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August 07, 2018
Solving South Africa’s Growth Imperative
By: Raghav Narsalay and Yusof Seedat​​

Talk about trying times for Africa’s most industrialized economy. South Africa’s latest GDP figures saw the economy shrink by its biggest margin in since 2010—almost a decade. Business confidence is bruised, and it’s no surprise that analysts are projecting anemic growth for 2018.

How bad is the situation? Put it this way: In 2017 one of the country’s largest retailers reported a decline in earnings for the first time in 16 years.

Most companies are focused now on cost reduction and improving the bottom line. But our view is that instead of simply cutting costs, companies must shift their focus from outputs to outcomes. And the key to that shift is investment in digital technologies to unlock new sources of value.

Our Industry X.O research unpacks how digital reinvention can reignite industrial growth in South Africa. Consider the consumer goods and services (CG&S) industry. Our analysis reveals that companies can realize a 34.5 percent increase in market capitalization by combining five technologies—machine learning, blockchain, digital twin, autonomous vehicles and autonomous robots—to create better and more personal experiences for consumers.

How would, say, a toothpaste manufacturer apply these technologies? With machine learning and Big Data analytics, the company can analyze customer data and predict trends, such as changing consumer tastes for more expensive toothpaste or different flavors. Machine-learning algorithms can examine customer behavior and help identify reasons for slow sales, and even suggest tweaks to the toothpaste formula.

Insights gleaned from the algorithms can be fed into digital twins—virtual models of a process, product or service. This allows the company to test different products and manufacturing scenarios and choose the one that works best. A digital twin would show the toothpaste company the impact a new flavor would have on the manufacturing process.

The combined powers of blockchain and autonomous vehicles can solve what might be the biggest challenge CG&S companies face today: last-mile delivery. Blockchain, through its digital ledger and smart contracts, makes it much easier for buyers and sellers to enter contracts, and at lower costs. Autonomous vehicles, including drones, help make it possible for products to be delivered to informal settlements, otherwise off the radar for people living within them.

One way for established companies to obtain these impressive new capabilities while also easing funding burdens is to collaborate with startups.

Two examples. Makro, one of South Africa’s largest retailers, recently acquired a majority stake in a last-mile delivery startup Wumdrop. The deal will help Makro improve the customer experience by significantly reducing delivery times. And Unilever collaborated with a startup to drive sales of its laundry brand Omo. A chatbot rewards customers that take a picture and upload their cash receipt to it; Unilever gains valuable data and the customer is rewarded with airtime for their mobile phone. This helps the company transform simple chats into experiences customers like, by combining digital capabilities such as image recognition, artificial intelligence, and mobile ordering and payment.

Cost cutting is important, but it isn’t the path to sustained growth. South Africa’s business leaders, in CG&S and beyond, must keep focused on delivering the experiences their customers want.

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