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Managing Risks in Digital Transformation

By Ashish Kumar , Shashank Kumar , Abbas Kudrati
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  1. Free Chapter
    Chapter 1: Invisible Digitization Tsunami
About this book
With the rapid pace of digital change today, especially since the pandemic sped up digital transformation and technologies, it has become more important than ever to be aware of the unknown risks and the landscape of digital threats. This book highlights various risks and shows how business-as-usual operations carried out by unaware or targeted workers can lead your organization to a regulatory or business risk, which can impact your organization’s reputation and balance sheet. This book is your guide to identifying the topmost risks relevant to your business with a clear roadmap of when to start the risk mitigation process and what your next steps should be. With a focus on the new and emerging risks that remote-working companies are experiencing across diverse industries, you’ll learn how to manage risks by taking advantage of zero trust network architecture and the steps to be taken when smart devices are compromised. Toward the end, you’ll explore various types of AI-powered machines and be ready to make your business future-proof. In a nutshell, this book will direct you on how to identify and mitigate risks that the ever- advancing digital technology has unleashed.
Publication date:
April 2023
Publisher
Packt
Pages
242
ISBN
9781803246512

 

Invisible Digitization Tsunami

It’s a bright day in 2023, and most humans on the planet are acclimating to the new normal after the pandemic that changed the way we work and live, while a few months back, Amazon founder Jeff Bezos took the first civil flight to space, creating a milestone. The world around us is changing fast. The human population in 2022 was around 8 billion, and most of us had a mobile phone; the count of phones is hovering around the 10 billion mark. What’s moving faster than the human and mobile population is the count of internet-connected smart devices, also known as IoT devices. Today, they are found in cars, smart homes, and industrial devices and they number 13.5+ billion at the time of writing. That totals up to 24 billion internet-connected devices between 8 billion humans.

On a personal front, I think the number of virtual assistant devices, such as Amazon devices, will beat the estimate of 90 million for 2022. In 2021, Amazon sold close to 55 million devices. Sometimes, you may wonder why we did not have such innovation a few years back. I remember the shift humans made from the once-dominant Sony Walkman to CDs, and then to mass storage devices, such as the Apple iPod and the MP3 format. I owned an iPod, and it was a cool product that Apple launched in 2001; it got its last update at some point in 2014. While at its peak Apple sold close to 51 million iPods, it still missed the innovation spotted by Amazon – voice command technology. Apple eventually recognized this trend and decided to retire its music hardware products. Visit the following link for interesting facts and an assessment from Statista about why Apple said goodbye to music devices: https://www.statista.com/chart/10469/apple-ipod-sales/.

It’s so convenient to just talk to a machine and ask it to play the song of your choice instantly. You don’t have to move your hand, touch a button, or shuffle through a rack of CDs to find your favorite songs anymore. You can just ask the machine to play your choice of song and your virtual assistant device plays it. I call this the inflection point in the human history digitization journey. It opens up a world of voice commands, such as operating lights, refrigerators, heating, security cameras, and home service drones – it’s truly an inflection point where machines and humans define how humans live, work, and play.

It’s interesting to see trends around digital assistants such as Amazon Alexa. Feel free to read more about this at https://safeatlast.co/blog/amazon-alexa-statistics/#gref.

The last few years also heralded a shift in the way we communicate both personally and professionally; I remember growing up watching Star Trek, which became very popular during the 1970s. It had the concept of cellular phones, which became reality in the 1980s, first in Japan thanks to NTT. It was fiction coming true in just a few years, and today, we can reach anyone on the planet in just a few clicks with HD video quality. Today, more than 500 million meetings occur daily on Teams and Zoom combined, which is a staggering digital immersion of our lives in technology.

Technology’s rapidly evolving adoption due to the pandemic is transforming industries, companies, and governments at a pace never seen before. The democratization of AI and the establishment of cloud technologies is giving birth to new ideas, companies, and risks that were never imagined before.

