15/03/2017 | Written by: Jan van Groningen
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Contemporary digital business: during the first two hours of Singles Day, online retailer Alibaba received turnover of 7 billion dollars. A few weeks later Sphere.com saw a 60% increase in its turnover during the St. Nicholas sales and, in the same 4th quarter, Ahold saw its online turnover increase by 28%. These are not future prospects; these are increases that have already occurred in the retail industry. Such increases are expected to grow exponentially.
We see the same digitization process in other sectors, for example in healthcare. A large cancer research center in the United States has made the oncological knowledge of its most advanced researchers available in a cognitive app, so that cancer patients throughout the entire world can reap the benefits of better diagnostics and treatment. Another example is Medtronics, which can predict hypoglycemia in diabetes patients three hours before it actually appears.
The world is embracing digitization in which data plays a key role on a massive scale. Many organizations are racking their brains over how to collect this data and use it such a way that they (1) can offer better (online) customer experience, (2) can develop new products, services and business models in open innovative ecosystems and (3) can run processes flexibly in a cost-efficient manner.
They hope to find the right path to digitization, with which the organization can reinvent itself digitally. My experience is that organizations achieve these objectives when they use the following digital building blocks to construct their digital enterprise.
- New expertise. You cannot reinvent yourself digitally without tapping new expertise. After all, digitization requires new skills. Suddenly, you must have people in house who help you transform your sales environment into an online environment or hire developers who are able to analyze social media data in real time and integrate this data into a mobile app. New expertise is not only to be found within the organization. The solution also involves orchestrating ecosystems, so that the right knowledge is retrieved from the right business partner.
- Develop new business models. Digital reinvention is only possible when one weighs new business models: new considerations must be made to maintain or increase your competitive position. Working within an ecosystem of partners is crucial. New technologies such as block chain simplify the functioning of these ecosystems, for example for payment processes or offering third party logistics services.
- A new work method. In the new digital world you want to be able to quickly offer your customers high quality services that fit in perfectly with the ´customer journey´, using APIs, for example. After all, customers expect nothing less. Agile development methods, in which business and IT optimally collaborate, are a crucial condition for achieving that objective. For now, such collaboration often takes place internally; the following step is to have this type of collaboration with the other parties in your ecosystem, as well. Utilizing open standards plays a key role in this.
Now that the outlines and the playing field of the new digital organization have been sketched, we are faced with the question of how IT can give optimal gestalt to that digital world. What digital tools are required to be able to support the first three digital building blocks? How can we optimally utilize cloud platform functionalities and possibilities, including IoT, Cognitive, Analytics, API connections and DevOps? And in particular: what must we do to ensure that the requisite functionalities for digitizing the business are available? How many DiDos must we invest in order to reap the number of DiDos we want to earn?
Frequently companies look to the CIO to tell them how they can fulfill these three requirements, since if there is anyone who can estimate the power of IT, it is the CIO. However, the CIO frequently sees his or her options restricted in an IT organization in which up to 80% of the budget is spent on maintenance of the existing IT systems, only leaving a small part of the budget to be utilized for innovation. In addition, he or she is saddled with employees whose skills and competencies no longer provide what the new digital world demands.
CIOs thus diligently search for ways to achieve innovation while faced with the previously mentioned challenges. Of course, one important question here is how can you spend the available budget in such a way that IT pays for itself as much as possible, or provide IT that helps increase the organization’s share of the Digital Dollars (or ‘DiDos’) from the digital market.
From my experience, CIOs reach their ´digital readiness´ if they keep three important objectives in mind. The first one is about selecting a cloud architecture to transform the current, mostly traditional IT-infrastructure to a flexible IT-as-a-Service that the business community can use autonomously. The second objective is about business enablement, unlocking new technologies that are available on the cloud platform (IoT, blockchain, cognitive, analytics, automation, etc.) all aimed at facilitating digital innovation. The third and final objective is the creation of a ´digital strategy´ that provides the business path to digitization.
The following building blocks are essential to CIOs to meeting these objectives:
- Workload transformation. If data is the key to digital success, it must first of all be possible to have both internal and external data flow freely and to merge these streams in an open IT organization, without sacrificing security. In such a scenario, the applications and data sets undergo a total transformation. Data integration and application migration are moved to a cloud platform, where the possibilities of the digital world are laid out for the CIO. Whether you want to invoke smart cognitive software via an API to gain insights from customer data, or you want to connect an Internet of Things environment, the cloud offers these possibilities.
- Delivery innovation. Smart, cognitive systems learn from interactions and actions and continually become smarter in the process. They see patterns in data that were previously hidden. Innovative IT applications can be delivered that enable the organization to better serve the ultimate client, to tap new markets or launch a partnership. For example, with the help of IBM Watson, Under Armour developed a Cognitive Coaching System to help people improve their fitness programs. On the other hand, these cognitive systems are deployed to optimize work processes for managing the technical infrastructure and automated environment in far-reaching ways. The objective is to automate whatever can be automated, so that budget is freed up for innovation and availability can be maximized in such a way as to build a solid foundation under the digital business forms.
- Service integration. A digital world, in which the cloud is the platform, is specifically characterized by the presence of different software, infrastructure and platform vendors. The average IT organization uses at least 8 different cloud suppliers. These services must integrate seamlessly with one another. The objective of making your organization ready for the digital transformation is to free up budget for innovation and to offer added value to the business as quickly as possible, thanks to the utilization of cloud services.
Nothing ventured, nothing gained is true for the digital world, as well. Digital Readiness precedes Digital Reinvention. Those who do not invest DiDos will, in turn, fail to reap any Digital Dollars. Please consider the described building blocks as an action plan for building a Digital-Ready IT as a Service environment, on the one hand, in which business and IT optimally collaborate and for digitally reinventing the organization on the other: in other words, an organization in which the customer is always the focal point, large amounts of data flow readily and insights are gained that enable your organization to remain relevant in the digital world.
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