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Digital Transformation Demands More from future Managers

Prof. Sreeram Gopalkrishnan

Recently we had a series of presentations from MMS students on Digital Transformation as a part of the preparation for the Dandekar Trophy. Though the students who were gunning for a selection did a marvelous job, only a ew could be sent to represent AIMS. During the process there were several insights that were drawn. Digital transformation has changed the Banking Industry, Retailing, eCommerce driven businesses, Telecom infrastructure and Capital Markets too.

Capital markets are turning more technological than financial, with machines taking over. In India, over 30% of trading in the markets is Algo trading. In the US, this is even higher at almost 70%. Algorithmic trading is when you use a computer program, with a specific set of clearly defined instructions, to buy and sell online. A typical computer can process several million decisions and arrive at the most suited one fitting the desired parameters.

You can program a computer to buy 50 shares of ITC when its 50-day moving average goes above the 200-day moving average or Sell when its 50-day moving average goes below the 200-day moving average. The algorithmic trading system automatically does it, in microseconds, faster than any human (Trader) can even press the mouse button. Also called high frequency trading (HFT), Algo Trading capitalises on placing a large number of orders at very fast speeds across multiple markets and multiple decision parameters and take advantage of systematic discrepancies.

But does this mean that an MBA analyst can be replaced? No. For the Algo to be programmed to Buy or Sell we should not what’s the value of a business. That’s where you come in. True value can be discovered only by the Analyst though the machine can do the Buying or Selling. The extent to which Automobiles are being taken over by computers is truly remarkable. Perhaps the first recall of a car due to software glitches was by Toyota in 2010, when it sought to rectify and recalibrate the electrically generated pedal "feel" in its braking system. The Prius, a hybrid, uses an electric generator to recharge batteries from the motion in the wheel and pools it back to the powertrain.

The degree of computerisation has grown so much that we are actually driving a computer to work. Some components run by a computer in a car are Climate control, Alarm, engine management, wiper, Automatic transmission, ABS, airbag, parking aid and many others. In 2007, the US announced tougher curbs on the emission of nitrogen oxide (NOx), and VW suspended sales of its diesel cars. It told the public that it had something up its sleeve – the BlueTDI engine. But it was a magic trick exposed by Daniel Carder and his small research team at West Virginia University. The team produced early evidence that Volkswagen AG was cheating on U.S. vehicle emissions tests by reprogramming a software Algorithm that changes when the car was being tested and shifts back when its back.

While U.S. regulators had started to investigate unusual emissions of certain models back in 2014 it took Volkswagen until Sept. 3, 2015, almost a year, to admit it had used the devices. VW has a problem. It is an empire spanning across 12 brands from Ducati motor bikes to Golf family sedans, Porsche roadsters, Scania trucks and MAN ship engines. With 592,000 employees, 119 factories in 31 countries, the giant looks ungovernable. Moreover, VW's supervisory board is dominated by the Porsche-Piech family, regional politicians and German trade unions, making it too political to function effectively. Ethical moorings is a part of Corporate Culture and that is difficult to program digitally. Managers build Values in organizations and products. That can never be replaced.