The pandemic disrupted education across the globe and affected millions of students. In response, education institutes implemented some forms of digital learning. Digital learning opened up new ways to learn independently of physical proximity between teachers and learners. Digital learning provides a new learning environment that has benefits and risks. Digital learning provides the convenience of attending classes from your home. It also provides an easy way for your friends to attend the same class, or anyone else to attend the class on your behalf. The vast majority of students had never attended online courses before the pandemic. The experience was equally new to teachers across all age brackets. While most students and teachers were busy adjusting to the new digital world, what went unnoticed was the risk of digital learning.

How the world eats has changed dramatically, thanks again to the pandemic. Just a decade back, ordering food mostly meant pizza. Nowadays, food delivery has become a global market worth more than $150 billion; it has more than tripled since 2017. Most food orders pre-pandemic were delivered by a driver employed by the restaurant. There were fewer payment methods, including cash on delivery. In the post-pandemic times, things have changed. Today, most customers order via their cell phones and through food delivery apps such as Uber Eats, Foodpanda, Zomato, and DoorDash. The food delivery business has its risks, such as the time it takes to deliver food, packing to maintain the food’s quality, and theft of food while it’s being delivered. Risks that go unnoticed are private information about what you eat, the time you order, and sensitive data such as credit card numbers that get transmitted and stored across multiple systems owned by various third parties in the delivery network.

Changes triggered by the pandemic were unexpected and fast. More important was the new world, which was more digital and stayed not just for a few days but for months across the globe during the pandemic. Changes impact our lives in different ways. Some of us embrace change faster than others. The digital habits induced by the pandemic are changing the way we learn things, make payments, order food, go shopping, and work.

For most of us, change brings uncertainty and loss of control. Digital changes are no different. Sometimes, changes in technology are inevitably agnostic to our liking or the rate at which we adopt them. Digital changes could include downloading an app from an app store if you want to purchase goods or services, which creates new digital habits. Digital changes such as “you must update the software or you will not be able to get new features again” evoke mixed responses. Attending calls on your favorite collaboration suite, such as Microsoft Teams or Zoom, and sharing your screen is a newly formed habit.

Changes around video calls and video meetings came in so fast that it’s worthwhile looking at trends, as covered in the following links on the usage and statistics for leading video call providers, such as Microsoft Teams and Zoom during the pandemic years:

You may not like browsing the app stores offered by various phone or technology service providers, you may not like the new version of the operating system, or you may find sharing screens a very mundane activity; however, changes are inevitable.

Some changes require you to act, such as updating your phone’s operating system, while some changes just soak into your life, such as browsing the internet or spending time on social networks, without any action needed from you. I call these changes ambient as they bring permanent changes to our lives. Moving from SMS to WhatsApp, Telegram, and Instagram are examples of ambient change. Driving a car to a new holiday location using digital maps is again an ambient change that has soaked into the lives of billions. Ambient changes come fast, without friction, with extremely low learning curves, and permanence. Ambient changes are what I am afraid of most. These changes bring in differentiated digital risk, giving humans almost no option to go back to the old ways of doing the same activity.

Well, don’t lose your thoughts, and let me remind you what Hagrid said: “No good sittin’ worryin’ abou’ it. What’s comin’ will come, an’ we’ll meet it when it does.” What this phrase teaches us is to not worry and face the changes as and when they come.

In this chapter, we’ll explore how rapidly we are getting fused into this digital web around us. This chapter also discusses the contentious fact that it is as though an invisible hand is guiding us to become absorbed in and addicted to this digital life, where risks are only visible toward the end of the journey. To begin with, we’ll explore the following topics:

  • Digital transformation: This covers the journey we have followed to get to the digital domain – how quickly the population at large is immersing itself into innovations, providing new ways of living and working, and the associated risks; yes, associated risks.
  • An invisible hand: This covers how the invisible hand that is made up of convenience, ease, and gratification of having control, time-saving mechanisms, and an unprecedented level of access to services is pushing us into the digital life, and new kinds of digital and physical risks.

There is surely a digital tsunami ahead that has benefits, new experiences, and new risks.

 

Digital transformation

Computing has come a long way, and so has the use of computers. Computers have also morphed from the size of big rooms back in the 1980s to small chips in IoT devices.

