Your Company has 5 Years to Go Digital or Go Away

Okay, that headline might be a bit too strong; nevertheless, digital transformation is an important issue. Becky Morgan (@fulcrumcwi), President of Fulcrum ConsultingWorks, asks, "Is your organization moving fast enough to thrive in the next 5, 10, or 20 years?"[1] That's an excellent question. Morgan is among many analysts who believe companies must go digital in order to survive and that the transformation to a digital enterprise must take place over the next five to ten years.[2] Morgan asserts a gradual approach to change is probably insufficient. She explains:

"Take a look around. Your cell phone has exponentially more power, memory and storage than what entire companies ran on a few short years ago. Amazon recognized and satisfies increasing demands for instant gratification. ... Landline phones are increasingly rare, cash and checks are involved in fewer and fewer transactions, and machines can tell us when they need attention before the crisis strikes. Change is accelerating in both speed and type. While each of the advances I just mentioned may not have slapped you or your business in the face, the combination of revolutionary technologies and speed of acceptance will do just that. Staying ahead of the curve requires much more than continuous improvement. Radical transformation, followed by continuous improvement, no doubt followed by a new radical transformation is in the cards for every business with aspirations of thriving long term. The tortoise only beats the hare if the finish line doesn't move and the hare becomes easily distracted. Don't bet the future of your business on that kind of unlikely serendipity."

Morgan obviously believes the finish line is moving constantly and at an accelerating pace. She's not alone.

Digital Transformation is Occurring Rapidly

Editors at Enterprise Innovation (EI) write, "The astonishing speed with which the digital revolution is transforming businesses and even entire industries is making it a challenge for different-sized companies to clearly understand digitalization and fully grasp its implications."[3] One of the reasons digital transformation can be challenging is that C-level executives don't understand what it means (which is why grasping its implications can be difficult). The EI editors observe, "Successful digital transformation demands a culture activated by top leadership that encourages innovation and risk taking, and empowers all the stakeholders of the company. This is easier said than done — involving various facets of the organization to push for big data can be quite tricky, as these are often new initiatives some members of the C-Suite may not fully grasp just yet."

The reason all C-level executives need to understand why digital transformation is an imperative is because it affects every aspect of a business. Peter Sondergaard (@PeterSonderg), Senior Vice President and Global Head of Research at Gartner, told participants at the 2016 Gartner ITxpo, "You now need to make cloud, mobile, social and data your core capabilities while investing in resilience, business continuity and disaster recovery, [inside] and outside in a hybrid approach.”[4] Sondergaard went on to note that artificial intelligence and advanced analytics will play a major role in digital transformation. "The new competitive differentiator," he stated, "is understanding the customer's intent through advanced algorithms and artificial intelligence. Creating new experiences that solve problems customers didn’t realize they had." Sounds to me like he was talking about cognitive computing systems. Cognitive computing systems leverage artificial intelligence and advanced mathematics to address challenges in every aspect of a business.

Fundamentals of Digital Transformation

"What is a digital transformation," asks Maribel Lopez (@MaribelLopez), founder of Lopez Research. "It seems fairly obvious until someone asks you to define it. At that point, you realize that digital transformation is like a snowflake. The definition of digital transformation is unique for each company."[5] I agree no "one size fits all" strategy exists for digital transformation — companies are too unique and the data they require too varied. At Enterra Solutions®, we have been performing Digital Transformation work at clients through a process we entitle Enterra Cognitive Process Re-engineering™. This method aligns strategy and operations through the re-engineering of critical business processes by considering all of the relevant data and having the cognitive computing system automate the subtle decision logic of the best employees while performing complex optimizations and forecasts. There are some general activities all companies must master in order to transform successfully into a digital enterprise. 

Data Integration

Useful data (i.e., data that is easily analyzed) used to be confined to structured databases. That is no longer the case. Today, data comes in many forms — both structured and unstructured. In order for that data to be analyzed in any meaningful way, it must integrated. Cognitive computing systems are ideal platforms for this kind of integration since they can handle both structured and unstructured data and interact using natural language processing. With the emergence of the Internet of Things (IoT) the amount of data that must be analyzed is going to explode. Cognitive computing systems, or some form of artificial intelligence system, is going to be required to deal with that amount of data.

