Towards the Digital Enterprise

Stephen DeAngelis

June 30, 2015

“Technology is intertwined in nearly every aspect of business today,” writes Pierre Nanterme (@PierreNanterme) and Marty Cole, respectively Accenture’s Chairman/CEO and Group Chief Executive for technology, “with information technology fast becoming a primary driver of market differentiation, business growth, and profitability. … Every business is now a digital business.”[1] Although that may sound a bit hyperbolic, their point is valid. Today every business is touched in some way by technology that connects them to a larger digital ecosystem. Laura McLellan (@lauramclellan), a Research Vice President at Gartner, writes, “Companies that aren’t at least seriously planning for, and at best putting people, process and technology into place to pilot data-driven (not relationship-driven) digital ecosystems/ marketplaces/ alliances, may already be in deep trouble.”[2] Boston Consulting Group (BCG) analysts Ralf Dreischmeier, Karalee Close, and Philippe Trichet, agree that changes caused by digitalization in the business world are going to disrupt more industries. They predict, “As entire industries are disrupted by bold digital entrants and business models, more and more companies are at risk of extinction. Music, retailing, media, and travel are far along on this path, but we are also seeing similar patterns in more traditional industries, such as banking, agriculture, energy, health care, industrial goods, and manufacturing.”[3]

No business likes to hear that it could be in deep trouble and on the verge of extinction. Many businesses have barely stepped up on the front stoop ready to knock on the digital enterprise door and they are anxious to see what awaits them inside. If the analysts cited above are correct, the digital enterprise era will be an always-connected, continually-analyzed, and data-driven world. So what is a digital enterprise? One good definition is: A digital enterprise is an organization that leverages digital technology as a competitive advantage in its internal and external operations. New York Times‘ columnist Steve Lohr (@SteveLohr) writes, “Technology tools are part of this engine of change in decision-making.”[4] He explains:

“Modern data technology has two key ingredients. The first is the explosion of digital data — from the Web, smartphones, GPS mapping, sensors, genomic data, and the like. That’s the newish data. But traditional business data has been steadily digitized over the last two decades, as well. Today, estimates Erik Brynjolfsson of MIT’s Sloan School of Management, 90 percent of what companies do, from communications to marketing to manufacturing, is either created in digital form (like e-mail or documents) or tracked digitally (like bar codes and radio tags). In the 1990s, Brynjolfsson figures that only about 20 percent of corporate activity left a digital footprint. That’s a quantum change. The second main technical ingredient is the steady advance over years in clever software, largely from the computing discipline of artificial intelligence, to help make sense of it all. These are the two essential technologies — abundant data and smart software — in the toolkit of what we’re now calling data science, or big data. The technology opens the door to seeing and measuring things as never before.”

Given those facts, you can see that that Accenture’s declaration that every business is a digital business is not as hyperbolic as it first appeared.

The Digital Supply Chain

At the heart of every business is the supply chain that facilitates the flow of resources and goods. Jennifer Baljko (@jbaljko) notes, “3D printing, the Internet of Things (IoT), increased mobility, and connectivity are already influencing today’s manufacturing strategies.”[5] She then asks, “What kinds of digital supply chain processes are being put in place to support these manufacturing changes?” To answer that question, she turned to a report published by Supply Chains Insight. In that report, Lora Cecere (@lcecere), the company’s founder and CEO wrote:

“The gap between what we have today and what it could be is large. We live in a digital age in our personal lives; however, this is not the case in our supply chains. Supply chain leaders express rising frustration about the gap of what they see as possible in the digital age, and what they experience in their day-to-day world in their offices.”

Baljko notes that data latency and slow responses are two ill effects created by gaps in the digital supply chain. She writes:

“Traditional supply chain processes tend to be characterized by data latency of hours, days and weeks; software project deployments rely on licensed software solutions, and responses are based on previous historical interactions. Digital supply chain processes, however, provide real-time data; employ cloud-based solutions that can be continually adapted, and sense IoT activity and adapt in more of a cognitive learning way.”

Accenture analysts agree with Baljko that cognitive computing systems are going to provide “the ultimate long-term solution” for many of businesses’ most nagging challenges.[6]

Digital Decision Making

Bain analysts, Michael C. Mankins and Lori Sherer (), assert that if you can improve a company’s decision making you can dramatically improve its bottom line.[7] They explain:

“The best way to understand any company’s operations is to view them as a series of decisions. People in organizations make thousands of decisions every day. The decisions range from big, one-off strategic choices (such as where to locate the next multibillion-dollar plant) to everyday frontline decisions that add up to a lot of value over time (such as whether to suggest another purchase to a customer). In between those extremes are all the decisions that marketers, finance people, operations specialists and so on must make as they carry out their jobs week in and week out. We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision making and execution have the results to show for it.”

To improve decision making, many companies are turning to cognitive computing for help. Christopher Mims (@mims) reports, “Firms are keeping head counts low, and even eliminating management positions, by replacing them with something you wouldn’t immediately think of as a drop-in substitute for leaders and decision-makers: data.”[8] Cognitive computing systems can handle many more variables than traditional analytic platforms and discover insights and relationships that will help promote an enterprise’s bottom line. One of the toughest decisions a company will have to make is determining which decisions to automate. Lohr adds, “Having all kinds of decisions dictated by — rather than guided by — this layer of data-driven artificial intelligence that increasingly resides on top of both the digital and physical worlds is a pitfall, for sure. It is made possible by the technology, but the outcome will depend mainly on how people decide to use and manage the technology.” I agree with Lohr that the technology must be used wisely. The best use of cognitive computing for decision making is part of a management by exception scheme where human decision makers are involved in all but the most routine decisions.

Digital Tools

As it transforms into a digital enterprise, most of the digital tools that a company will need to leverage have been touched on above. They include: mobile technologies, sensors, cloud computing, the Internet of Things, advanced analytics, and cognitive computing. McLellan asserts that your company needs to “shift your business’s mind-set from being formal and corporate-centric to being adaptive, informal and network-centric, with an appreciation for the real complexity of your ecosystems.” Baljko adds, “The cloud, predictive analytics, IoT and mobility are affecting production planning, shifting visibility levels, improving agility, and creating new product markets. Examine the digital cross-functionality between the manufacturing and supply chain and how supply chain practices could be an engine for digital concepts.” All of this may sound a bit overwhelming, but anxiety often accompanies any good journey to a new place. The digital landscape is in constant flux. Fortunately, the best-of-class technologies being developed today are much more adaptable than some technologies have been in the past.

Footnotes

[1] Pierre Nanterme and Marty Cole, “Every Business is a Digital Business,” Accenture Technology Vision 2013.
[2] Laura McLellan, “Marketing’s Role in Strategic Planning for Digital Ecosystems,” Gartner, 6 February 2015.
[3] Ralf Dreischmeier, Karalee Close, and Philippe Trichet, “The Digital Imperative,” bcg.perspectives, 2 March 2015.
[4] Steve Lohr, “Data Capitalism,” ChangeThis, March 2015.
[5] Jennifer Baljko, “The Dawn of the Digital Supply Chain,” EBN, 13 April 2015.
[6] “From Digitally Disrupted to Digital Disrupter,” Accenture Technology Vision 2014.
[7] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.
[8] Christopher Mims, “Data Is the New Middle Manager,” The Wall Street Journal, 19 April 2015.