The top five ethical | moral principles for digital transformation

11 April 2018 Consultancy.uk

Digital transformation represents the critical response needed by organisations to meet rising customer expectations, deliver scalable, individualised experiences, and respond to market forces with ever increasing levels of business agility. Digital services and disruptive technologies such as cloud computing, robotics, AI and big data combined with optimised operating models enable organisations to drive innovation and respond to internal and external events quicker and cheaper than ever before.

Interestingly, according to a leading research and advisory firm, over 60% of executives believe that they are behind in their digital transformation programmes. Notably, the will to drive change and availability of funds are identified as the key barriers to success within many organisations. Whilst digital transformation is, of course, enabled through technology, these observations should remind us that the human dimension is as important as technology. What we stand for and how we behave represents the fundamental concepts of ethics and, if organisations want to deliver enduring success in a digital world, they will need to ensure that above all, they understand the need to act ethically.

The need for ethics

Ethics is the practice of making a principled choice between right and wrong, revolving around how people ought to act, not how they do act. And whilst the topic has in the past, struggled to gain acceptance from the business community, things are thankfully, very different now. Ethics is not just an important consideration within an organisation, it represents a key differentiator in a highly competitive market where reputation and values are now as important as products and services. 

Whilst ethics is clearly something all organisations with a digital transformation agenda should actively embrace, the most difficult challenge will be at an individual level – organisations do not make decisions, individuals do. Digital professionals at all levels will need to determine what the ‘right’ thing to do actually is from an ethical perspective. Notwithstanding the level of ethical awareness or ethics training that may or may not already exist within organisations, what is considered ethical can vary across individuals, groups, religions and cultures, and in a global and fast-moving digital society, these leave considerable room for interpretation.The top five ethical | moral principles for digital transformationEven when the right course of action is clear, real-world competitive pressures can cause individuals to make decisions that could have damaging consequences for others. Being ethical will ultimately mean having the skills and moral courage to challenge existing norms and act in an ethical manner. So, in a digital society, what does being ethical actually mean and how can those involved in designing, developing and deploying digital services translate ethical principles into professional behaviours that will underpin digital transformation initiatives? 

Business ethics for digital organisation

When organisations act in ways that are deemed unethical by others they are likely to attract adverse local, national and even international media attention. The events surrounding Volkswagen especially, will not be easily forgotten. Once a household name throughout the world as a pioneer in motor vehicle engineering, Volkswagen is now likely to be remembered more for its unethical behaviour than for any of its previous achievements.

If organisations are to deliver digital success, behaviours that reinforce trust and demonstrate integrity will be as important as the technical challenges that they face, such as application integration, cybersecurity and data governance. Digital initiatives have the potential to deliver sustainable benefits and increase the value of the organisation in the long-term, but these benefits must be tempered against the issues raised by declining trust, prompted by the unease at the way in which some organisations are exploiting digital technology. 

Confidentiality and data security issues remain; not only do breaches of information occur at unacceptable rates, organisations have been reluctant to inform those affected when they do. Equally, concerns regarding accountability are becoming more vocal as existing mechanisms may no longer be valid, or worse, compromised by the growth of AI and machine learning algorithms to make autonomous decisions.

Top 5 ethical principles for digital transformation

What is becoming clear is that trust in the digital economy is only likely to be achieved if digital professionals are willing to make ethical decisions despite working in highly competitive environments where the desire to rapidly deploy digital services is likely to prevail over the need to consider the ethical implications of doing so. Five ethical principles for digital transformation: 

1. Design for privacy, security and integrity
Whilst the opportunities to generate innovative and lucrative insights from big data are likely to be significant, so too are the risks from perceived unethical behaviour, whether actual or merely unintentional. How data is collected, managed and used is not just a legal issue, it is an ethical issue. 

Quote Dave Yardley

In the digital world, transparency and integrity must be the core values that guide professional behaviour. Organisations must use data in responsible and ethical ways; and that means not using it in ways that are considered intrusive, manipulative or disrespectful to others. Being transparent means that organisation must state their intentions regarding data usage and allow their customers to provide their consent. Organisations are often criticised for the amount of customer data that they collect and monetise. Part of the challenge here is the disconnect or lack of transparency around the value exchange between customers and service providers. Any benefit gained from collecting personal data must be shared by both parties and not exploited for monetary gain.

The concept of ‘informed consent’ is a key principle within ethics, referring to permission granted in the full knowledge of the likely consequences. This represents a significant challenge to organisation harvesting data, especially personal data for analytics as very little may be known about the intended use of the data when it is collected. In reality, obtaining informed consent may be impossible or prohibitively expensive owing to the scale of the task but, that said, the principle should still be adopted during the design and development of digital services where possible. Even then, informed consent will remain the subject of some debate as organisations will still need to consider both the validity and scope of consent provided if agreements are mandatory to access digital services.

