COVID-19 has dominated our lives. Businesses are looking for guidance from the government and beyond to understand how to address the long-term impact of the pandemic. On Wednesday 7th October, Lord Karan Bilimoria, President of the CBI was invited to speak at IBM’s Think Summit Digital conference. He sat down with Bill Kelleher, Chairman, IBM UK and Ireland to discuss and explore the actions organisations can take now to emerge smarter, more resilient, more agile, and more able to thrive for years to come. Here is an extract of that conversation.
Interviewer: Lord Bilimoria, in your role at the CBI, you speak to businesses and clients every day, but what is the mood you are sensing from business leaders?
Lord Bilimoria: There's no question about it. People have had the sense of complete uncertainty, discomfort, ambiguity throughout this process for six months now. We are all asking ourselves ‘What is happening?’, ‘How is this going to evolve?’, ‘When is this going to end?’, ‘Is there going to be a second wave?’ It’s a health crisis and economic crisis completely intertwined, and it's like nothing any of us have ever seen before.
I have seen recessions over the years, but this is more difficult than ever before because it's a demand shock, it's a supply shock - and globally, everyone is affected by it.
Interviewer: Bill Kelleher, you've seen businesses throughout all the different sectors that IBM deals with responding, I'm sure, a whole myriad of different ways. How have people generally been responding to the challenges?
Bill Kelleher: If I look across the various sectors and industries, there is no question we have seen a range of levels of readiness, depending on what pressures businesses in particular sectors have been under. Certainly the clients I deal with most regularly were quite well prepared. However, that’s not true of all businesses. IBM recently (August 2020) commissioned a survey with Omdia of around 300 companies in the UK, and the feedback was a little different. 78% of those companies believed their business continuity and disaster recovery plans were not strong enough. Now, at the same time, while business infrastructure was severely disrupted, 88% agreed that technology significantly mitigated the impact of the crisis. So yes, quite a mixed picture in terms of what I have seen first-hand and what's been fed back to us in our survey.
Interviewer: So Lord Bilimoria, the challenges that remain are still deep challenges for many businesses across many sectors. What do you think are the main hurdles now to overcome? What are the priorities?
Lord Bilimoria: As the CBI, we speak for 190,000 businesses, employing 7 million people. That accounts for one third of the UK private sector workforce, which gives us a fairly complete idea of what is happening on the ground. And the challenges are numerous. Finance is a big problem; a cash crunch, a lot of businesses with severe cash issues. And then of course, there is a demand shock, which is all linked to the uncertainty and the health crisis. What businesses are looking for is help from the government, and the government has been fantastic in this country in terms of some of the schemes it has made available like the job retention scheme and the loan scheme. But what businesses are looking for is, like Bill said – resilience. You have to be resilient and the key to that is adapting. We have had to learn how to adapt very quickly in terms of adopting technology – and what we have done in months would have normally taken place over years. And in terms of collaboration, people have realised that a lot is possible.
Interviewer: And of course there are still challenges to be overcome with all these projects. Of course, nothing is ever straight-forward, but it's interesting what you're saying there about agility and the ability to change and adapt. Of course, there'll be losers as well as winners. Could this be an opportunity for whole sectors to restructure get rid of ‘zombie jobs’ as they say, is that a concern as well as an opportunity?
Lord Bilimoria: Well, if you look back at history, you could argue that the last crisis of this magnitude would be the Second World War. At that time, 75 or so years ago, in the midst of the war in 1942, the Beveridge Report was commissioned. That report transformed this country and it came out of the middle of a crisis. After that, came the Welfare State and the National Health Service – everything that we benefit from today as citizens came out of that massive crisis. So the opportunity we have today through this current crisis, is to build huge opportunities going forward. And I can see it happening in front of my eyes.
Interviewer: I imagine those huge opportunities are going to come in large part from technological advances. Tell us just a few of the examples of the way tech has been helpful to companies to meet these challenges.
