Technology is transforming the business by improving efficiency and making it possible to reach previously ignored low-margin customers. Deloitte, a professional services firm, is a heavyweight in audit and advisory services from dealmaking to digitization.
Romal Shetty, Deloitte’s South Asia Chief Executive Officer says the firm provides a growing share of services to the global firm. Increasingly, these services from the region have a strong emphasis on technology.
South Asia is also a beacon for other reasons too. Led by India, its youthful population, the potential for improved governance and business practices, opportunities for increased intra-regional trade, and the transformative impact of digital technology have elevated the region’s economic prospects.
However, Sri Lanka’s story has been a contrast to India’s recent success. But the island now stands at a critical turning point. Global professional services giant Deloitte, a $65 billion firm, is investing in the Sri Lankan unit.
In this conversation, Romal Shetty, Chief Executive Officer of Deloitte South Asia, and Channa Manoharan, the Country Managing Partner for Sri Lanka and the Maldives, discuss the future, technology, governance and stakeholder capitalism.
Excerpts of the interview are as follows:
What is your outlook for the South Asian Region?
Romal: Globally, most economies find themselves either stagnant or in decline. However, South Asia stands out as a rare beacon of hope, and this optimism is rooted in several fundamental factors.
Firstly, South Asia boasts a significant demographic advantage with its youthful population. This youthful workforce can be a driving force for economic growth and innovation.
Secondly, when we assess South Asia as a whole, there is substantial room for improvement in various aspects, including governance and business practices. This presents an opportunity for the region to enhance its overall performance and competitiveness.
Thirdly, there’s immense potential within South Asia itself when it comes to intra-regional trade. With a population of 1.8 billion people, fostering stronger trade relationships within the region can open up vast markets.
Fourthly, the rise of digital technology has been a transformative force, impacting economies and people’s lives in profound ways. South Asia can benefit from this technological leapfrogging, bypassing some of the developmental stages that Western economies had to navigate.
In essence, South Asia possesses a combination of factors that make it an exceptionally promising region at this point in history. These factors include a pool of talented and youthful individuals, the potential for significant improvements, and the prospect of a more extensive and prosperous regional trade network. As such, being in South Asia at this moment can be viewed as one of the most opportune times in our generation.
Sri Lanka’s story over the last five years has been a little different to the South Asian experience. What principles do you believe should shape our path for future growth?
Channa: There has never been any doubt in Sri Lanka’s potential. The challenge is how to translate potential into achievements. One obstacle that has hindered Sri Lanka’s advancement is a tendency to self-implode, creating a substantial gap between what we could achieve and what we achieve; and the root cause of this gap often comes down to governance.
Whether we’re talking about cricket, business, or the economy, the common thread is the critical importance of having the right governance structures in place. When there’s a conducive and supportive framework for governance, we tend to fulfil our true potential.
Today, we find ourselves in a situation, with the potential to leapfrog ahead. One compelling reason for this optimism is the government’s commitment to creating an environment conducive to growth. This involves establishing the right governance foundations, which encompass aspects like anti-corruption measures, deregulation, and empowering institutions like the Central Bank to operate independently.
If we can achieve this level of governance and ensure the independence of critical institutions such as the judiciary and regulatory bodies, combined with the insights Romal shared, we’ll have a robust foundation for sustained growth.
Importantly, we won’t need to traverse every stage of development that other economies have gone through. We can draw valuable lessons from the South Asian experience. India’s transformation through digital enablement serves as a particularly relevant reference point. Looking at recent budget and policy announcements, it’s evident that we’re moving in the right direction. The key now is to stay the course and bridge the gap between our vision and the realization of our full potential.
Romal: I’d like to expand on the remarkable success of the Sri Lankan cricket team in 1996, which serves as a fantastic example. Yes, they had a talented group of individuals and excellent leadership, but what truly set them apart was their innovation. During the first 10 overs of a match, they played an aggressive style of cricket that was ahead of its time. While the groundwork for such innovation had been laid earlier, Sri Lanka took it to the next level.
