Unlocking Economic Potential Through Digital Transformation

In a recent episode of the Augmented Ops podcast, Lior Susan, a seasoned venture capitalist with a keen focus on industrial technology, offers a compelling narrative on the transformative potential of digital technology in what he dubs ‘physical industries’. The discussion, titled “Venture Capital's Role in Digital Transformation,” explores how new technologies are not just reshaping individual companies or industries, but are a critical driver for global economic growth.

As Susan describes the role played by venture capital in fueling innovation in this sector, he sheds light on how digitally transforming industries like manufacturing, logistics, and agriculture can catapult global GDP — underlining the pivotal role of technology in steering the world towards a more prosperous and sustainable future.

Susan highlights the vast, untapped potential lying within sectors that form the bulk of the world's economic output. "More than $80 trillion is what I will categorize as the physical industries or industrial industries," he states, “and those industries that carry more than 80% of the world GDP, they just did not have the digital transformation yet.”

These industries have been notably slow in embracing digital transformation, a fact that Susan attributes to a historical focus on IT advancements at the expense of operational technology. This discrepancy in prioritizing digitalization is a gap that, if bridged, could launch a new era of economic prosperity.

While the need to transform these industries is clear, there continues to be significant apprehension over how the workers that have long been essential to this sector will be impacted. As Susan points out, however, the real power of technology lies not in replacing people but in augmenting their capabilities.

This paradigm shift from pure automation to augmentation is central to unlocking the true potential of industries. By empowering frontline workers with digital tools, companies are not just enhancing productivity but also fostering an environment where human ingenuity is complemented by technological efficiency.

What he views as “the shift from pure automation in the classic sense to augmentation” brings to the forefront the need to rethink our approach to industrial operations — viewing technology as a way to empower frontline workers, rather than replace them outright. Critical to the success of initiatives like this is the integration of IT and OT technologies.

Susan argues that fostering a collaborative, synergistic relationship between IT — whose concern has traditionally been security and compliance — and OT — whose responsibility it is to solve problems in operations — is essential to successful digital transformation. It's not just about automating processes but enabling access to data across systems to solve problems that span both operations and higher level business processes. This integration is the cornerstone of a more agile industrial landscape that can adapt quickly to changing demands and unexpected challenges.

Susan’s comments not only highlight the transformative impact of digital technologies on individual firms but also extend to the broader goal of reshaping entire industries. Susan envisions a future where the principles of digital transformation are not just limited to isolated instances of innovation but becomes the driving force for entire sectors.

Susan firmly believes that for significant global economic growth, digital transformation must extend beyond the boundaries of single firms to encompass entire industries. This large-scale transformation is not merely a pathway to economic prosperity but also a strategic imperative to ensure industries remain competitive and relevant in an increasingly competitive economic environment.

For such a transformative vision to be realized, however, Susan argues that a collaborative technology ecosystem is vital. Products from different vendors must be interoperable with one another in order to enable businesses to build their tech stack with the technologies that best fit their unique operational needs.

“I think ecosystem is not an easy thing,” he states. “It's really hard to [form a connection] between different companies that [are] focusing on different aspects of the chain, and [find that] magically, everything works like a charm.”

At the moment, the gaps in native connectivity between various systems is bridged by system integrators, but according to Susan, “software will eat a big portion of that system integration. And I think you will be able to simplify a lot of things with software.”

As Susan states, creating a cohesive ecosystem is challenging yet essential. It requires a collective effort to develop standards, design open architectures, and integrate different technologies to ensure that innovation is not constrained by any vendor’s walled garden. While Susan accepts that his vision for industry-wide transformation is ambitious, as more and more technology vendors embrace the idea of open ecosystems and architectures, the future of digital transformation in physical industries looks bright.