The Bumpy Ride to Digital Enterprise Transformation

Does change frighten or concern you? If it does, “Fasten your seatbelts, it’s going to be a bumpy ride.”[1] According to analysts from Accenture, “The retail and consumer goods industries will change more in the next 10 years than they have over the past 40. One primary force is responsible — digitalization — and it has already begun.”[2] They add, “With trillions in potential profit at stake over the next decade, retail and consumer goods leaders are harnessing the power of digital to meet rapidly changing market needs and stay ahead of the competition.” Although many business leaders believe the rise of the digital enterprise is the root cause of change and disruption. Professor Marion Debruyne (@MarionDebruyne), Dean of the Vlerick Business School, believes the real root cause is technology available to consumers not digital competitors. “Customer expectations are becoming increasingly more complex,” she states. “And if something is unsatisfactory, these same customers will be the first ones to announce their dissatisfaction to the entire world.” The editorial staff at IEDP adds, “In this she pinpoints customer experience as the key focus in how companies must face the challenge of digital transformation.”[3] Whether you believe disruption is caused by your competitors or your customers, digital transformation is an imperative.

Digital Disruption and the Future

Your company doesn’t want to change for change’s sake. It doesn’t want to invest in new technologies just because they are available. You need to have a business case that makes sense. Don’t get me wrong change is inevitable. It always has been. Nevertheless, you still need a reason to change. Analysts from SAP believe digital transformation needs to be grounded in a flexible “Enterprise Digital Platform” that can help ensure a business is future-proofed. They explain, “The ‘Enterprise Digital Platform’ is the foundation for connected business ecosystems. Its multi-layer architecture integrates core IT-applications and allows creating new information-based revenue streams.”[4] Since I’m the President and CEO of a cognitive computing firm, it should come as no surprise that I believe cognitive computing platforms make ideal foundations upon which to build a digital enterprise. The SAP analysts note that a study conducted for SAP by IDC concluded an Enterprise Digital Platform “is a cloud-first architecture consisting of a set of highly flexible building blocks based on innovative technologies. They continue:

“So what are the components on the various layers of this structure? Its fundament is a modern IT-core that integrates all mission-critical applications and information systems to sustain operations and business continuity. Core IT is not a ‘separate’ environment — rather the applications are brought to the center of the integrated ‘Enterprise Digital Platform’. On the next level is the ‘data layer’ — a data discovery environment with great analytical capabilities designed to extract business value and meaning. On the ‘development layer’, IT-professionals can continuously deliver new digital products and services. The ‘integration layer’ uses services and APIs to connect the internal and external ecosystems. Finally, on the ‘engagement layer’ the users have front-ends that connect them to this ecosystem, allowing a whole new customer-centric, immersive experience. What, then, makes the digital platform so central to the enterprise architecture in the age of digital transformation? It is exactly that it is the technological enabler of the main benefits of digital transformation: Redefined business models and the tapping into new, information-based revenue streams. It allows enterprise-wide collaboration and beyond through connected eco-systems.”

Cognitive computing platforms are ideal Enterprise Digital Platforms because they sit on top of legacy systems (enhancing sunk investments). They can integrate and analyze both structured and unstructured data. And they communicate with operators using natural language generation. Cognitive computing systems not only include advanced analytic capabilities, they leverage machine learning to ensure the platform changes along with the environment. SAP analysts assert once an Enterprise Digital Platform is in place “the enterprise is positioned to continually support new business models and drive innovation.”

Accenture analysts agree advanced technologies are going help future-proof organizations. Technologies they identify as being valuable to support the entire value chain are: the Internet of Things (IoT); artificial intelligence/machine learning (aka cognitive computing); robotics; digital traceability; and augmented and/or virtual reality. They believe CPG companies that embrace these technologies will become the leaders. They explain:

  • Leaders will use digital to understand and connect with consumers. “The average consumer has global access to more than one billion products. The result? Fragile customer loyalty.”
  • Leaders will rapidly adopt game-changing technologies now. “We see eight technologies [noted above] playing a key role through 2025, impacting all major areas of the business, from digital traceability to robotics.”
  • Leaders will test new business models online and offline. “Mastering an omnichannel approach is key. Industry leaders are also already grappling with digitally enabled business models like the sharing economy (rentals), the personalization economy (curated subscriptions), auto replenishment and smart ordering via the replenishment economy, and the services economy (‘Do it for me’).”
  • Leaders will know the three must-have capabilities to thrive over the next decade. Those must-have capabilities are: “Partnership mindset; last-mile delivery; and advanced data sciences.”