Already, concerns have been raised over the ability of mobile phone software to track individuals’ movements even when the location services feature on the phone is inactive and reports that facial recognition applications are being used in certain countries have a darker objective - to collect personal data for reasons that are likely to be less than sincere.

2. Promote trust
Data consumers, whether they are individuals, groups or organisations must be able to trust the digital services and the data they are using. Those who collect and manage data must uphold the principle that its integrity must be assured if it is to be of value to consumers. Assuring data integrity must mean that organisations have a duty to ensure that the data they hold is subject to robust governance and audit procedures. Simply put, organisations must know that what was put there hasn't changed. 

Digital infrastructures provide the capability to not just hold data, but to enable it to be made available to others for a multitude of uses, including validation, replication and analysis. If digital consumers are to trust the underlying data driving the services they use, it must have clear provenance, end-to-end traceability from source to the user interface, and be of sufficient quality, fit for its intended purpose. If the provenance and veracity of the data cannot be verified it creates a significant level of risk for those consuming it – once the data has been processed, any actions undertaken as a consequence can’t be undone. 

A 2014 survey by the Pew Research Center in the US found that only 11% of individuals were at least ‘somewhat confident’ that online video and social media sites would keep their personal data private. Part of the challenge is the difficulty of segmentation of consumers by their attitudes to privacy, which are context-specific and defy generalisation. But it’s a challenge that businesses need to address: nine out of ten internet users in the UK and the United States would avoid doing business with companies that do not protect their privacy.

Organisations who are racing to deliver ‘the art of the possible’ without acknowledging the core principles of privacy, security and integrity are likely to leave themselves exposed to high levels of ethical risk. 

Digital transformation is booming, and for success it is key to keep ethical principles in mind

3. Beware of bias
Unintentional ethical behaviour can be caused by many things, but one of the more likely reasons will be due to the sub-conscious biases that can influence human behaviour. Confirmation bias is probably the most well-known example, where individuals seek or interpret information in a way that that confirms their beliefs, hypotheses or expectations and dismiss opinions and information that are contrary to these. For example, ‘cherry-picking’ data that will be used to support digital transformation business cases or to drive the testing of digital services is likely to raise ethical concerns with those expecting such activities to be performed with a high level of integrity and impartiality. 

When there is bias in data there is a real risk that systems that consume this data will inherit that bias. Of particular concern must be the machine learning algorithms that are used to make millions of decisions every day. Warnings have already been aired regarding algorithmic bias, with experts suggesting that such bias is now pervasive in many industries, with little action being taken to identify or correct it. A worrying thought considering machine learning is now moving into many industry sectors including medicine, finance and law. 

The answer to the question of bias is, of course, ‘transparency’. Digital professionals will need to challenge status quo behaviour and actively identify hidden biases that may be present as they develop, assure and deploy digital service. Again, consumer trust must also be established and maintained, by ensuring customers buying systems using AI and machine learning algorithms know how the inference models have been built and the data used to drive them. 

4. Ensure there is accountability
Inference models and algorithms are fundamental components within the burgeoning range of ‘smart’ digital services that provide an artificial intelligence and machine learning capability. Owing to their ability to combine social data with decision-making engines, concerns have grown about the extent to which clear accountability structures can be maintained. For example, if algorithms are used by financial services organisations to make decisions that would normally be made by qualified and regulated professionals, questions must be raised around where accountability lies. Organisations seeking to develop digital services must, therefore, ensure that these services are not used to avoid or reduce corporate accountability.

5. Promote an ethical culture
Organisational culture can be described as the set of shared values, beliefs and norms that influences the way individuals within it think, feel and behave. Values especially, are important as they articulate what the organisation stands for, such as ‘providing an excellent digital experience’ or ‘excellence through innovation and teamwork’. Whilst corporate values can be readily found on corporate websites, publishing a list of values is not the same as adopting values. Value-driven organisations are those that actively demonstrate their values and use them to guide their behaviour, even doing so means making some difficult decisions. 

Whilst digital transformation has the potential to create opportunity, value and success at all levels within the organisation, these must be achieved through fairness, honesty and integrity. Digital organisations, therefore, have a moral responsibility to safeguard their employees from taking unnecessary risks that could ultimately prove to be damaging to both the individual and the organisation. Let’s not forget that professional reputation is as important to individuals as it is to organisations. 

Ethics for digital success

In the digital economy, the successful organisation will be the one that is not only aware of ethical values such as trust, honesty, fairness, confidentiality and accountability, but actively adopts them to do the right thing and make decisions that are above reproach.

Ethics must no longer be thought of as just a marketing tool that has no real influence on the culture of digital organisations, but instead, represent a fundamental set of behaviours that should be exhibited by all those who have a vested interest in digital transformation. If there was ever a need for ethical principles for digital transformation, it must surely be now.

An article by Dave Yardley, author of the book ‘Practical Consultancy Ethics’.

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”