This innovation principle applies not only to cricket but also to major corporations worldwide. Our research spanning over 30 years underscores three critical elements for success. Firstly, you need a unique and difficult-to-replicate idea. Second, this idea should be technology-enabled. And third, it should have the potential for significant scale. Interestingly, size doesn’t necessarily slow you down; sometimes, smaller entities can be more agile than larger ones.
Sri Lanka has a unique opportunity in this regard, as it has already demonstrated its ability to innovate and excel. Moreover, if you examine some of the world’s leading technology companies, you’ll find individuals of Sri Lankan origin among their ranks. There’s no reason why Sri Lanka cannot push the envelope, embrace innovation boldly, and implement initiatives at a scale that extends beyond its domestic market to impact global markets as well.
What is your strategy for Deloitte in South Asia?
Romal: We have a clear strategy in mind for our brand. First and foremost, we want to be recognized for our unwavering commitment to quality. Quality is non-negotiable for us. Additionally, the well-being of our people is of paramount importance. We believe that when our team members are healthy and content, they can perform at their best.
When it comes to scale, we have ambitious goals. While Deloitte is a global powerhouse with a rich history spanning 175 years and a $65 billion revenue, our South Asia branch, currently a billion-dollar entity, aspires to break into the top five Deloitte firms worldwide. We are well on track to achieve this goal, with nearly a quarter of Deloitte’s global workforce of 450,000 people based in South Asia. Over the next three to five years, we anticipate that South Asia will make up 30% of Deloitte’s global workforce.
What does this mean for us? It means that we have the privilege of collaborating with some of the world’s most prestigious corporations and governments, tackling their most pressing challenges. We are no longer confined to serving South Asia alone; instead, we see South Asia as a hub for global solutions, where our exceptional talent works on addressing the world’s most significant issues.
Our second strategic pillar is growth. We aim to transition from a billion-dollar firm to a two-billion-dollar powerhouse within the next four years. To achieve this, we require top-notch talent across the region, particularly in digital, cloud, cybersecurity, and artificial intelligence. Moreover, we are shifting our focus to developing world-class assets right here in South Asia. These assets will not only benefit our operations but also be replicable and useful to other Deloitte firms around the world. We aim to lead in innovation and excellence on a global scale.
Deloitte is a $65 billion firm, and South Asia accounts for $1 billion in revenue and 25% of Deloitte’s global workforce. Can you explain why this workforce distribution is so disproportionate, and what activities or skills are driving the need for such a large share of the workforce in South Asia?
Romal: Our South Asia firm operates in two main segments, comprising approximately 27,000 professionals serving local markets and companies, and an additional 85,000 individuals working in partnership with the global firm to cater to both global and local needs. Our strategic focus is centred around several key areas, with a strong emphasis on technology.
In an increasingly digitized world, technology plays a pivotal role in our operations. We have established the Generative AI Centre of Excellence, reflecting our commitment to harnessing the potential of generative artificial intelligence. Likewise, our dedication to environmental, social, and governance (ESG) initiatives is evident in the establishment of the ESG Centre of Excellence, both of which are rooted in South Asia.
On the economic front, we closely monitor the growth trajectories of South Asian countries. India is already the world’s fifth-largest economy, with this momentum, it is well-positioned to ascend to the position of the third-largest global economy by 2030. Bangladesh is also experiencing substantial economic growth, and Sri Lanka is steadily progressing along a similar trajectory. Our strategic outlook extends beyond short-term horizons, focusing on five to six-year projections.
Our commitment to South Asia not only stems from its potential as an attractive market but also the wealth of talent it offers. We seek to harness this talent not only to enhance South Asian economies but also to benefit other regions. This involves utilizing South Asian expertise in technology and accounting, among other domains, and promoting digital literacy.
Furthermore, we explore ways to support the country’s growth, particularly in sectors like tourism, by implementing innovative, cost-efficient interventions that can drive tangible impacts. Channa and I share a common vision of “making an impact that matters” and are dedicated to touching the lives of people through our work.
How does Deloitte Sri Lanka fit into this vision?
