Harnessing new digital technologies to create more customer value and reduce operating costs is a challenging prospect to many organizations accustomed to primarily investing in slow-coach IT to keep the lights on. To leverage the potential of technologies like big data, artificial intelligence, blockchain, the Internet of Things, virtual reality and cloud computing (etc.), your enterprise needs to embrace a digital ecosystem that’s able to embrace new technologies and adapt to change affordably and expediently.
McKinsey & Co. suggest companies with digital platforms enjoyed an annual boost in earnings before interest and taxes (EBIT) of 1.4 percent, compared with the 0.3 percent gains of non-players. They go on to state that performance effects are cumulative, with EBIT improvements adding to early-year gains, so over a five- year period, platform players may capture an additional 10 percent in EBIT growth—a company’s 2 percent EBIT growth, for example, would increase to 2.2 percent in year five.</p><cite>Source: ‘The right digital-platform strategy’, McKinsey & Co, May 2019
The Jump Off Point
Most large organizations today struggle to leverage new innovation in their business model. They work in hybrid environments, connecting digital and analogue technologies together as best they can. The last decade has seen efforts to move business processes online and create digital ecosystems where customers, suppliers and providers can come together to share a common data processing platform (i.e. a digital platform) that serves all stakeholders. That said, many businesses still operate online shops only to hand-crank orders through traditional back-office systems and processes.
The total value of global retail e-commerce sales will reach $3.45T in 2019 and by 2040, around 95% of all purchases are expected to be via ecommerce.
Small wonder that all enterprises want to trade online and move forward with a digital transformation.
Leadership teams, frustrated by slow-paced IT results, go headlong into a massive organizational re-design just to release the ‘innovation hand-break’ and get their digital transformation plans moving along the road. They approach their digital transformation as a wholly ’new project’ and support initiatives with dedicated Development Operations (DevOps) teams and new tool-sets.
There are risks to adopting a bold approach that ignores well-adopted IT project safeguards in a rush to achieve a big ticket win at all costs. While the rewards of digital enablement to business models are known to be considerable, the success rate of software projects remains low.
Data Quality Can De-Rail Projects
Data quality issues are a constant threat to step-change innovation projects. Re-using data can expose poor data capture protocols, a lack of good data husbanding, and ill-though-through data models. And IT leaders know, there’s always a risk that the digital transformation being considered today, could be the legacy application of tomorrow!
The Frictional Relationship between Enterprise IT and Digital Transformation
Digital Transformation sees ‘IT’ transitioning from a subject that happened in back-offices – to automate processes by equipping workers with computer processing tools – to something that customers, partners and suppliers can harness themselves. This shift from back-office to front-office means that no longer is IT about enforcing best practise into processes by installing Systems of Record that every other competitor also happens to use. Instead, IT becomes a game-changer; but only when it is tailored to deliver the unique characteristics of the business model that exists in the enterprise. It’s created a demand for two‐speed IT… because coded legacy IT is slow. DevOps teams need fast, code‐less tools to implement digital transformation projects that lower skill demands and produce sustainable results.
Digital Transformation has moved enterprise IT into the limelight having re-sited enterprise software from a state of competitive neutrality to a competitive weapon; from heavily standardized to heavily tailored; from a state where a slow-pace of development was ‘liveable’ to a state where extremely fast still isn’t fast enough.
Summary—The Road is Long
Both market analysts and practitioners agree, the road to become a digital leader is paved with challenges, but those that survive the next decade are likely to be the businesses that get there, eventually. Digital transformation is expected to grow at CAGR of 20.1 per cent from 2017 to 2025 by streamlining business processes. Source: Grand View research
Ian Tomlin is a management consultant and writer on the subject of enterprise computing and organizational design. He serves on the USTECH GLOBAL EMEA Management Team. Ian has written several books on the subject of digital transformation, cloud computing, social operating systems, codeless applications development, business intelligence, data science, office security, customer data platforms, vendor management systems, Managed Service Provisioning (MSP), customer experience, and organizational design. He can be reached via LinkedIn or Twitter.
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