Digital Transformation Requires Cognitive Technologies

Stephen DeAngelis

April 29, 2019

When Neil Armstrong took his first step on the moon, there were people still living who remembered a time before airplanes took to the air. Those people marveled at the pace of technology advancement. In the half century since Armstrong and Buzz Aldrin strolled on the Moon’s surface, the pace of technological advance has only increased. As a result, company executives can feel the business landscape shifting beneath their feet. According to McKinsey & Company analysts Jacques Bughin, Laura LaBerge, and Anette Mellbye, what business leaders are feeling are the beginning tremors of a new digital age. They assert, “Digital technology, despite its seeming ubiquity, has only begun to penetrate industries. As it continues its advance, the implications for revenues, profits, and opportunities will be dramatic. … On average, industries are less than 40 percent digitized, despite the relatively deep penetration of these technologies in media, retail, and high tech.”[1] They add, “Bold, tightly integrated digital strategies will be the biggest differentiator between companies that win and companies that don’t, and the biggest payouts will go to those that initiate digital disruptions. Fast-followers with operational excellence and superior organizational health won’t be far behind.” It makes sense that companies need to transform to take advantage of new technologies if they want to survive and thrive. That’s always been the general rule for businesses. In the digital age, cognitive technologies (aka artificial intelligence (AI) systems) are predicted to have the greatest impact on the business environment.

 

Technology and transformation

 

An age old question is, “Which came first, the chicken or the egg?” Many companies find themselves in a similar chicken-and-egg debate. Which comes first, transformation or technology? In many ways, it’s a false debate. Technology facilitates transformation and transformation leverages technology. Nicole Laskowski (@TT_Nicole) asserts, “You can’t do enterprise AI without digital transformation.”[2] She draws that conclusion from comments made by Michael Chui (@mchui), a partner and head researcher at the McKinsey Global Institute. Chui said, “If we just look at technical assets deployed, what we found was those companies that have actually moved the furthest in their digitization story are also the ones who are able to take most advantage of AI. So there are no shortcuts here, is another way to put it. If you’re going to go on an AI journey, you simultaneously need to go on the digitization journey.” The logic behind that sentiment is simple. Artificial intelligence requires lots of data to work properly and digitization is all about the data.

 

Machine learning is one of the most discussed AI technologies and is the beating heart of most cognitive systems. At Enterra Solutions®, we define cognitive computing as a combination of semantic intelligence (i.e., machine learning, natural language processing, and ontologies) and computational intelligence (i.e., advanced mathematical techniques). Our cognitive system, the Enterra Enterprise Cognitive System™, employs an Artificial Intelligence Learning Agent™ (AILA®) and is a system that can Sense, Think, Act, and Learn®. Like other artificial intelligence systems, AILA requires a lot of data in order to provide the best results. Evan Schuman reports, “Machine learning based data analytics is rewriting the rules for how enterprises handle data. Research into machine learning and analytics is already yielding success in turning vast amounts of data — shaped with the help of data scientists — into analytical rules that can spot things that would escape human analysis in the past — whether it be in pursuit of pushing forward genome research or predicting problems with complex machinery.”[3] Rajeev Ronanki (@RajeevRonanki), Senior Vice President and Chief Digital Officer at Anthem, agrees AI is changing the business landscape. “Digital technology,” he writes, “is fundamentally transforming the way we interact with the world.”[4]

 

Ronanki is so certain AI is the foundation upon which businesses must build in the digital age he insists businesses must be AI-first organizations. He explains, “The sheer volume of data and data sources required to get us where we need to go has exceeded the pace and scale of our human capacity to process it. Enter artificial intelligence. … AI can mobilize analytics and automation to deliver moments that matter.”

 

The importance of having a digital strategy

 

Business leaders know throwing money at a problem without a clear vision of the end state is never a good idea. Ronanki insists, “Establishing a gateway goal, an overarching plan fashioned as a mission statement, can bring a future-based project into focus and lay the groundwork to begin building the structure that supports the transformation initiative.” A good strategy requires a lot of thought if anticipated returns are to be achieved. McKinsey analysts note, “Economic pressure will make it increasingly critical for executives to pay careful heed to where — and not just how — they compete and to monitor closely the return on their digital investments.” Business consultant Adrian Grigoriu (@AdrianGrigoriu) believes beginning a digital transformation without a digital strategy is a fool’s errand. “Because technology has progressed so much in a short amount of time,” he writes, “the enterprise has to go through a Digital Transformation pundits say. … The enterprise has to adopt new technologies to respond to the increasingly faster changes of the world around.”[5] He argues, however, that adopting new technologies without a clear vision of how they can benefit an organization makes no sense.

 

“Rather than embarking in a Digital Transformation,” he writes, “the enterprise should proceed with a Digital Strategy. … A Digital Strategy is a long term plan of action designed to monetize the advantages of the appropriate emerging technologies deployed in correlation and integration. As opposed to a Digital Transformation or an uncorrelated sequence of them, each planned and executed separately, one after another, a Digital Strategy is a plan that stipulates upfront the end architecture and all foreseeable actions toward the digital business vision, plan updated when necessary as the time goes by.” Will things change once the strategic is implemented requiring ongoing strategy adjustments? Of course. But having a strategy and modifying it as necessary improves a company’s chances of pulling off a successful digital transformation. McKinsey analysts conclude, “Improving the ROI of digital investments requires precise targeting along the dimensions where digitization is proceeding. Digital has widely expanded the number of available investment options, and simply spreading the same amount of resources across them is a losing proposition.”

 

Concluding thoughts

 

Companies embarking on digital transformation journeys are often venturing into the unknown. Success is never guaranteed. Google the term “digital transformation” and you’ll find scores of articles predicting failure of most transformation efforts. Because technology is changing so fast, Tim Sandle (@timsandle) observes, “The scope of business digital transformation keeps expanding.”[6] He believes leveraging artificial intelligence can improve the chances of success as well as smooth digital transformation process. He concludes, “Artificial intelligence can remove some of the drudgery from work through collecting data and doing a preliminary analysis, and by offering improved analytics for business.” McKinsey’s Chui asserts, “Early adopters have moved beyond experimentation to integrate AI into core processes and find ways to scale the technology across the enterprise. The McKinsey research shows that, as with cutting-edge technologies that have come before it, CIOs should expect talent and culture — not technology — to be the biggest enterprise AI hurdle.” Organizations shouldn’t spend time worrying about whether technology or transformation comes first — they are symbiotic and must move forward together.

 

Footnotes
[1] Jacques Bughin, Laura LaBerge, and Anette Mellbye, “The case for digital reinvention,” McKinsey Quarterly, February 2017.
[2] Nicole Laskowski, “McKinsey: You can’t do enterprise AI without digital transformation,” TechTarget, 16 October 2017.
[3] Evan Schuman, “Digital transformation: How machine learning could help change business,” Ars Technica, 20 September 2017.
[4] Rajeev Ronanki, “Building An AI-First Organization,” Forbes, 25 February 2019.
[5] Adrian Grigoriu, “The Enterprise Needs a Digital Strategy, Not a Digital Transformation,” Toolbox, 20 March 2019.
[6] Tim Sandle, “Artificial intelligence is necessary for a smooth DX transition,” Digital Journal, 9 June 2018.