Channa: Sri Lanka possesses remarkable product engineering capabilities and a burgeoning ecosystem of companies that produce world-class technological and innovative solutions. Our goal is to take these achievements to the next level. Our strength lies in our resilience and our consistent ability to punch above our weight class. We are known for our ingenuity, and our talent pool has a track record of solving complex problems and contributing to world-class innovations.
In pursuit of our vision, we aspire to be an integral part of the global innovation landscape, building intellectual property (IP) and actively engaging with global developments. We understand that isolation is not an option, and we must embrace collaboration, change, and learning from more innovative economies worldwide.
Secondly, we recognize that the primary drivers of future growth are India, South Asia, and China. To capitalize on this growth wave, we must align ourselves with these dynamic regions and integrate into the global supply chain and markets. Our potential to contribute significantly to shaping this narrative and supporting our companies and governments in achieving sustainable growth for our country is immense.
Tell us about the culture at Deloitte. What’s the vibe and tone at the top from what you have seen so far?
Channa: Our culture holds tremendous significance for us. It revolves around a few key principles that are instrumental in our success.
First and foremost, we cultivate a mindset of thinking big and relentlessly pursuing our ambitions while leaving no room for excuses. This mindset is deeply ingrained in our organization and serves as the bedrock of our achievements.
Collaboration is another pivotal aspect of our culture. We actively seek partnerships and synergies with others, working collectively to achieve common goals. By uniting our efforts and venturing into the market together, we unlock our collective potential.
Self-belief stands as the cornerstone of our culture. We possess unwavering confidence in our capacity to make a meaningful impact on the lives of our people and society at large. This unwavering self-belief propels us to constantly strive for excellence and innovation.
Importantly, we prioritize fun and happiness in our work environment. We are dedicated to creating a workplace where our team members can discover joy and fulfilment in their roles.
I’m delighted to learn about Romal’s initiatives, including the appointment of a Chief Happiness Officer and the promotion of women’s leadership and inclusivity. These initiatives align seamlessly with our growth aspirations. Our objective is to provide global opportunities for our talent, enabling them to engage in exciting and innovative work right here in Sri Lanka. This encompasses offering high-paying, dynamic roles that make significant contributions to our country’s growth and development.
Romal: I find this topic of culture incredibly fascinating and essential. When Channa and I first met, our partnership was born out of a shared culture characterized by high integrity and strong ethics. These values have always been at the forefront, not only for me but for all the partners I engage with in Sri Lanka.
Two principles have consistently stood out in our discussions: our commitment to making a positive impact on our country and the community, and our recognition that there’s more we can do for South Asia.
The third pillar of our culture revolves around our unwavering belief that we can achieve remarkable things while upholding kindness, humanity, and happiness within our firm. It’s crucial to emphasize that these elements aren’t mutually exclusive. We don’t need to adopt an approach where success requires sacrificing people. We firmly believe that we can pursue success while maintaining a compassionate and humane work environment. This alignment in our cultures has been a driving force in our partnership.
Given the prevalent challenges in the region, including high poverty rates, low female workforce participation, and governance issues; as an organization is aligning goals to the local context important?
Romal: Indeed, it’s undeniable that we live in a world with challenges, but rather than ignoring them, we believe in actively participating in the effort to bring about positive change. This starts with self-awareness and a commitment to personal growth.
Take, for instance, our Deloitte Heartland program. Heartland is dedicated to reaching out to the heart of our societies and making a difference. When we discuss diversity, it’s not confined to gender alone; it also encompasses different financial strata. Our goal is to provide opportunities to hundreds of children, ranging from education to eventual job placements. Currently, we focus on empowering young girls through this program.
Additionally, when the COVID-19 pandemic struck, we rose to the challenge by developing virtual healthcare platforms. These platforms enabled individuals, even those with basic mobile phones, to access healthcare services without the need to visit crowded healthcare centres. This is an example of how we strive to make a positive impact within our communities.
By taking such initiatives, we not only contribute to the betterment of society but also inspire our clients to follow suit.
We firmly believe in leading by example and understand that some investments may not yield immediate returns. However, in the long run, engaging in such initiatives is not only beneficial for society but also for our business.
How does one craft a business strategy around Sri Lanka, given our challenges with governance?
