The Digital Enterprise in the Digital Age

The historical period in which we live has been given a number of labels including the Digital Age and the Information Age. The dictionary defines an “age” as “a distinct period of history” such as “an age of technological growth.” The modifier attached to the “age” — a modifier like “digital” — describes the characteristic having the greatest impact on that age. Our current historical period has a number of modifiers describing it because the characteristic most in play differs depending on the subject at hand. If we were talking about the weather, we would probably call this the Age of Climate Change. If we were talking about energy, we would probably call this the Age of Renewable Energy. The Digital Age, however, has captured the imagination of pundits because the effects of digital technology are so widespread. Business analysts generally agree that any company desiring to excel in the Digital Age needs to transform into a digital enterprise. Jaco Viljoen, an Agile Consultant at IndigoCube, insists, “Many companies don’t really understand what ‘digital’ actually means – or, more importantly, what capabilities they need to prosper in a digital economy.”[1] He goes on to observe, “[A company must pass] through three stages on the path towards becoming digital: digital competence, digital usage and, finally, digital transformation.”

Digital Usage

Too many business leaders believe that becoming a digital enterprise simply means adopting digital technologies. Jonathan Bingham, co-founder and CEO of Janeiro Digital, begs to differ. He notes, “The term ‘digital transformation’ has a nice ring to it, but few organizations understand the true meaning of the words. Most believe it simply refers to moving away from inefficient, outdated technologies. However, the textbook definition of digital transformation necessitates a fundamental shift or evolution of your business model, changing the very way in which your business is conducted.”[2] Digital transformation sounds daunting and it is. Perhaps that is why so many companies remain at or near the starting line. Timo Elliott (@timoelliott), an Innovation Evangelist for SAP, reports that an SAP “Digital Transformation Executive Study“, supported by Oxford Economics, concluded most executives believe digital transformation is essential, but few have achieved digital enterprise status.[3] The study surveyed over 3,000 executives in 17 regions around the world and revealed “84% of executives say that digital transformation is critical to their survival in the next five years — but that only 3% say they have completed company-wide transformation efforts so far.”

Digital transformation is like eating an elephant and is best done one bite at a time. That’s why digital usage is the first step towards becoming a digital enterprise. Victor Ng, editorial director of Questex Asia, offers five tips on surviving and succeeding in digital transformation.[4] They are:

  1. Don’t be left out. “Data is the new currency and applications are the new engines of the digital economy. Without them, businesses will be left out of the digital economy. Hence, they need to keep up.”
  2. Buy in now. “Organizations need to start investing in big data and analytics.”
  3. Get ready. “Growth and expansion is only possible by leveraging IoT, AI and machine learning. Enterprises need to be prepared for such working and business environments.”
  4. Go “soft”. “Hardware and connectivity are now commodities, the future is software-driven, and businesses will also need to be software-defined.”
  5. Get the right skills. “Application development, data science and information security are dominating the digital economy.”

Digital Competence

Earl van As, Vice President of Marketing at Conexiom, notes, “Digital transformation requires a substantial change to the operations of key business processes.”[5] Change is always difficult and confidence in the new way of doing things can often lag. Van As observes that digital technologies bring with them a competency that makes transformation easier. He explains:

“The shift to Industry 4.0 can be observed in the adaptation of solutions such as Artificial Intelligence (AI) and wearable technology. Many businesses are adopting these large-scale improvements in order to remain competitive in a fast-evolving market. In the supply chain, RPA (robotic process automation) and machine learning have enabled automation of complex processes with minimal human intervention. Due to its scalability and productivity, RPA optimizes efficiency and workflow by allowing staff to focus on profit-generating tasks. However, the implementation of such innovative solutions requires enormous preparatory upgrades of legacy platforms for businesses to operate in the advanced digital ecosystem.”