Bill Kelleher: I think there has been some real innovation through necessity. If I look across the sectors - with some exceptions - most sectors have been in some form of survival mode and for them, technology has effectively become a life jacket through this period. Technology has bolstered our supply chains, our customer operations, our internal workflows and processes, and of course working from home. I mentioned that around about 80% of companies have invested in additional technology simply to remote work during this pandemic. However, technology should not be seen as an ‘emergency fix’ or simply be deployed incrementally. At least half of the companies we polled in our survey tell us that they expect to continue to work remotely. New working patterns will emerge and these will be enabled by technology.
Organisations that were most advanced on their digital journeys really adapted well to the to the lockdown challenges. They were able to be responsive, agile, and really didn't miss a beat when it came to serving their customers. However, the companies that were in the early stages of building their own digital capabilities struggled. And when I speak to them, they acknowledge that if had they had more data-driven capabilities, more cloud-based platforms or technologies at their disposal, they would have been better prepared.
Interviewer: And Lord Bilimoria, how do you see what we've learnt from this crisis in terms of the way we use technology? How do you see that moving forward for the UK is there's going to be a way that the UK can emerge more strongly?
Lord Bilimoria: Without a doubt. Organisations are realising that resilience is key to weathering what we are going through at the moment.
One of my roles is as Chair of the Manufacturing Commission, and every year we celebrate advances in digital manufacturing. In Britain, Manufacturing makes up 10% of our GDP and that 10%, is very high quality and productive. That capability to be productive is down to the digital technologies that are used throughout the sector.
And let me offer another current example. The world is in a race, with over a hundred of vaccine trials going on at the moment. That drive is being led by universities and businesses all working together. I am on a task-force at the moment about universities and business and innovation and it is so powerful - a billion vaccine doses are already being manufactured while we waiting for the trials to be completed in anticipation that it will work. One of the solutions to coping with this crisis is mass testing – at the moment we don't have that capability, but already the technology exists to do instant tests with saliva, where you get your result in 20 minutes on a credit card slip of paper. Now, just imagine the power if you can produce millions of those - the whole population can just test on a regular basis and we could go about life as normal through pure technology.
Interviewer: There’s a question on everyone’s minds, which is ‘do you know when that might happen here?’
Lord Bilimoria: Well, in America in September, 10 million of these tests were produced, 50 million in October. It's up and running, it's happening at a unit costs of $5 dollars, and the price can only go down. So it's only a matter of time before we have it here.
Interviewer: So, what technology should businesses prioritise now? What's the best thing to help a business not just survive this challenge, but thrive beyond?
Bill Kelleher: That is a very broad question with a broad set of answers, but let me try to share some insights. By definition, businesses are at different stages of technology adoption. What is interesting is that most businesses or business functions now can effectively be rendered in code. So capabilities become a business driver. I would prioritise three areas and they would be the use of cloud, data and AI, taken as a single thing, and of course, security.
Cloud has been around for some time, however, still, only around 20% of enterprise workloads are running in the cloud. Others have experimented and implemented cloud solutions without interoperability, so much so that they’ve inadvertently created an inflexible, messy barrier to innovation. Often, their business operations span several geographic locations, each with unique government and regulatory requirements. And their applications and processes are fuelled by multiple data sources. Without a centralised strategy for cloud-based business transformation, it can expose a business to risks for potential outages, security breaches and escalating costs. But with the right architecture, these risks can be mitigated. An Omdia survey IBM commissioned found that 95% of respondents agree that moving applications to the cloud had benefited their organisation during the pandemic, with 94% anticipating further investment to accelerate recovery.
Next is data and AI; using insights from the data that you have in the business and then applying artificial intelligence techniques and tools to that. The Omdia study IBM commissioned confirmed this, with 57% of respondents intending to invest in business wide AI, both embedded in applications and as part of a business data platform, with supply chain and customer insights as primary use cases.
And then thirdly, cybersecurity continues to be in the spotlight as organisations look to enhance security capabilities to ensure that sustained remote working does not undermine their operations. In fact, 72% or respondents surveyed revealed they were already enhancing their defences against new or increased cybersecurity threats, which as we lift, will put them in a good position.