Cars manufactured 40-50 years back were very, very different from the cars manufactured today. Modern cars are connected and have integrated maps. I used to find it difficult to park my car between two cars, but not any longer thanks to the parking assist features. Cruise control in cars today has been upgraded so that it’s adaptive and the car can maintain its speed relative to cars around it. Cars today come with digital displays with touchscreens that show way more than just the speed and acceleration of the old days. Cars today come with cameras outside for parking assistance and traffic symbol alerts along the road, and inside for checking on driver drowsiness. Modern cars today can also run on their own using autonomous driving.

Technology has changed driving so much that you don’t need humans today to even drive a car. The future of driving is without a human driver. The car industry has been transformed and continues on its transformation journey due to technology.

It’s not just the car industry; any industry, including healthcare, manufacturing, music, and television, is transforming due to the use of technology.

As are you beginning to see on executive profiles on LinkedIn, digital transformation officers, chief digital officers, leaders in digital transformation, and digital transformation as a skill are becoming prominent.

So, what is digital transformation and what risks does it bring to our lives?

As computers have touched business processes and gained more intelligence in the form of what they can see, the ability to listen, operate a mechanical arm in car manufacture, or maneuver a car, humans began to realize new ways to use computers.

Business processes that were established in companies across the world have matured and are running effectively. Governments also have well-established processes such as the system of tax collection, and workers such as traffic cops ensure smooth traffic flow and issue tickets when they spot a speeding vehicle.

Digital technologies have changed our lives. Most of the time, we think that technological advancements are a thing of the future, which is not true. Society gives technology and technological advancements a sense of purpose, and innovations will continue to disrupt and change norms.

Why do we need a traffic cop when speeding cameras across the country can automatically issue tickets to drivers for speeding? Why do we need a human to process tax documents when AI software can assess, validate, and process the entire tax submission? Why do humans need to drive a car when cars can drive themselves?

These technological changes not only impact the normal way of working, studying, and socializing, but also impact actors, such as humans in the roles of customers, employees, partners, or other stakeholders that are part of the process.

Why do I need a human to deliver me pizza when a drone can deliver it faster to my doorstep by flying from a nearby pizza shop?

Let’s look at an example of opening a bank account. We used to go to the bank with relevant documents, such as photo ID, proof of social status, and any other necessary documents. You would hand these documents to a bank officer, who would, in turn, verify them and open a bank account for you. This could take from a few minutes to a few days, depending on which bank and country you opened an account in. Once your account was open, you would receive a checkbook, a credit card, or a debit card to use with your account. Now, let’s look at this same simple example through the lens of digital transformation, where you can open a bank account in minutes by using a mobile application, taking your picture, and entering your social security number, which gets verified by the government authorized agency such as the home or external affairs ministry online. Once it’s verified, your credit rating is pulled from the credit agency and an account is created for you in minutes. A bank officer sipping their coffee miles away receives a notification on their phone to verify that the automatic account opening system should go ahead and create an account for this new customer in their banking system. The bank officer verifies your form, the picture you have taken from your phone, and your ratings from the credit agency, and presses the approve button.

In a matter of seconds, your phone screen says “thank you,” displays your account number on your phone screen, and prompts you about whether you want a virtual debit or credit card instantly, while the bank sends you physical cards in due course. You are thrilled to get a new bank account in minutes and click on the virtual credit card, which again gets created in minutes for you.

Phew! That was the digital transformation of the account opening business process for a bank. It used a computer in the form of a mobile application that could fill in your details, take a photo of you from your mobile camera, and use a complex backend API and workflows that, in minutes, gave you a new bank account and a virtual credit card. You could be sitting in the Bahamas enjoying your coconut drink with the bank officer sitting thousands of miles away in a call center, facilitating your account opening without you even having to go to your nearest bank branch. It all looks great, but where does risk come in here? What if it was not you who requested an account, and someone else used your identity and photo to create a bank account and then misuses that account? What if in this process, you inserted a photo of Harry Potter, and the account got created without your image? What if, while creating a bank account, your personal information was also relayed and exfiltrated by an attacker for later use and abuse? What if your virtual credit card details got into the wrong hands? What if the wrong hands is not a human but software? What if this malicious software then makes a fraudulent transaction on your behalf? Who will you catch as there is no human in this process?