Advanced Analytics

Data is of no use unless it is analyzed. EI editors observe, "Integrating data analytics into the organization, and deriving the full value out of it, must be a C-Suite initiative that’s cascaded throughout each department." Sondergaard adds, "IoT ... changes how CIOs should invest in analytics because decisions must move from days to minutes to instant." That's just another reason why cognitive computing will be the foundation on which digital enterprises will be built. Cognitive computing systems work 24/7 and at the speed of the modern business environment. Sondergaard explains, "Algorithms determine the action. The new type of intelligence, driven by machine learning is artificial intelligence. ... We are building machines that learn from experience and produce outcomes their designers did not explicitly envision. Systems that can experience and adapt to the world via the data they collect. Machine learning and artificial intelligence move at the speed of data, not at the speed of code releases. Information is the new code base."

Step-by-Step Transformation

Lopez recommends taking small steps towards the goal of digital transformation. "While it's essential to have a multi-year strategic plan for digital transformation," she explains, "it's just as important to have a set of well-defined, smaller efforts that support key performance indicators today while fueling a longer term transition to right-time experiences." At Enterra® we call this a "crawl, walk, run" approach that leverages proof of concept or proof of value projects to ensure transformation efforts are worth the investment and can be scaled. Lopez concludes:

"Digital transformation is a journey, and we've been on this journey for some time. Many businesses are on at least the fourth wave of digital transformation moving from mainframes to PCs, to the Internet and now the mobile cloud era. While we haven't completed the journey to the mobile cloud era, we're already entering the next era of machine learning, cognitive computing, and virtual reality. We'll be on the journey for years, perhaps decades, but that doesn't mean that you can't create meaningful impact today — one project at a time."

Summary

Sondergaard insists successful digital transformation will result in a new digital ecosystem. He explains, "Ecosystems go beyond the capability to decide. CIOs need to build the capability to interact with customers, partners, adjacent industries, even your competitors. The ecosystems allow for the transformation from traditional business with linear value supply chains to networked digital ecosystem businesses. Many industry models will transform the digital ecosystems. Moving from single relationships run by intermediaries toward distributed partnerships managed by a shared distributed ledger system like blockchain. Building a strong ecosystem will help you manage the transition. Ecosystems are the future of digital." No one claims that digital transformation is going to be easy — just that it's going to be necessary. According to research conducted by The Economist Intelligence Unit, "Large, global companies that extensively employ digital technologies see greater performance, efficiencies and collaboration than companies that have not fully taken advantage of those technologies."[6] Kevin Benedict (@krbenedict), a Senior Analyst at Center for the Future of Work asserts, "The Age of Hyper-Transformation transpires over the years 2016 through 2020. During this age, the gap between digital laggards and leaders quickly widens into a chasm nearly impossible to leap."[7] If he's correct, your company only has five years to go digital or go away — eventually.

Footnotes
[1] Becky Morgan, "Should Business Transformation Be In Your Future?" IndustryWeek, 18 October 2016.
[2] Stephen DeAngelis, "The Digital Enterprise and Beyond," Enterra Insights, 14 November 2016.
[3] Editors, "Navigating the world of digital transformation," Enterprise Innovation, 12 October 2016.
[4] "Gartner Identifies Five Domains for the New Digital Platform," Information Management, October 2016.
[5] Maribel Lopez, "Small Changes Drive Big Digital Transformation Results," Forbes, 31 October 2016.
[6] CSC, "Digital Enterprise Leaders Realize Greater Performance, According to an Economist Intelligence Unit Survey Sponsored by CSC," Business Wire, 13 October 2016.
[7] Kevin Benedict, “Surviving the Three Ages of Digital Transformation,” Sys.con Media, 27 May 2016.

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