Cognitive computing platforms can often link legacy systems rather than having to replace them thus enhancing prior investments and limiting additional costs. Van As suggests document automation is an area in which digital competence can be gained quickly and help lay the foundation for further digital transformation. He recommends automating the following documentation processes: sales orders; AP invoices; quotes; and special pricing agreements. He concludes, “Simple-to-implement initiatives like document automation also work to improve ROI and overall profitability without requiring extensive effort.” Just as importantly, they improve a company’s digital competence on their digital transformation journey.

Digital Transformation

Grant Kirkwood (@prolixity), Founder and CTO at Unitas Global, observes, “Digital transformation, defined as the changes that occur in society when digital technologies are applied, represents a fundamental shift in the way businesses operate, completely redefining internal and external activities, processes, competencies and models. By incorporating cutting-edge digital technologies into their everyday operations, companies around the world are developing new business strategies that both enhance the value delivered to customers as well as position themselves for future innovation.”[6] SAP’s Elliott reports “leading organizations turn out to be different from the others in four key ways.” They are:

  • They are focused on true transformation. “96% of the leaders say digital transformation is a core business goal, compared to 61% percent of all others. The leaders have a ‘digital engagement first’ mindset, rather than a ‘product first’ mindset, with greater emphasis on changing the company as a whole by improving digital skills and increasing employee engagement.”
  • They transform customer-facing functions first. “Almost all digital transformation efforts attempt to improve the customer experience. But almost twice as many of the leaders cite customer empowerment as a key global trend, and 92% report that they have mature digital transformation strategies and processes in place to improve the customer experience vs. just 22% for all others.”
  • They are talent driven. “Leaders spend more both on hiring and on retraining workers than their peers. They are also significantly more likely to favor flatter, more agile organizational structures.”
  • They invest in next-generation technology using a bi-modal architecture. “The leaders, perhaps unsurprisingly, are ahead in technology maturity, but it’s mainly about new ways of working. 93% of the leaders say technology is critically important to retaining competitive advantage, compared with 72% of others. They are investing more heavily in big data and analytics (94 percent vs. 60 percent), and the internet of things (76 percent vs. 52 percent). And 50% percent of them are already working with artificial intelligence and machine learning, compared to 7 percent of all others. But the key difference is how that they apply that technology: 72% of leaders say that a bi-modal IT architecture – involving a mix of front-end and backend infrastructure, able to operate at multiple speeds for multiple business needs — is important to digital transformation, compared to 30% of others.”

As President and CEO of a cognitive computing company, I’m obviously biased in favor new technologies. My experience with clients, however, confirms what Elliott writes about visionary leaders who embrace new technologies — they are more open-minded and far-sighted than their competitors.

Summary

Is it worth all the effort and anguish to become a digital enterprise? Elliott notes, “The top 100 or so companies that report the most transformation say they’re getting big benefits: 85% say they’ve seen increased market share (vs. 41% for the rest), and 80% say their efforts have increased profitability (vs. 53% for the rest). They also expect to see more revenue growth over the next two years than the rest of the organizations surveyed.” Like any journey, the road to becoming a digital enterprise is likely to contain twists, turns, and obstacles. Companies keeping their eye on their destination will invest in new digital technologies and leverage them to overcome any challenges they may face.

Footnotes
[1] Jaco Viljoen, “Does your company have what it takes to be a digital enterprise?ITWeb, 20 July 2017.
[2] Jonathan Bingham, “Digital Transformation Myths and How They Hold You Back,” InformationWeek, 26 July 2017.
[3] Timo Elliott, “Digital Transformation — Are You Doing it Wrong?,” SAP Blogs, 27 July 2017.
[4] Chong Vin Nee, “The transformation journey in the digital economy,” Enterprise Innovation, 1 August 2017.
[5] Earl van As, “Easy Wins In The Journey Toward Digital Transformation,” Manufacturing.net, 8 August 2017.
[6] Grant Kirkwood, “The Three Phases Of Digital Transformation: Simplifying Migration To The Hybrid Cloud,” Forbes, 20 July 2017.

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