Romal: The transformative impact of digitalization on governance is profound. When governments and private sector corporations embrace digital technologies across various aspects of their operations, it not only enhances efficiency but also reduces instances of misconduct and inefficiency. We’ve witnessed this positive change in countries like India, where the digitization of processes has led to significant improvements in the ease of doing business. This is a path we can also follow.
Consider the application of AI, for instance. Imagine if aircraft were guided to available landing gates with precision using algorithms, particularly at airports facing gate congestion issues. Such a simple technological solution could save millions of gallons of fuel, with a direct positive impact on the environment. In regions like ours, we’re fortunate to have abundant natural resources like sunshine and wind, which can be harnessed for renewable energy. It’s about leveraging our unique assets and not solely focusing on what others possess. This approach allows us to contribute to environmental sustainability while embracing innovative solutions driven by digital technologies.
How do you strike a balance in this region for businesses to be more self-aware about the environment in which they operate?
Romal: The awareness surrounding ESG factors within financial institutions has significantly increased over the past five to ten years. Now, the focus is shifting towards the practical implementation of ESG principles. This transition involves a multi-faceted approach.
First, government mandates are playing a role in promoting ESG compliance. For instance, governments may incentivize ESG-compliant practices or impose stricter regulations on entities with low ESG scores. This can impact interest rates on loans, encouraging businesses to prioritize ESG.
Second, businesses are realizing the importance of ESG for their sustainability. For instance, supplying steel to European markets now often requires ESG compliance. This trend reflects the growing recognition that ESG considerations are integral to market access and success.
Third, there is a shift towards infusing purpose into daily work. Companies are increasingly adopting a sense of purpose beyond profit, emphasizing their role in creating positive change in the world. This purpose-driven approach is influencing decision-making and strategies within corporations.
How will Deloitte make a change in Sri Lanka? What is the impact you envision the firm will have?
Channa: We are driven by a profound desire to make a difference and create an enduring impact. In Sri Lanka, we understand that seizing the right opportunities is crucial. As a nation and as a firm, we recognize the need to capitalize on these moments. Our commitment to becoming the world’s number one professional services firm aligns with our responsibility to support Sri Lanka in seizing its moment of transformation. During an executive committee meeting, the question arose: What legacy do we want to leave behind? Our collective vision is to witness Sri Lanka fully realize its potential in our generation.
To achieve this, we are dedicated to several key objectives. First, we aim to assist our clients in seizing the moment, urging them to be bold and make necessary changes. We encourage them to think globally, transcending the boundaries of Sri Lanka’s 22 million population. By introducing efficiencies and best practices, we help them generate value for shareholders and reinvest in growth.
Second, we are deeply committed to providing opportunities for our talent. We have set ambitious growth goals, envisioning a 5X expansion over the next five years, a goal we believe is achievable.
Supporting the government is another critical facet of our mission. This involves strengthening governance, and institutions, unlocking the value of state-owned enterprises, and promoting deregulation. Rather than reinventing the wheel, we draw from the lessons of South Asia and tailor solutions to the Sri Lankan context.
Our approach emphasizes learning, execution, and collaboration. We are eager to bring the eminence of the Deloitte brand as the number one firm, with deep and wide-ranging competencies, to Sri Lanka. Achieving scale is essential for making a meaningful impact.
Can we improve governance at the state or national level and what role can digitalization play?
Romal: I’d like to share two compelling examples of how digital technology is driving positive change in India. In the first example, consider the milk production industry, often characterized by small-scale farmers spread across various regions. By leveraging digital technology, you can introduce a system similar to Uber for collecting milk. This approach allows for improved volume management, enhancing farmers’ negotiation power when selling their produce. Furthermore, implementing a well-designed digital solution, complete with micro-cold storage to reduce perishability, has significantly reduced milk wastage. With this digital transformation, the supply chain becomes efficient, reducing perishability by 30% and enabling farmers to command better prices for their milk.