So for me, the three priorities today would be cloud data, AI and security. And there's lots of emerging technologies to consider too - to name one, quantum, but I’ll leave that for another discussion.
Interviewer: Lord Bilimoria, from your position, What do you think businesses need from the government now? These government programmes that were put in place at the beginning of lockdown saved the day for many can't go on forever can they? So what do we need?
Lord Bilimoria: What Bill has said is just so important. The power of technology is key to this. I mean, if I just look at my own business, Cobra Beer, and the ‘eat out to help out’ scheme that the government introduced - what a success! It was a £500 million pound investment but it got people out to the restaurants, got restaurants busy on a Monday, Tuesday, Wednesday. It was a great, innovative idea. Because of that, we now see that we can turn things around in a matter of days – we can decide to create a technology, get restaurants to sign up to the idea, enable customers to find which restaurants they would like to try, give them directions on how to get there, send offers and links to restaurant websites. We should never take the power of technology for granted. It is so powerful.
And in terms of the government's role, the government needs to ensure it continues to be a catalyst. The UK government has set a target now of 2.4% spend on GDP on research and development and innovation. At the moment we spend 1.7%. America is 2.8%, Germany is around 2.3.1%, Israel is at 4% of GDP. If we just go from 1.7% to 2.7%, that is an extra £20 billion pounds more a year of investment in R&D and innovation that will power this economy ahead. But that is not just got to come from government, it's got to come from business as well. And I know companies like IBM do huge amounts of investment in R&D innovation. And universities - which university has won more Nobel prizes than any other in the world? Not MIT, CalTech, Harvard or Yale, but Cambridge University. So we've got the capability in this country and we punch above our weight. We are 1% of the world's population, and we produce 16% of the world's leading research papers. So, you know, we've got the capability. If we get that extra funding, I think that would be phenomenal.
Interviewer: That's an incredibly bullish and optimistic view, which is why we love talking to you. But when you're talking to your members at the CBI, so many of them, I'm sure are worried about confidence. Demand is in shock and unemployment figures are likely to go up. Does it concern you that any innovation might not compensate for the economic situation more broadly?
Lord Bilimoria: Well, that is the reality of dealing with a crisis. My father, who was a senior Indian army officer, you know, he had to stay cool, calm and collected in a crisis. And I have been remembering that every day in the last few months. You have to adopt the attitude of being able to deal with that terrible situation in front of you, but also looking ahead and having faith that you can get through it. And once you are through it, it will make you stronger, more capable, more resilient, more innovative, more adaptable, all of which will set you up to do even better afterwards.
Interviewer: If you had to give a few tips to your clients now, what would they be? What actions can business take right now?
Bill Kelleher: The key action area for me would be around taking this opportunity to really evaluate and reassess the digital core of our businesses. It’s time to re-think the way we do things and make the necessary changes and investments now. We have an opportunity for recalibration. So that would be my key recommendation right now; that businesses really look at their core digital capabilities and ensure that they are making changes and learning from this last six or seven months and then I think we will get the lift. So I think let's take this opportunity to reassess, re-evaluate and move forward.
Interviewer: Any final words of encouragement?
Lord Bilimoria: Well, I think we have got to ‘go gigabit’. Broadband capability is key and there is a role for government to play here to help with that. We take it so for granted, but if ever you have had any connectivity glitches, you realise how debilitating it is – we are dependent on it. Reliable, secure broadband makes us all that much more powerful and effective. And finally skills. We must not forget that there are still 11 million people in this country who do not have that digital capability. My 84-year-old mother in India knows how to use email, which means I can communicate with her and send her photographs and it is just wonderful. And if she can do it, everyone can do it. So I think we've got to make sure that the whole country is skilled digitally. And that's the way ahead.
Interviewer: Lord Bilimoria, Bill Kelleher, thank you very much, indeed for sharing your insights.
Bill Kelleher and Lord Bilimoria: Thank you very much.
Editor’s note: this is an edited extract of a keynote that was delivered at IBM’s Think Digital Summit UK and Ireland on 7 October. The session was filmed in a studio in London adhering to strict social distancing measures currently in place in the UK.