Path to Becoming a Digital Enterprise is Often Turbulent

Stephen DeAngelis

August 18, 2016

Many, if not most, business analysts believe industrial age organizations must transform into a digital enterprise if they are to thrive in the coming decades. New research concludes, however, that the path leading to that goal remains obscure for many companies. James Bourne (@James_T_Bourne) reports that the study, which was published by IFS, a software provider, concluded, “While the vast majority of enterprises are keen on pursuing a digital transformation strategy, two in five don’t know how to go about it. 86% of the almost 500 senior decision makers across a variety of industries including manufacturing, automotive and energy argued digital transformation would play a key role in their market, yet 40% do not have a strategy for it.”[1] Bourne believes the main challenge to developing a corporate strategy is “muddled thinking” at the c-level of many organizations (including, arguments about who should lead the transformation effort). The survey found, “The CIO is most likely to lead company-wide digital transformation, according to 40% of respondents, while the CEO (39%) and CFO (35%) were also highly cited, compared to the CTO (20%) and the CMO, which garnered only 6% of the vote.” When asked what technologies were going to be driving factors during the transformation process, respondents answered, “The Internet of Things and cloud computing were seen jointly as the key technologies driving digital transformation. Respondents on average ranked them both 59 out of 100 in terms of importance, marginally ahead of cognitive computing (55), machine learning (53) and wearable technology (48).”

R “Ray” Wang (@rwang0), Principal Analyst, Founder, and Chairman of Constellation Research, Inc., asserts that c-suite arguments won’t help the digital enterprise transformation process.[2] A ship without a rudder isn’t a good way to get from where you are to where you need to be. Wang argues leadership is the first of five critical success factors to digital transformation. The five factors are:

1. Craft a cultural renaissance. “Successful organizations,” Wang writes, “drive digital transformation from the board level on down. Innovation must not come to a halt after a project has been completed. Organizations who have mastered digital transformation build a continuous pipeline of innovation and a deep bench of execution. While most organizations start this process by hiring a chief digital officer to lead the charge, the long term goal is to infuse a digital DNA among all executives and digitally enable CXO’s for success.” Wang is correct that digital enterprise transformation can’t be left to a chief digital officer. The main goal of digital enterprise transformation is to get an organization working collaboratively by breaking down silos characteristic of industrial age corporations.

2. Start with design thinking. Wang writes, “When leaders unlock solutions to questions that never would have been asked, they start the process of design thinking. By taking an empathetic approach, organizations can think outside the box. To accelerate the process, leaders must build diversity through digital artisans. If there are too many left brain folks, balance out the team with right brain folks. Got a lot of architects, balance out the team with an ethnographer or UX designer. When leaders build a diversity of thought processes, sparks of innovation serve as catalysts to enable transformation.” I agree with Wang that diverse working groups are essential. They create what Frans Johansson calls The Medici Effect. The Medici family was at the heart of the Italian Renaissance. Their wealth permitted it to support artists, philosophers, theologians, and scientists, whose combined intellect helped burst the historical pall known as the Dark Ages. Out of the box thinking can be aided by cognitive computing systems, like the Enterra Enterprise Cognitive System™ (ECS) — a system that can Sense, Think, Act, and Learn®. Cognitive computing systems can help discover new relationships and provide actionable insights that aid strategic thinking and decision making.

3. Commit to business model disruption. “With 52% of the Fortune 500 merged, acquired, and bankrupt since 2000,” Wang writes, “success requires a rethink of the core mission and business model of the organization. In 2015, 55% of the Fortune 500 failed to make a profit. The reality — digital Darwinism is unkind to those who wait. The winners have built digital business models. In fact, this is not a digital divide but a winner takes all market. In this post-sale, on-demand, attention economy, digital transformation is more than a technology shift, it’s about transforming business models and how organizations and brands engage. Success requires building trust and authenticity of the brand, designing business models to support the brand, and then building products, services, experiences, and outcomes that support the business models.” Flexibility in thinking and adaptability of processes are essential in the digital era. Because cognitive computing systems are adaptable to almost any situation, they will be found at the heart of most digital enterprises.

4. Apply a form follows functions approach for technology adoption. Digital technologies play a role in transformation,” Wang writes. “However, leaders should apply disruptive technologies that support the business model, not the other way around. Given the rapidly shortening life cycle of new technologies, market leaders and fast followers must build both agile frameworks and disposable technologies to address the pace of change.” I’m not sure “disposable” is the word I apply to technologies that support digital enterprise transformation. “Adaptable” seems like a better term. Like biologic Darwinism, digital Darwinism will favor adaptable systems.

5. Institutionalize and incentivize concept to commercialization. Wang writes, “With roughly one-third of pilots succeeding and one-fifth of those pilots entering commercialization, moving beyond the pilot requires significant commitment to change. Why Business leaders with profit and loss responsibility often take the safe path despite the successful proof of concept and pilots. They fear failure from loss to their bottom line, potential cannibalization of revenue or market share, and political fallout of a failed project. Successful organizations provide the guard rails to improve the percentage of projects that succeed from concept to commercialization.” At Enterra Solutions®, we normally recommend a “crawl, walk, run” approach for digital transformation projects. Because cognitive computing systems are scalable, this approach ensures the best chance that a solution will move successfully from concept to implementation.

By now you should understand that the path to digital enterprise transformation is bumpy. Bob Violino (@BobViolino) reports, “A majority of businesses (87%) face ‘severe turbulence’ as they pursue digital transformation, according to research from Bizagi a provider of digital process automation software.”[3] Turbulent or not business leaders understand that digital enterprise transformation is an imperative. Violino notes, “Three quarters of the respondents think the pace of change is increasing due to disruptive businesses challenging the status quo. A large majority (82%) understand that they must accelerate the pace of transformation in order to keep up in their industry.” Referring to survey results, Gustavo Gomez, CEO of Bizagi, stated, “Customer expectation is changing the way businesses think and creating the momentum behind digital transformation. The majority of businesses are struggling to avoid the pitfalls that accompany digital transformation, and the secret to overcoming these challenges is to understand the drivers of change and create the IT agility to respond quickly.”

Footnotes
[1] James Bourne, “Digital transformation key but strategy unclear, argues research,” Enterprise AppsTech, 11 July 2016.
[2] R “Ray” Wang, “Best Practices: Five Critical Success Factors To Digital Transformation,” Enterprise Irregulars, 11 July 2016.
[3] Bob Violino, “Digital Transformation Still A Thrill Ride For Many Organizations,” Information Management, 7 July 2016.