that will also enable companies to adopt some of these technologies.

Tim Butara: So, now, Pari, to kind of reinforce– because, mostly now we’ve just been discussing kind of big-picture, more theoretical stuff, but I want to reinforce the points that we made so far. And I’m wondering if you have some really great examples of successful digital transformation 2.0 in some of the major industries, such as retail, banking, automotive, etc.

Pari Natarajan: Absolutely. Automotive is a great example. If you think of integrated experience, today, you are able to– think about the evolution of autonomous driving. And what is going to happen is the LLM model, which is deployed in ChatGPT, it’s now going to be used in the autonomous driving system. It’s going to be a matter of time, in the next few months, six months, you will start to see the technology included in that. So suddenly your costs are going to be a lot smaller.

And think of the direction and the number of accidents which are going to happen on the road. Right. That’s one. And it’s going to free up at least one to two hours of time in everybody’s life every day. Especially, most of the people live in suburban and travel quite a bit for work.

So you have efficiency in terms of, one, it reduces the number of hours you need to drive, so you can do something else with it. Second, it reduces the number of accidents. Third, it will increase the value of the asset. Right. Now I buy a car and I’m driving into the office, the car is sitting idle. The car can be used now as a taxi, as an uber, the car can go and earn money for me. And it can be ready for me when I come back and I go back.

So this is the future where the value, and the car is going to get better and better. So your value of the car is not going to depreciate, which is what happens with traditional cars. The value of the car could appreciate, because the car has learned a lot more about a particular location. And because of the intelligence on the particular location, like wisdom, right. If you are in a job for a long time, you gain wisdom and you get paid more. So the car is going to gain wisdom with all the knowledge of a particular location, so the value of the car is going to increase.

So think of, your time is getting reduced, you’re getting more efficient, your risk of accidents is reduced. And the car is also an asset you’re able to monetize, like a house you’re renting out. But only for a period of time, think of it like an Airbnb, your car is like an Airbnb, you can rent when we’re not using it, and then the value appreciates, like a house. So a lot of this could fundamentally change in a depreciating asset. And that’s an example of what is in the future for us in automotive.

Tim Butara: So, the future definitely has a lot of interesting stuff in store for us. I think we mentioned that even the phase that we’re in right now is basically just a transition to the next phase, which I believe we mentioned– one concept that stuck out to me that you spoke about earlier was the autonomous enterprise that we’re moving towards. Do you have any other predictions on what this next phase of digital transformation will be marked by?

Pari Natarajan: Yeah, so, the other dimension is in terms of how we can entertain. So, right now, the way we talk about metaverse, when you talk about metaverse as a technology, the hype of the LLM models kind of overtook metaverse in the last three months. But on some level, the metaverse is also going to be very real. 

Because, think of LLM, what does it do, right? It’s able to generate content. And then, we already have gaming, games you play which are interactive. You combine that. And we can also look at a future where your entertainment, you’re almost like inside a movie, in the metaverse. And you’re able to interact, and your interaction changes the course of the movie. So, the way you experience entertainment is going to change in the future. So that’s another industry which is going to massively disrupt.

And then we talked about direct to consumer. If you’re an influencer, then you have an audience, you have millions of people, or even 100,000 people. Now you can automate everything. So, you have an idea for a particular product, you can automate the creation of the product, which you get somewhere and designed by somebody else, which is being manufactured in China. And there is a logistics company which is able to ship it directly to the consumer. 

And you own the whole experience of that. You don’t have to be on Amazon platform, you don’t have to be anything else. You own the complete experience, as long as you have an audience. You’re able to do that automated, your taxes automatically, your collection is managed by your digital agents. 

Think of, like, you are a small business, you have all of these agents doing this work for you. These are all AI agents. So that’s another model that we see will evolve, the creation of the digital agents who will do the work for individuals, partly in different roles. And we will start to use them in our personal life, but also, if you’re a business, you’ll also use them in your work life. And that transformation is also happening very quickly.

Tim Butara: Definitely a lot of innovation still on the horizon across the board. And I just want to, in the context of the immersive experiences that you mentioned, I remembered… Have you ever read, when you were a kid, have you ever read those time machine books?

Pari Natarajan: Of course.

Tim Butara: Ok, yeah, choose this and go to page X, and then you chose that and you got something bad like, I don’t know, get eaten by dinosaurs. And you’re like, no no no, I chose the other one. And I’m just thinking about what something like this could look like if it was happening in the metaverse. Probably a lot of potential there still.

Pari Natarajan: Absolutely. You’re absolutely right. So, entertainment, the way we know it, is going to get redefined. 

Tim Butara: Well, Pari, this has been a very very interesting and a great discussion. Definitely a lot of moving parts, a lot of things still to discuss. And probably if we had this conversation, or another one, in like six months’ time, everything would be completely different. So, we might need to do it again some time in the near future. But, before we wrap up this one, if listeners right now would like to maybe reach out to you, learn more about Zinnov, learn more about you, where would you point them to?

Pari Natarajan: Yeah, they can go to our website, zinnov.com, you can find all of the information. They can look me up on LinkedIn. Those are two locations they will get more information about Zinnov and myself. 

Tim Butara: Well, Pari, thanks again so much for joining us today, it’s been great discussing this with you.

Pari Natarajan: Thanks, Tim, thanks for the time. Enjoyed the conversation.

Tim Butara: Well, to our listeners, that’s all for this episode. Have a great day, everyone, and stay safe.

Outro:
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