Leading Digital Disruption

In another article, the editorial staff at IEDP writes, “In industries from banking to retail, media, logistics, manufacturing, education, professional services, and life sciences, leaders are struggling to face up to new disruptive, technology driven, business models.”[5] The editorial staff goes on to observe, “Although the word disruption has negative connotations, in the context of digital transformation — addressed effectively — disruption can bring enormous positive benefits.” In order to gain those benefits, the staff notes, companies need effective leadership. Centuries ago Niccolo Machiavelli, in his classic The Prince, wrote, “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things, because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may well under the new.” The IEDP editorial staff reports, “New research from IMD’s Global Center for Digital Transformation and metaBeratung points to four leadership competencies that are vital for business leaders facing large-scale digital disruption.” Those competencies are:

“First, successful digital leaders tend to show humility and a willingness to seek diverse inputs — both from within their organizations and from outside. In today’s world of near-ubiquitous Internet and social media availability, employees have equal access to information within a business, and may in fact have deeper specific subject knowledge than those leading them. … While humility allows leaders to be open to new ideas and innovations, being adaptable is critical in a complex and changing environment. Without it, the capacity to respond to digital disruption is severely restricted. A humble and adaptable leader is willing to change his or her mind, and then communicate that newly minted adaptation to employees and peers. … Dealing with fast changing cultural and business impacts requires adaptability. For any leader, having a clear vision and articulating it well is a core competency. But in times of rapid technology and business model change, with opportunities cropping up on all sides, it becomes critical. The sheer unpredictability of business today means traditional analytical approaches are failing to provide the long-term definitive strategies which leaders have relied on in the past. In times of rapid change, people need to be inspired by a strong vision. Adaptability without vision can lead to rudderless change. … The final competency is to successfully engage with customers, partners, suppliers, employees, and the broader ecosystem. At their core, digital leaders are listeners, with a broad-based desire to explore, discover, learn and discuss with others. They listen to their clients and customers; their teams and staff; and their peers and partners with humility and a willingness to change their minds. They ensure a constant interchange of information and encourage employees to challenge views and opinions, and they set and adjust corporate visions based on these exchanges.”

As noted earlier, a digital enterprise is an agile enterprise. It makes sense that an agile organization need to be led by an agile leader. One of the most profound things the IMD/metaBeratung report concluded was that “adaptability without vision can lead to rudderless change.” Undergoing digital transformation is a bumpy enough ride with someone at the helm. During one race at the 2017 America’s Cup challenger races, the helmsman of the Swedish boat slipped overboard during one of the boat’s tacks. What had been a close race against the New Zealand boat suddenly wasn’t. The boat was still a good one manned by a competent crew. Lack of a leader made all the difference. A good vision (i.e., a solid digital transformation business plan) is like a seat belt that can help a company in the driver’s seat during the bumpy digital transformation ride.

Footnotes
[1] Many people believe that’s the advice aging stage actress Margo Channing (played by Bette Davis) gave to her guests in the movie “All About Eve (1950).” What Channing actually said was, “Fasten your seatbelts, it’s going to be a bumpy night.”
[2] Accenture, “Painting the Digital Future of Retail & Consumer Goods Companies,” Supply Chain 24/7, 9 June 2017.
[3] Editorial Staff, “Digital’s Commercial Imperative,” IEDP, 1 February 2017.
[4] SAP, “Creating a future-proof IT: How the Enterprise Digital Platform supports digital,” CIO, 31 May 2017.
[5] Editorial Staff, “Leading through Digital Disruption,” IEDP, 15 May 2017.

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