Digitization makes changes that use technology to make life easier for consumers, employees, businesses, and governments. It provides efficiency and new ways of achieving the same goals. It also creates new types of risk. Some of these risks are visible (known), while others are invisible. We’ll explore this in more detail in the next section. Feel free to read the Global trends: Navigating a world of disruption report from McKinsey at https://www.mckinsey.com/featured-insights/innovation-and-growth/navigating-a-world-of-disruption.

 

An invisible hand

Today, we send more WhatsApp messages than we used to with SMSes just a few years back. Most of my friends don’t send SMSes any longer. Nowadays, it’s WhatsApp, Snapchat, or Telegram.

Do you know we also had a multimedia messaging service (MMS), which could be used to send images, video, or contacts to recipients? It was rich but it could not stand the onslaught of WhatsApp, which provided a much easier and more intuitive way to send and received images, videos, and audio messages.

So, what happened here? MMS capabilities used to be pre-installed on each phone, whereas users are required to install WhatsApp. Since both provide rich multimedia content, why did MMS not take off?

Let’s look at user experience and touchpoints in using these technologies. SMS is off the table due to its limitations regarding handling multimedia content. Let’s look at MMS and WhatsApp: both can send rich content, such as images and video, but MMS uses SMS transport as a channel to send content, so it will always require cellular phone connectivity with your provider. On the other hand, WhatsApp is independent of your cellular network. It works when you are on Wi-Fi or when you are without cellular connectivity.

To add to that, if you roam to other countries, sending MMSes can be very expensive as it also uses cellular infrastructure. What makes WhatsApp the king of messaging is that you can send messages even when there is no connectivity. Yes, the message gets in the sent queue and the user can do the next task without waiting for the message to be delivered to the recipient. A user can send the next message, leaving the WhatsApp framework to send messages as and when a connection is available. This is a very powerful feature; I call it send it and forget it. The verdict came quickly and MMS died at a very rapid speed, but what it left behind was the trace of an invisible hand at work. If the technology you produce is easy to use, cheap, and intuitive. it will get adopted very fast as if there is an invisible hand making it popular and adopted across masses, countries, and languages.

So, for a technology to truly offer an invisible hand, it needs to deliver greater efficiency and innovative capabilities that increase the value to customers multifold times. Primary capabilities must be easy to use (no manual, no tutorial, no how-to for using as many features as possible). It should be independent (that is, not tied to any platform, device, time, or channel), and have a free version. At the time of writing, digitization has increased and given all of us more thinking time to innovate; in essence, the pace of technological innovation has accelerated. Look at buzzing stock exchange companies that are more digital and tech-savvy; they are leading the pack and increasing their market share. Pick any company in insurance, finance, distribution, retail, telecom, or any other sector; the more tech-enabled the company is, the greater the chance that it will disrupt the market and become successful.

The next wave of innovation is led by AI, and its infusion will lead to more disruption and automation than any other technology on this planet. The following chart developed by McKinsey (the original graph can be found at https://www.mckinsey.com/featured-insights/innovation-and-growth/navigating-a-world-of-disruption) shows sectors and companies that will be impacted by AI:

Figure 1.1 – The potential of AI to deliver more value across industry verticals

Figure 1.1 – The potential of AI to deliver more value across industry verticals

While the pace of adoption of AI by various companies across sectors will differ, the invisible hand that is driving digital adoption will be evident in the way employees work, engage with customers and partners, and collaborate with other employees. Business engagements will use more AI to reduce or ease human work. When we talk about AI, we always think of devices depicted in movies and science fiction novels.

AI tends to be accompanied by the thought that if everything is done by machines, robots, and AI, what will humans do? Some media companies and blog writers have exploited this, thinking with creative headings such as “the top 10 jobs that will be lost in the coming years.” It’s natural for people to read such articles to see whether and, if so, how their work will be affected. As per the McKinsey study, automation and AI promise to create more jobs than they will take away or replace redundant jobs and bring something new into the picture instead. Also, AI promises to make jobs easier while creating new jobs that will require different kinds of skills. For now, it is not a zero-sum game: AI promises to create more jobs.

