Digital transformation and AI in business in a challenging SA
The previous week was a difficult week for South Africans and also businesses in the country. Last Thursday, SA Reserve Bank Governor Lesetja Kganyago announced that the Monetary Policy Committee decided to increase the repurchase rate by 50 basis points, to 8.25%, per year from May 26.
At the same time, so-called SA Inc shares listed on the JSE have experienced a major sell-off with 48 stocks from all sectors of the economy hitting new 52-week lows during the previous week. Interestingly, some of the stocks came from the JSE Top 40 and include many long-time market favourites.
The selling off of market favourites is raising concern. Usually, when market favourites are sold off, it is a sign of capitulation.
It seems as if the market has decided that the situation in South Africa will not change in the near future. Investors are realising that continuous political instability, a low-growth economic environment, rising interest rates, high inflation, lower prices for key commodity exports, perpetual load shedding at high levels, a weaker currency, a possible recession, and continued grey-listing by the Financial Action Task Force will probably be with us for some time to come.
The market finds it difficult to be positive amid the gloom and, therefore, the valuations of local equities discount the reality and even the possibility of no improvement of the South African business environment ever.
However, a changing reality is a time for reflection and provides businesses with an opportunity to thoroughly rethink their business strategies under the circumstances.
An important strategy to consider under the changed circumstances is digital transformation or the integration of digital technologies into all areas of a business, resulting in fundamental changes in how businesses operate and deliver value to their customers.
Digital transformation
Digital transformation usually include the embedding and leveraging of new and emerging technologies such as artificial intelligence, cloud computing, the internet of things, and big data analytics to improve processes, increase efficiency, enhance the customer experience, unlock new value and drive business growth.
The ultimate goal of digital transformation is to drive change and enable businesses to remain competitive in a changing business environment by creating a culture of innovation and agility that enables organisations to continuously adapt to new market conditions, challenges, opportunities, technology and customer needs.
Artificial intelligence
One of the top technology trends of 2023 according to Gartner and also an important building block of digital transformation is AI or the simulation of human intelligence processes by machines such as computer systems.
AI systems entail the ingesting of large amounts of labelled training data, analysing the data for correlations, patterns and trends and then using the patterns and trends to make predictions about future states.
A conversational chatbot, like ChatGPT, that is given examples of text can learn to generate lifelike exchanges with people. Similarly, an image recognition tool can learn to identify and describe objects in images by reviewing millions of examples. And new generative AI techniques can create realistic text, computer code, images, music and other media.
This dependency on data, and in particular business data of a high quality, is the major reason why businesses have to prepare a continuous data pipeline to train and feed AI. Businesses, therefore, need to pay attention not only to data quality but also to business intelligence and the data architecture.
Benefits of AI
AI is thus an important tool to use in the changed South African situation and can deliver numerous benefits such as:
* An improved customer experience. AI can be used to personalise business services and products, thus enabling organisations to offer tailored recommendations and personalised services to their customers. This often leads to an improved customer experience, satisfaction and loyalty.
* Increased efficiency. AI can automate routine tasks such as customer service, compliance checks and fraud detection, freeing staff to focus on more strategic activities and important tasks.
* Improved risk management. AI can be used to analyse vast amounts of data to identify patterns and assess risk, enabling organisations to reduce risk significantly.
* Enhanced fraud detection. In the South African environment where fraud is rife, AI can be used to detect fraudulent transactions and activity in real time, enabling organisations to respond quickly and prevent losses. AI can also be used to identify patterns of fraudulent behaviour and proactively prevent future acts of fraud.
* Cost savings. By automating many routine tasks and streamlining operations, AI can help organisations to reduce costs and increase profitability.
And these are just a few of an increasing list of benefits that can be reaped by business through the innovative application of AI.
The value of adaptive AI
The value of operationalised AI lies in the ability to rapidly develop, deploy, adapt and maintain AI across various environments in the organisation, especially in a changing business environment. Given the engineering complexity of today and the demand for faster time to market, it is critical to develop less rigid AI engineering pipelines or build flexible AI models that can self-adapt in production.
Adaptive AI, one of the exciting new developments in AI, learns, adapts and improves as it encounters changes in data and the environment. It thus accelerates value and continuously keeps AI aligned to enterprise goals in real time.
In the difficult and changing an business environment that may be with us for much longer than we hoped, business will also have to adjust information technology operations to adapt to a higher inflation, everlasting load shedding, political instability, a weaker rand, high cost of money and a subdued market due to increased economic pressure on the consumer.
Professor Louis C H Fourie is an Extraordinary Professor in Information Systems at the University of the Western Cape
BUSINESS REPORT