What Does Becoming a Digital Enterprise Mean to You?

Stephen DeAngelis

October 7, 2015

“Companies today are rushing headlong to become more digital,” write Karel Dörner and David Edelman (@davidedelman). “But what does digital really mean?”[1] Most analysts agree that businesses need to transform into digital enterprises if they are going to thrive in the decades ahead. The problem, according to Dörner and Edelman, is that executives don’t always know what becoming a digital enterprise means in their particular industry or field. They explain:

“For some executives, it’s about technology. For others, digital is a new way of engaging with customers. And for others still, it represents an entirely new way of doing business. None of these definitions is necessarily incorrect. But such diverse perspectives often trip up leadership teams because they reflect a lack of alignment and common vision about where the business needs to go. This often results in piecemeal initiatives or misguided efforts that lead to missed opportunities, sluggish performance, or false starts.”

Bernard Marr (@BernardMarr) insists that some executives are so unsure about the digital future that they withdraw into denial. He warns, however, “If you’re still saying, ‘Big data isn’t relevant to my company,’ you’re missing the boat.”[2] Marr asserts, “Big data and its implications will affect every single business — from Fortune 500 enterprises to mom and pop companies — and change how we do business, inside and out.” That may well be true; but, as Dörner and Edelman point out, without a vision of what it means to be a digital enterprise in the specific circumstances in which a business must operate (and a way to align the company behind that vision), companies can wander. You’ve heard the phrase: “If you don’t know where you’re going, any road will take you there.” Basically, that idea is a paraphrase of a conversation between Alice and the Cheshire Cat in Lewis Carroll’s Alice in Wonderland:

“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where—” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“—so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”

Without understanding what it means to become a digital enterprise and how to transform into one, a company is not much better off than Alice. Dörner and Edelman observe, “Being digital requires being open to reexamining your entire way of doing business and understanding where the new frontiers of value are. For some companies, capturing new frontiers may be about developing entirely new businesses in adjacent categories; for others, it may be about identifying and going after new value pools in existing sectors.” One of the first things company executives should do is ask themselves, “How could digitalization affect my business?” To help answer that question, Marr suggests potential ways that data collection, analysis, and interpretation could impact your business. He asserts that it all begins with data and a new appreciation of how data can be a valuable asset to your business. He explains:

“Even the smallest businesses generate data these days. If the business has a website, a social media presence, accepts credit cards, etc., even a one-person shop has data it can collect on its customers, its user experience, web traffic, and more. This means companies of all sizes need a strategy for big data and a plan of how to collect, use, and protect it. … It also means that businesses and industries that never thought big data would be ‘for them’ might be scrambling to catch up. Let me just make this as plain as possible: If you own or operate a business, and you have questions about how to improve that business, you have data, your data is an asset, and it can be used to improve your business. Simple as that.”

One of the most discussed uses for big data, of course, is how it can be used to understand customers better. “Every company (from car manufacturers who will monitor our driving to tennis racket manufacturers that know how often and how well we play),” Marr writes, “will get much better insights into what customers want, what they will use, what channels they use to buy, and so on.” He stresses that companies that collect and analyze data about customers also have an obligation to treat that data with respect. Failing to do so, he notes, can result in serious backlash. “In the best of all possible worlds,” he concludes, “companies will use the data they collect to improve their products and the customer experience.” Dörner and Edelman agree that companies need to rethink “how to use new capabilities to improve how customers are served.” They elaborate:

“This is grounded in an obsession with understanding each step of a customer’s purchasing journey — regardless of channel — and thinking about how digital capabilities can design and deliver the best possible experience, across all parts of the business. For example, the supply chain is critical to developing the flexibility, efficiency, and speed to deliver the right product efficiently in a way the customer wants. By the same token, data and metrics can focus on delivering insights about customers that in turn drive marketing and sales decisions. Critically, digital isn’t about just working to deliver a one-off customer journey. It’s about implementing a cyclical dynamic where processes and capabilities are constantly evolving based on inputs from the customer, fostering ongoing product or service loyalty.”

As Dörner and Edelman imply, another impact that big data can have on a business is internal — improving operations and processes. Marr explains, “From using sensors to track machine performance, to optimising delivery routes, to better tracking employee performance and even recruiting top talent, big data has the potential to improve internal efficiency and operations for almost any type of business and in many different departments.” Dörner and Edelman assert that making the transformation into a digital enterprise requires an interconnected set of four core capabilities. They are:

Proactive decision making. Relevance is the currency of the digital age. This requires making decisions, based on intelligence, that deliver content and experiences that are personalized and relevant to the customer. Remembering customer preferences is a basic example of this capability, but it also extends to personalizing and optimizing the next step in the customer’s journey. …

Contextual interactivity. This means analyzing how a consumer is interacting with a brand and modifying those interactions to improve the customer experience. For example, the content and experience may adapt as a customer shifts from a mobile phone to a laptop or from evaluating a brand to making a purchasing decision. The rising number of customer interactions generates a stream of intelligence that allows brands to make better decisions about what their customers want. And the rapid rise of wearable technology and the Internet of Things represents the latest wave of touchpoints that will enable companies to blend digital and physical experiences even more.

Real-time automation. To support this cyclical give-and-take dynamic with customers and help them complete a task now requires extensive automation. Automation of customer interactions can boost the number of self-service options that help resolve problems quickly, personalize communications to be more relevant, and deliver consistent customer journeys no matter the channel, time, or device. Automating the supply chain and core business processes can drive down costs, but it’s also crucial to providing companies with more flexibility to respond to and anticipate customer demand.

Journey-focused innovation. Serving customers well gives companies permission to be innovative in how they interact with and sell to them. That may include, for example, expanding existing customer journeys into new businesses and services that extend the relationship with the customer, ideally to the benefit of both parties. These innovations in turn fuel more interactions, create more information, and increase the value of the customer-brand relationship.

A number of the capabilities, technologies, and activities discussed by Dörner and Edelman (e.g., customer insights, better decision making, automation, and Internet of Things) require the power of artificial intelligence (specifically, the power of cognitive computing). In Accenture’s latest technology vision entitled “From Digitally Disrupted to Digital Disrupter,” Accenture analysts state that cognitive computing will provide the “ultimate long-term solution” for many business challenges. As I have repeatedly written, I believe that cognitive computing will eventually be found at the heart of every digital enterprise. What does becoming a digital enterprise mean to you?

Footnotes
[1] Karel Dörner and David Edelman, “What ‘digital’ really means,” McKinsey Telecom, Media, & High Tech Extranet, 15 September 2015.
[2] Bernard Marr, “4 Ways Big Data Will Change Every Business,” Forbes, 8 September 2015.