Let’s quickly look at the key message from the report:

“Under a midpoint scenario, about 15 percent of the global workforce, or the equivalent of about 400 million workers, could be displaced by automation from 2016 to 2030. At the same time, 550 million to 890 million new jobs could be created from productivity gains, innovation, and catalysts of new labor demand, including rising incomes in emerging economies and increased investment in infrastructure, real estate, energy, and technology.”

– McKinsey study 2021

What also makes this interesting is my observation that 3 years in the IT industry is almost the same as 10 years in conventional industries due to the pace of innovation. While my observation’s timeline is debatable, innovation in the IT sector led by Microsoft, Apple, Google, and Facebook is unparalleled in any other industry. The second point I want to make is the time it takes for an innovation to become mainstream is also reducing. I still recollect how quickly WhatsApp ate SMS for lunch and how Zoom/Teams ate telecoms voice calls for breakfast, or the time it took for consumers to switch from big fat TVs to thin smart TVs at home. While it’s about adoption, the following visuals also share the speed at which we have adopted digitization. Let’s take a look at the following graph (the original graph can be found at https://www.visualcapitalist.com/rising-speed-technological-adoption/) to understand this better:

Figure 1.2 – Consumer rate of adoption for various technologies

Figure 1.2 – Consumer rate of adoption for various technologies

Indeed, all of us in our various personas, from our working lives or personal lives, want to adopt and try out new technologies. I get goosebumps when young kids these days prefer to text with emoticons to express themselves because I find that such short and quick ways to display emotions are not the most efficient when it comes to human-to-human interaction. Our quick adoption of digitization is also creating new and different behavior patterns.

 

Summary

As we embrace digital life, all our activities, such as talking to a friend over a video call, planning a trip to our favorite destination, approving a purchase order created by our finance team member, having a board meeting or sensitive organization change discussion on a digital call, or communicating via email about a sensitive dividend or stock data with our banker, happens with a few clicks on our phone or computer. As I use my phone to check for the availability of hotels in Central London, I can surely feel two things strongly. First, the digital tsunami has just started and there is more to come. Second, the invisible hand of change will ensure populations across continents are immersed in this digital life, which will lead to more productivity, empowerment, and digital risks.

In the next chapter, we’ll uncover more risks that technology delivers, along with the productivity benefits it provides in our lives.

About the Authors
  • Ashish Kumar

    Ashish Kumar is on a mission to make this planet safer for digital transformation. Ashish leads Microsoft security engineering teams in learning about customers, partners, and market priorities on cybersecurity. He works with various universities, government, and large enterprises to help them build a secure digital posture and go deeper into digital transformation impacting every person on the planet. An Enthusiastic self-starter, goal-driven achiever, and motivated team player with a creative and progressive attitude is on a journey to share his experiences with you.

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  • Shashank Kumar

    Shashank Kumar, a cybersecurity practitioner and long time regulatory risk enthusiast, is a Principal Product Manager for Microsoft Purview Compliance products. He works closely with some of the world’s largest corporations to understand their current and future cybersecurity risks and help solve them through new features or products from Microsoft Data Security Product-group.

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  • Abbas Kudrati

    Abbas Kudrati, a long-time cybersecurity practitioner and CISO, is Microsoft Asia’s Chief Cybersecurity Advisor. In addition to his work at Microsoft, he serves as an executive advisor to Deakin University, HITRUST, EC Council, and several security and technology start-ups. He supports the broader security community through his work with ISACA Chapters and student mentorship. He is the Technical Editor of various books and the bestselling author of books such as, "Threat Hunting in the Cloud" and "Zero Trust and Journey Across the Digital Estate". He is also a part-time Professor of Practice with LaTrobe University and a keynote speaker on Zero-Trust, Cybersecurity, Cloud Security, Governance, Risk, and Compliance.

    Browse publications by this author
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