Can Digital Enterprise Laggards Catch Up?

Stephen DeAngelis

July 12, 2016

Many analysts believe that in order for a business to survive and thrive in the information age, it must transform its industrial age organization into a digital enterprise. Kevin Benedict (@krbenedict), a Senior Analyst at Center for the Future of Work, is one of those analysts. He asserts, “When digital laggards finally recognize the degree of market disruption caused by the rapid adoption of digital technologies, and desperately try to outrun the inescapable Darwinian effect of their slow response, they will be faced with not one, but three ages of digital transformation to navigate and survive.”[1] My only quibble with that assertion regards his reference to Charles Darwin, who developed the theory of evolution. Evolution is a slow process and digital enterprise transformation requires a revolution not evolution. To be fair, Benedict referred to “Darwinian effects” rather than evolution. In general, the effects of the evolutionary process are that adaptable organisms survive and inflexible organisms die. Benedict explains that Darwinian effects are what characterize the first (and current) digital transformation age. He explains:

“Today, we live and work in the Age of Disruptive Transformation. Traditional methods of conducting business, marketing products, delivering services, and engaging customers have been dramatically disrupted by digital technologies. These disruptions were caused by the rapid consumer adoption of a new set of new digital and mobile technologies, and the resulting behavioral changes. Enterprises that fail to recognize these consumer and market disruptions, and fail to rapidly respond to them, will ultimately join a long list of companies, with familiar brands, that have filed for bankruptcy as a result of their inability to transform at the speed consumers are adopting new digital technologies and behaviors.”

Benedict believes the first digital transformation age is ending (which is why he is concerned about laggards) and he believes we are entering the second age. “We are in the Age of Hyper-Transformation today,” Benedict asserts, “and we are already seeing the consequences on companies not able to react fast enough. These companies were blinded to early market and consumer signals, and failed to recognize market disruption until too late. These competitive oversights will be amplified during the Age of Hyper-Transformation and cause many leading companies to stumble.” He adds, “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.” Although that may sound hopeless for organizations not yet involved in digital transformation, the fact that Benedict believes we are just entering this second age of digital transformation means it’s not too late to start. The good news is that cognitive computing systems are now available that can help speed up digital enterprise transformation. Cognitive computing systems can help integrate data, monitor and automate processes, help with corporate alignment, and provide actionable insights to decision makers. Benedict’s deliberate use of the term “hyper-transformation” underscores how quickly digital enterprise transformation must take place if companies are going to survive.

 

According to Benedict, the Age of Hyper-Transformation will give way to the Age of Ubiquitous Transformation. “The Age of Ubiquitous Transformation,” he writes, “completes the series covering the years 2020-2025. The rate of accelerating business impact slows as digital technologies mature, business adoptions widen and become ubiquitous, and the new digital normal arrives. Robotic process automation, artificial intelligence and machine learning support the real-time digital enterprise, constantly monitoring and adjusting the business and alerting to changes in the rapidly changing competitive landscape. The survivors of the two earlier ages of digital transformation will have adjusted their business models, sales and marketing, and supply chains to be agile, real-time, lean, all sensing and responsive to emerging technology and consumer trends. The new digital normal will embrace constant change and perpetual migration in symbiotic pace with the evolving digital consumer.” Although I agree with most of what Benedict writes, I believe that cognitive computing will go beyond his vision in some areas. For example, he refers to Robotic Process Automation (RPA); but RPA doesn’t go far enough. Terms like “robotic” and “automation” conjure up industrial age images rather than images associated with cognitive computing and digital enterprise transformation. Vinodh Swaminathan, KPMG’s Managing Director of Innovation and Enterprise Solutions, explains, “The cognitive systems era, which is the most exciting phase of enterprise transformation in more than a century, is upon us. Cognitive software mimics human activities such as perceiving, inferring, gathering evidence, hypothesizing, and reasoning. And when combined with advanced automation, these systems can be trained to execute judgment-intensive tasks.”[2] As a result of these capabilities, companies should be thinking in terms of Cognitive Process Automation™ rather than Robotic Process Automation. In another article, Benedict notes that “rapid advances in six areas have converged to create the era of digital transformation.”[3] Those areas are:

 

1. Hardware
2. Software
3. Networks (cables, wireless and social)
4. Commercial and consumer comprehension
5. Democratization of technology at scale (low costs & mass adoption)
6. Moving beyond human time to digital time

 

Benedict then lists three dozen specific innovations and advances contributing to the digital enterprise transformation imperative. He concludes:

“All of these innovations and advances, and our adoption of them, changed us. We are different consumers. We are different employers and employees. Our expectations increased. We became impatient and mobile. We became global. We demand immediate, accurate and real-time responses. We want personalized and contextually relevant experiences. We want digital experiences that are beautiful, simple and elegant. We want instant access to all products, services, news, information and friends’ status. We want to share our lives instantly and globally. We want to find things, buy things, move money and complete transactions from anywhere at anytime. All of these innovations and our resulting behavioral changes — changed commercial marketplaces and brought us to the tipping point. Definition of tipping point: the point at which a series of small changes or incidents becomes significant enough to cause a larger, more drastic change. That drastic change today is — digital transformation.”

Andrew Horne, an IT practice leader at CEB, reports, “Two-thirds of business leaders believe that their companies must pick up the pace of enterprise digitization to remain competitive. These leaders recognize that customer and employee expectations are increasingly shaped by digital capabilities, that new competitors are emerging with fast-scaling digital business models, and that many of their companies’ most worrying threats are digital.”[4] He believes that the ground beneath organizations continues to shift the further we get into the digital age. He describes six shifts that apply broadly across industries, geographies, customer types, and operating models. They are:

 

1. Demand is growing more personal. “Customers today seek services that align with their preferences and values as individuals rather than segments. To meet the needs of personalization at scale, companies will rely on digital channels and digital innovations in product development, manufacturing, logistics and customer service.”

 

2. Products are becoming information-rich services. “Because of this, more companies will introduce subscription or bundling models and will build interfaces where customers can access combinations of products and services from their organization and other companies.”

 

3. Data reliance is deepening. “As the amount of data available for consumption increases, customers, business leaders, and frontline employees will rely more heavily on data to make decisions.”

 

4. Work is changing to reflect machines’ broader role. “As advanced automation becomes increasingly adaptable, companies will look to it for opportunities for efficiency and growth. Automation technologies have already changed the nature of work in less skilled activities but will increasingly replace activities that require higher-level skills.”

 

5. Internal and external boundaries are blurring. “As advanced automation becomes increasingly adaptable, companies will look to it for opportunities for efficiency and growth. Automation technologies have already changed the nature of work in less skilled activities but will increasingly replace activities that require higher-level skills.”

 

6. Everything is accelerating (except large companies). “Incumbent organizations are having a hard time keeping pace with rapid change in customer demand and digitally native competitors.”

 

Horne’s last point complements Benedict’s assertion that Darwinian effects are winnowing out industrial age organizations from among more robust digital enterprises. It’s not too late for laggards to develop and implement a digital transformation strategy; but, time is running out.

 

Footnotes
[1] Kevin Benedict, “Surviving the Three Ages of Digital Transformation,” Sys.con Media, 27 May 2016.
[2] Vinodh Swaminathan, “Embracing the Cognitive Era,” KPMG, 22 January 2016.
[3] Kevin Benedict, “Forces Driving the Digital Transformation Era,” The Center for the Future of Work, 8 April 2016.
[4] Andrew Horne, “Six shifts that define enterprise digitization in 2020,” TechTarget, 26 May 2016.