Productivity is the answer to inflation
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Inflation will kickstart the digital transformation of supply chains. Gathering and securing data across geographies is the key challenge for the next decade, says archTIS CEO Daniel Lai.
We are more connected than ever to our global partners. If you need evidence of this, look at the market’s activities this past month.
Australian investors are spooked, following US Federal Reserve Chair Jerome Powell’s comments that US interest rates will need to be higher for longer to fight inflation, signalling that perhaps our own reserve bank will continue to do the same.
Interest rates however are the proverbial ‘stick’. Productivity gains are the ‘carrot’ governments around the world will be looking towards to grow our way out of this economic quagmire. Investing in productivity as a nation is far more palatable to them than the austerity measures implemented by nations like the UK, following the global financial crisis in 2008.
Productivity gains are the mythical beast of business. What do they actually look like?
In today’s world of skill shortages, rising wages, increasing interest rates and cost cutting, the promise of Digital Transformation (DX) is the greatest opportunity for productivity gains. To work smarter, not harder. There is far more low-hanging fruit in this area than you initially might think – look at the sheer amount of businesses that are now realising that much of their operations don’t require an office, just a computer.
Businesses that would have never normally been pushed to consider ‘what technology should I use to get the job done’ are now incentivised to see how efficient they can truly get. IDC states that investment in DX for 2022-2024 is expected to be $6.3 trillion and account for 55% of all ICT investment by the end of 2024.
Supply chains, a key inflationary sticking point, are the most obvious candidate for rapid digital transformation. Many already use sophisticated technology to manage the careful timing of when supply is needed, but this next phase of development must now be done with a view to increase resilience. This is an unbelievably complex problem, which will require some level of artificial intelligence and automation of supply chain management to properly coordinate.
In turn, agriculture and other connected ‘supply’ industries will also begin to seriously scale up their use of data. McKinsey’s report The Data-driven Enterprise of 2025, released this year, gives a glimpse into what this future will look like. For a closer to home example, the CSIRO lists this trend in its ‘seven megatrends that will shape the next 20 years’ report.
The foundation of all commerce is trust. Supply chains are still the most vulnerable link for digital security and trust and are therefore a target for malicious activity. Secure Collaboration and data-centric security are vital to this future. Data has to flow across the supply chain to increase productivity and increase value. The data has to be consumed effectively and collaborated on by multiple parties securely – internally and externally – using a number of tools (email, chat, file shares, etc.) to make the promised productivity gains happen.
Understanding and prioritising digital trust and security as an asset will ensure the return on these Digital Transformation investments. The Digital supply chain has an Achilles heel, in the form of bad actors or malicious insiders. Without a mechanism to properly secure information exchange, the whole project of digital transformation and all of its productivity gains will be brought to a halt. Think Optus, Channel Nine or any other number of high-profile brands breached by attackers.
It is up to business and cybersecurity leaders to show how, with the right technology, it can be done. Governments are looking to invest in spaces that tick multiple boxes – enabling new technologies and creating efficiency at the same time. We are already seeing this thinking being applied to the energy sector and the commitments to invest in renewable sources, even in regions with abundant natural reserves, in the name of resilience and productivity.
As these decision makers see the enormous potential of digital transformation, it will help to fuel consumer and in turn investor growth of innovative technologies. This multi-pronged interest will cause the pain brought upon the tech sector by the pandemic to become a distant memory very quickly.
This article was developed in collaboration with archTIS, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.