The second example is the remarkable digitization of India’s parliament, making it the only fully digitized parliament in the world. This transformation brings transparency and accessibility to governance. For the average citizen, it means having access to information about how their elected representatives are utilizing public funds, what projects they are working on, and how much progress has been made. Moreover, citizens can listen to parliamentary proceedings and understand the issues their representatives are addressing. This digital approach enhances transparency and governance, offering insights that were previously unavailable to the public. It’s a step towards creating a metaverse where individuals can virtually participate in parliamentary proceedings, promoting transparency and accountability.
These examples showcase how digital technology can have a transformative impact on various aspects of society, from supply chains to governance.
If there are early opportunities for Sri Lanka through digitalization to improve governance, where do you think those opportunities would come from?
Channa: The urgency of Sri Lanka’s economic situation demands that we make bold and rapid progress in solving our problems. We can’t afford to delay progress; we need to leap forward.
One key project that can have a transformative impact is the implementation of a digital ID system, similar to India’s Aadhaar project. The World Bank’s statistics on India demonstrate the incredible power of digitization. It helped India achieve digital inclusiveness in just four years, a feat that would have taken multiples of that without it. Sri Lanka has recognized the potential of such a project, as indicated by the government’s budget and digital economy strategy. However, execution has been lacking.
Implementing a digital ID system can yield several significant benefits.
For instance, it can address fiscal challenges related to broadening the tax base. This, in turn, can reduce the burden of indirect taxes on the population. Much of the groundwork for this project has already been laid, and with proper execution and prioritization, it can be completed in 12 to 18 months.
Second, a digital ID system brings accountability and transparency to various transactions, from identification of the citizen to traceability of transactions, such as property purchases and vehicle acquisitions. It enables tracking the source of funds and ensures that income earners are appropriately taxed.
The third benefit is around social safety-net payments and subsidies where the system can help identify the right recipients, reduce leakage and ensure that those in need receive the benefits they deserve.
Fourthly, a digital ID system serves as a solid foundation for private sector innovation. It provides the data infrastructure necessary for various sectors, including health, agriculture, ports, and trade, to leverage digital solutions effectively.
The successful implementation of a digital ID system hinges on government commitment, legislative support, and intergovernmental cooperation. It is a critical component for solving many of our challenges, and it can significantly accelerate our progress. Chambers of Commerce and various stakeholders are aligned in their support for prioritizing and resourcing this project, recognizing it as a quick win with far-reaching benefits. It’s time to take action and make this transformational project a reality.
Romal: Another crucial aspect to consider from a Sri Lankan perspective is our readiness to identify and embrace global megatrends. These trends encompass cutting-edge fields like AI, generative AI, and cybersecurity. The question we should ask is whether we, as a nation, are prepared to invest in these transformative areas. By doing so, we unlock vast opportunities that extend far beyond our domestic market.
Additionally, we must explore emerging fields like ESG science-based techniques. Are there specific industries or technologies that we, as a country, aspire to pioneer and excel in? This strategic thinking can propel our nation’s growth and prosperity.
It’s worth noting that such endeavours are often ingrained in the South Asian ethos. Our region has a natural inclination for innovation, adaptability, and finding resource-efficient solutions. Therefore, embracing these global megatrends aligns with our inherent strengths and can lead to significant success on the world stage.
Channa: The encouraging part is that the Sri Lankan government has allocated funds to establish an AI agency in the budget. This signifies a clear commitment to advancing AI and technology in our country. Additionally, the President’s call for increased private-sector involvement in government initiatives is a positive development.
Any closing thoughts?
Romal: I’m truly excited about the prospects in Sri Lanka. It’s a stunningly beautiful country with immense potential. Having Channa and the entire team on board is a genuine blessing, and I’m thrilled to work alongside this fantastic group of individuals.
What excites me the most is the opportunity to make a meaningful impact on our society, contribute to the betterment of people’s lives, and be a positive force for change. Together, we have the potential to create a brighter future for Sri Lanka and its people, and that’s what keeps me enthusiastic and motivated.
Channa: Our dream is to see Sri Lanka emerge as a formidable economy, claiming its well-deserved spot on the global stage. We are confident that, through our efforts and contributions, we can play a role, albeit a small one, in realizing this dream and making it a reality.