Digital transformation is underway in more than two-thirds of businesses according to recent research by Nemertes, but the scope of those initiatives, and their degree of success is not easy to read.
Nemertes Research recently published a study that assessed digital trends and current projects in 368 companies globally, and which offered as its baseline for the research a useful definition of Digital Transformation.
Digital Transformation – What’s in a name?
In essence, the Nemertes Research definition of digital transformation is based on 3 interlocking goals.
The first is the innovative use of technology across a business. The second is materially and significantly improving (or introducing) a process or deliverable that leads inexorably to the third goal – increasing value.
The interdependent nature of these three goals can make for spectacular success in gearing a business for innovation and growth, but can equally lead to catastrophe where one component fails. Businesses might deploy all the radical new technologies they can get their hands on (and of course cost justify), but if they do not materially improve a process or establish a breakaway innovation, no value is generated and the required transformation won’t materialise.
Leaders looking for that attainment believe their businesses must pick up the pace of enterprise digitisation. They recognize that customer, employee and partner expectations are shaped by digital capabilities, that new competitors are emerging with rapidly scalable business models, and that most of their boardroom’s most troublesome scenarios are digital in their origins.
From the amount of coverage on view in the mainstream, financial and industry media its clear that Digital Transformation is on the agenda in every business, and therein lies the challenge: Every business is at a different milestone in its understanding and execution of digitisation, and even within those already embarked on the journey, the leadership team will comprise laggards on one side of the boardroom table and blue-sky digital freethinkers on the other.
Its worryingly easy for business leaders to get enmeshed in debates about current ‘hot’ technologies or fixate on becoming the cliched “Uber of (Insert Industry Here)” A more appropriate starting point is a shared perspective on business and technology trends that are driving enterprise digitization in their specific context, and a consensus on which are business-critical and, just as importantly, which can be put aside. Strategy is after all as much about what we say we are NOT going to do as much as the big bold statements saying what we are!
Stereotypically it has fallen to the CIO or their equivalent to build this shared view. Increasingly, line of business leaders, whether in finance, sales, marketing or operations are being given (or taking for themselves) the lead in defining and responding to drivers for digital transformation.
Changes in business models, consumer behavior and workforce expectations will have a significant impact on the shape and momentum of digital enterprise transformation in the next 5-10 years.
‘Its not Business, its Personal’
Customers, even in the B2B market, are increasingly looking for products and services that align with their preferences and traits as individuals rather than as collective and homogenous market segments.
To achieve this degree of customisation, businesses are turning to digital innovations in research, manufacturing, sales and service. On the other hand, customers want simple, non-intrusive interactions that deliver their desired results. This will remain a challenging balance for business to achieve, but the chances of success are enhance by digitisation.
Information is Key to the New Customer Experience
Organisations across every sector are accelerating their efforts to build, deliver or partner on information-based services which in turn drive the adoption of subscription and bundled models of consumption. This will require sophisticated interfaces where customers can source combinations of products and services from a range of providers. This concept of partnering and brokering of services via published interfaces reflects a major change that is characteristic of Digital Transformation.
A perfect example of this can be seen in the heart of our own industry.
With the high penetration of smartphones and the rapid evolution of internet services as the basis for business tools, service providers have been forced to seek alternative revenue streams. Although consumption of internet bandwidth has increased exponentially, its abundantly clear that neither customer nor telco can be said to be happy with either the experience or the financial outcome.
As customer reliance on over-the-top (OTT) services grows, they pay more for their bandwidth as compared to traditional telecom services. To the chagrin of the established providers, this internet bandwidth is a relatively insignificant component of their revenue model, regardless of the increased demand.
In response, many service providers have started to expose valuable APIs to both internal as well as external application builders. In doing so they can offer high-value application-ready data such as billing, location and messaging and generate an incremental and reliable source of revenue (as well as an ecosystem of partnerships and potential acquisitions that are ‘cool’ – a trait not often identified with your average telco.)
What’s more we are only at the beginning of this. Research indicates that less than 25% of mobile applications use APIs, creating significant headspace for telecom API providers. With the predicted further growth in mobile applications, and the IoT behemoth entering stage right, the demand for telecom APIs is inevitably going to increase in the immediate and mid-term future.
The Spiral Staircase of Data
A vast well of data in all its forms is now available for consumption, and in consuming it and allowing it to drive behaviour, businesses and individuals generate yet more data.
As this model of consumption spirals upwards, customers, business leaders, and their partners and employees will rely more on data to make decisions. Universal access to data will inform preferences and ideas, but will simultaneously put brakes on the rate at which decision and action follow, as the glut of inconsistent data of variable value makes it difficult to reach answers quickly and correctly. Businesses that don’t align with the information expectations of their customers will be challenged (and challenged publicly).
Ghosts in the Machines
Advanced automation, not just of discrete and rigid industrial processes but of ‘soft’ creative and social tasks, is now a reality.
Business must increasingly examine these for opportunities to drive efficiency and achieve growth. Clearly, automation has already fundamentally and irrevocably changed the form and nature of work in less skilled areas. It is increasingly replacing or enhancing activities that demand a degree of social and emotional intelligence, contextual knowledge or judgement. When automation takes on the activities once performed solely by skilled employees with a high sense of self-worth, everyone involved will need to adapt how they assess and demonstrate value, collaborating with and being guided by technology agents that elevate judgment, creativity and flexibility and not just accelerating outcomes.
Don’t Fence me In
Recognised boundaries across organisations, functions and roles are more fluid than at any time and are a defining characteristic of the digital enterprise.
Cross-industry models are drawing strategic players in historically isolated industries together, and long-standing industry ‘identities’ themselves may need to be redefined. For example, the automotive industry finds itself at the point of needing to redefine the very nature of its product – not by BMW or Ford – but by Apple and Google. Yet all parties to this radical and pivotal change, both incumbents and arrivistes, will need to collaborate with each other in order to reach their goal.
Scream if You Want to Go Faster
Most organisations, especially those ‘incumbents’, are challenged in trying to keep up with the dizzying rate of change in customer behavior and competitors who were ‘born digital’ and not yet even teenagers.
Risk assessment, regulatory compliance, governance, legacy IT systems, and globalisation can all serve as roadblocks for enterprises, while customers and competitors appear to move faster than ever. Larger companies must be adaptive, developing flexibility in the face of uncertainty and above all must avoid creating monolithic organisations and processes that are only optimized to a single outcome.
Please Be More Specific
Assessing and determining which of these seismic shifts are critical to your specific company and context is the necessary stage for digital transformation programs.
Leaders who can enable this shared vision will not just be rewarded with a starring role in the unfolding drama, but will be in for a decent share of the take and the royalties to follow.
At CommsVision 2016, our expert speakers and partner business leaders look forward to exploring with delegates how real businesses are meeting the challenge of enterprise digitization, and succeeding.