Digital Transformation and Disruption; these are two of the IT industry’s favourite terms at the moment. But what do they actually mean, especially to businesses? How do they relate to actions companies should take? What are the practical outcomes of digital transformation and disruption?
For mine, there is a distinct difference between digital transformation and digital disruption.
Digital transformation is something that all businesses should already be undertaking or, at least, planning. It relates to:
- Replacing or augmenting manual repeatable business processes with automated digital processes;
- A material reduction in the amount of paper a business uses to process and store records and requests;
- Having a meaningful online presence to deal with customers and suppliers – well beyond the “brochure-ware” websites of the past;
- Empowering employees to have access to the information and resources they require to carry out their work at any time, on any device, from anywhere.
Of course, digital transformation for its own sake is not necessarily advantageous for a business. Digitisation should bring tangible business benefits. The two most common benefits that businesses look for, and usually enjoy, from digital transformation are increased employee productivity and greater customer satisfaction. These benefits are not always simple or easy to quantify.
Forecasting digital benefits in a project plan is likely to rely on assumptions Management is not used to dealing with. Analysing benefits post implementation can also be seen by the business as “drawing a long bow” – attributing efficiency gains and customer satisfaction to other factors. However, the advice from the large global management consulting firms is clear; businesses need to digitise or face the prospect of perishing. And sometimes, although the benefits are not immediately obvious, digitally transformative projects should still proceed on the basis that the project sponsor intrinsically knows it is the best course for the business.
Should the ICT department drive a business’s digital transformation? The answer is yes, at least in part. However, lines of business are increasingly driving the digital transformation of their companies. They are more and more identifying ways in which ICT can provide employees and customers with a richer and more engaging experience and drive efficiencies resulting in either cost savings or increased revenue, or both. In these cases, ICT needs to provide the environment in which business units can readily implement their digital transformation plans. By working cooperatively, ICT can still ensure it fulfils its remit of adherence to the company’s security requirements and general ICT policies.
The term “bimodal IT” has been coined to describe this behaviour in a company where the business drives the ICT requirement, and the ICT department becomes an enabler allowing digital transformation to occur in a way that will serve the business best and in the most sustainable manner.
General Eric Shinseki is quoted as saying “If you don’t like change, you’re going to like irrelevance even less”. Anecdotally, the vast majority of companies’ ICT budgets are dedicated to “keeping the lights on” with very little assigned to innovation and digital change. The current literature is clear and overwhelming in urging businesses to transform or perish and to allocate a minimum of 20% of their ICT budget to digital transformation. The advice is that upgrading servers, networks and storage hardware and existing software to the latest versions is no longer sufficient to keep pace with change. If they have not already, ICT management needs to be the catalysts of change within their businesses. To hold on to the ICT status quo is likely to result in a business becoming increasingly less competitive and the emergence of “shadow IT”. The latter being where business units begin to bypass internal ICT to consume services from external providers (usually in the cloud). Shadow IT can result in data and security risks to the business and a loss of control by the ICT department. Cisco Systems estimates that, on average, businesses are using 15 times as many cloud services than they realise.
Capgemini, in its World Quality Report 2015-16, found that “Organisations from Australia and New Zealand are the highest spenders on hardware and infrastructure, investing 40% of their QA and Testing budgets in new systems”. This is symptomatic of a “tin hugging”, cloud laggard ICT culture. True digitisation requires ICT to shrug off the infrastructure ownership mentality, move to the cloud (see my previous technology update Cloud Computing: What’s All the Fuss About) and become a strategic business asset rather than a tactical overhead (see our update on Aligning Business and Technology Strategy).
Digital disruption is a completely different matter.
“If I asked people what they wanted they would have said faster horses” – Henry Ford.
An enduring quote from another age of disruption, that of mass production, that applies equally well in this age of digital disruption. It is also the attitude that Steve Jobs took when developing the iPhone. Commonly used examples of digital disruption today are the likes of Uber in the taxi industry, Airbnb in accommodation and Amazon in shopping.
I’ve used quotes and examples to illustrate digital disruption because I don’t believe there is a succinct definition of it. It’s not formulaic. It is a radical change in the way business is done in a particular sector and requires examination of product and service delivery from new perspectives.
It is the largest challenge facing business today. Cisco Systems chairman, John Chambers, in an address to their partner channel earlier this year said “disrupt or be disrupted” and his words are echoed in industry and business articles. And, these words translate into consequences as borne out by a study from the John M. Olin School of Business at Washington University. It estimates that 40 percent of today’s Fortune 500 companies on the S&P 500 will no longer exist in 10-years and attributes this to disruption. A staggering prediction …
It is certainly an exciting time to be in ICT and business. Challenging for sure, but the opportunities to apply emerging technologies to our businesses are many; drones for observation and delivery, 3-D printing in micro-manufacturing, robots, artificial intelligence and big data/analytics. How will these and other new technologies be employed in businesses and what new technologies will emerge?
It would seem the old adage, that change is the only constant, is as relevant as ever. Digital transformation is necessary to keep pace with how business is being done and to meet the growing expectations of customers and employees. It is driven from within and ICT management should be an integral part of it whilst remaining diligent to the security needs of the business. Digital disruption is not so gentle. It requires great innovation and enormous belief and, if successful, results in rich rewards.