Most enterprises are struggling to innovate and are not investing enough into new technologies to counter disruptive measures. As a result, in a few years, their products are becoming irrelevant in the market. Examples of Blackberry, Nokia, Kodak, Blockbuster have been quoted numerous times. Technology has lowered the entry barrier to innovation, and new entrants can easily disrupt the entire business models in a matter of months. Geographical borders do not guarantee any competitive advantages anymore. Any breakthrough or new idea travels around the world in a matter of minutes.

For an enterprise embarking on the digital transformation, following key things need to fall in place for building digital capability within the enterprise:

  • Business vision – digital transformation initiatives are cross division or cross-functional, as a result, having a common business vision to drive the transformation is very important
  • Leader led – the digital initiatives need to be top driven and led by a senior leader. The cross-functional team should report to the leader
  • People skills – cross-functional team needs to be staffed with people that bring varied experience and are adept at defining and refining digital journey focused on the customer experience. In case, the team is relatively new to digital, then hiring for appropriate skills need to be undertaken. Existing team members can undergo training for required skills. People that bring multiple skills to the table are core to the team
  • Platform approach and Automation - when looking for technology choices in implementing the identified projects, start thinking in terms of platforms instead of systems. Digital transformation is not about one project or program, the continuous iterations and interconnection of functionality, requires platforms that provide the requisite services to build such experience in a rapid manner. The implementation team should not get bogged with scalability and performance issues, things that mar the customer experience. The platform should handle the scalability and performance aspects of the application. Similarly, horizontal capabilities like data analytics, data aggregation, content services, logging services should be viewed and built as platform services. Again, if platform building skills are not available in-house, they need to be hired from market to jumpstart the process. Another key capability is to automate the Development to Operations application lifecycle (DevOps). When you working on scale, manual processes and intervention is error prone and not at all feasible. Investment in automation of all the DevOps process is an important part of the building digital capabilities
  • Open source software – in the digital products and services space, given that the product(s) can become viral overnight, scalability and performance of the product/service is a key criterion. Use of commercial proprietary products limits the ability of the enterprise to scale the product. Licensing cost is also the key factor for handling user base in excess of 100 thousand. Open source software allows benefiting from the larger community, cutting down on the costly license, use of commodity hardware and ability to dig deeper into code (if required). The platform approach is executed using a combination of open source software.

Enterprises threatened with changing business models have already built or started building digital capabilities. Companies like Walmart are no longer just brick and mortar players but giving tough competition in the online e-commerce space also. Investment into future is required for enterprise to reinvent them for the digital era.

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For enterprises disrupting the marketplace, technology is the key enabler that is helping them create new business models and processes. Open source software has played an enabler role in developing these new scalable and high-performing systems. From the digital transformation perspective, following four levers play an important role.

  • Connected – with the advent of IoT everything is getting connected. All this data is being transmitted over mobile and fixed bandwidth networks where the enterprises are making sense out of it leading to real-time decision making. New service models are being created around data. E.g. Rolls Royce aircraft engines capture data around the engine performance which can be given as subscription to airlines for predictive maintenance. This data can also be used to develop models for better engines.
  • Data – All the data from Things, device location, social interactions etc needs to be captured, processed and analyzed for patterns, behavior discovery to allow better predictions and decisions to be made.
  • Automation – Given the scale of the systems and data being emitted/generated for analysis, automation is the key enabler. Traditional technologies need to be combined with Artificial intelligence and machine learning models to increasingly create systems that can work autonomously. Lots of supervisor roles can be automated using the AI models. E.g. Uber has eliminated the complete middle management role found in a traditional taxi services company.
  • Users First – All the data and automation need to be used to build and provide contextualized products and services for the users. Enterprises or intermediaries can get direct access to users/customers via mobile apps. Users can have fully transparent access to their data and enterprises can offer services around that. E.g. Tesla have built a model for direct selling of cars to the end customer bypassing the franchise/dealer network. This allows them to understand the customer behavior and usage of car. They can sell additional services based on the user context.

It is still early days of digital transformation. Lots of enterprises are taking steps with digital as digital marketing which is a very narrow and siloed focus. Digital transformation is about rethinking the business, operational and technology processes (e.g. customer onboarding, customer cross/up sell, customer service, core products/services etc). Technology is the key enabler and drives the entire business model in the digital economy. Every company is being transformed in a technology company where technology is enabling all these digital interactions.

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New forces are impacting the entire value chain of an enterprise. Availability of large amounts of digital data, automation of the production processes, inter-connectivity of the supply chains, and digitization of the customer experience is re-organizing entire industries leading to the transformation of business models.

Let’s look at the some of the critical pieces of the value chain and see the impact of the new technologies.

  • Manufacturing – For any enterprise that is manufacturing or sourcing raw materials/parts/products, global sourcing has become the norm. Inter-connectivity of the entire supply chain via telecom networks has synchronized supply chains and shortened the production cycles. The advent of the Internet of Things (IoT) has enabled this inter-connectivity across the value chain
  • Distribution and Logistics – the distribution model is moving online, market boundaries are blurring, business and people are ordering from all over the world, leading to changing dynamics in the distribution and logistics part of the supply chain. The advent of 3D printing will bring changes in the way logistics are managed. Parts can be printed on location, saving on costly logistics and [asks for differential] warehousing strategy from today. Third party warehouse and fulfillment centers (e.g. Amazon fulfillment) changes the whole cost model. The advent of Geo location has allowed real time tracking of the item enabling more transparency allowing faster decisions.
  • Customer, Employees – With smart devices everywhere, consumers are starting to ask for information that is contextual, real-time and pushed to them. When the same individuals go to work in their companies, they expect the same quality of customer experience. The entire social revolution focused only on the social aspects of the customer journeys, but what digital millennial need is the digital transformation of the end to end customer journey. Large amounts of customer from social networks combined with knowledge of the customer from internal systems needs to be combed for creating a personalized, contextualized customer experience - a 720 degree of the customer.
  • Enterprise Systems – Businesses are not investing enough in Change to keep pace with the digital transformation happening all around them. Digital transformation is being enabled by technology and enterprises need to upgrade/enhance their legacy systems and technologies to support the new digital processes/models. Availability of SaaS solutions, open source software, big data, cloud computing is changing the enterprise landscape. The skill sets required to manage and make sense of these new plethora of technologies is driving the transformations.

The impact of the transformation can be seen in pioneering industries such as music (digital products are delivered via digital channels), media (traditional print news media is already on downward spiral, media giant Facebook does not create any content), retail (brick and mortar stores are getting replaced with online eCommerce stores, today largest retailer Alibaba does not own any inventory), taxi services - online ride aggregators are changing the dynamics of traditional taxi services, Uber does not own any taxis and electric cars are changing the dynamics of entire auto industry - imagine no car recalls but OTA software updates to fix the issues. Signs of similar digital transformation can be seen across most of the industry domains.

What signs are you seeing impacting your industry value chains?

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