Since the beginning of the Digital Age, business analysts have stressed the importance of Industrial Age companies transforming into digital enterprises. Analysts are now warning time to transform may be running out. Bob Violino (@BobViolino) reports, “A large percentage of companies in the U.S. have a three-year window of survival if they fail at digital transformation, according to a new report from Kong, a provider of application programming interface (API) and service lifecycle management technology. The company commissioned research firm Vanson Bourne to survey 200 technology leaders at large U.S. companies, and found that 39 percent expect their companies to go under or be acquired by 2023 if they lag behind.”[1] If the survey’s conclusion sounds a bit Casandra-ish, other studies have come to similar conclusions. Birger Thorburn, Chief Technology Officer at Experian, writes, “According to research from Forrester Consulting and [Experian], 81% of executives feel traditional business models will disappear in the next five years due to digital transformation. Similarly, recent IDC research reveals that 85% of enterprise decision-makers say they have a time frame of two years to make significant inroads into digital transformation or they will fall behind their competitors and suffer financially.”[2] I suspect the transformation window won’t completely close quite that quickly, but companies should be feeling an increased sense of urgency.

Digital transformation

Brian Solis (@briansolis), a digital analyst and futurist, asks, “How do you define digital transformation, and what does it look like once you’ve digitally transformed?”[3] Those are not easy questions to answer. Solis explains, “The truth is that everyone defines digital transformation differently, and as such, the end states are difficult to define.” At a minimum, digital transformation involves leveraging data and analysis to achieve company goals. Paul E. Benninghove, Director of Digital at Pavone Marketing Group, defines digital transformation this way: “Digital transformation is a digital- and customer-centric approach to doing business. It’s a path to insights about customers that is data-driven and analytics-based that provides the next step to growing a customer base and reaching people where they engage the most. It’s using technology to rapidly solve your customers’ problems.”[4] Benninghove fears too many companies view digital transformation as a way to become more efficient rather than a way to operate in an entirely new way. “Many enterprises view digital transformation through the lens of their business processes and how they can streamline them through the use of technology,” he writes, “making them more profitable and defining operations for the next, more customer-focused phase.”

Tricia Wang (@triciawang), a self-described Tech Ethnographer & Sociologist, asserts companies looking to become more efficient rather than truly transforming are involved in digitalization rather than digital transformation. During a 2017 conference, she told participants, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[5] Digitization is the gateway to digital transformation, but it falls far short of what analysts believe companies need to do to survive in the years ahead. Amit Zavery (@azavery), Vice President and Head of Platform at Google Cloud, asserts digital transformation is required “to achieve an ongoing state of IT agility that lets an enterprise continually adapt to changes in customer preference and marketplace dynamics. … Think of digital transformation less as a technology project to be finished than as a state of perpetual agility, always ready to evolve for whatever customers want next, and you’ll be pointed down the right path.”[6]

The rise of the cognitive enterprise

Solis believes some organizations should feel a sense of urgency because competitive businesses are poised to enter a post-digital transformation world. He explains, “What if I told you that most digital transformation roadmaps were no longer enough to compete for the future? In reality, digital transformation has become foundational. It’s necessary that every organization embrace digital transformation to modernize infrastructure, operations and most importantly, performance. There is no end state, however. It’s an endless process. To compete for the future now, enterprises must start to plan for a post digital transformation world.” Solis believes the post-digital transformation world will witness the rise of cognitive enterprises. He writes, “Executives must look beyond modernization toward AI, machine learning and other emergent technologies that are already starting to shape next-generation enterprises. … The cognitive enterprise landscape is starting to take shape.”

Why are cognitive technologies so important to businesses? The short answer is because cognitive technologies are better at handling complexity and ambiguity than previous technologies. Business consultant Steve Ardire and Charles Roe, founder of CR Scribes, observe, “With rapidly increasing volumes of Big Data, there is a compelling need for smarter machines to organize data faster, make better sense of it, discover insights, then learn, adapt, and improve over time without direct programming.”[7] The smarter machines to which they refer are cognitive computing systems. They explain, “Cognitive Systems learn, adapt, hypothesize, and recommend in real time, but Cognitive Computing is not about replacing humans with machines. It is about harnessing the combined strengths of man and machine as partners solving complex problems that adapt to ever-changing factors and new information.” Complex problems are not the only problems cognitive systems can tackle. Analytics expert Kamalika Some (@KamalikaS) notes, “A cognitive computing system is used in complex situations for ambiguous and uncertain outcomes.”[8] Ambiguity is often a tougher challenge than complexity.

Concluding thoughts

Because they are better equipped to deal with complexity and ambiguity, cognitive enterprises are more adaptable. They are better at making decisions. Bain analysts, Michael C. Mankins and Lori Sherer (@lorisherer), assert if you can improve a company’s decision making you can dramatically improve its bottom line. They explain, “The best way to understand any company’s operations is to view them as a series of decisions.”[9] They add, “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.” As a cognitive computing company, Enterra Solutions® bases its solutions and applications in the Enterra Cognitive Core™, which includes: High dimensional mathematics; constrained non-linear optimization; knowledge representation; semantic reasoning; reusable data and models; and an insight engine. This core provides the kind of IT and corporate agility enterprises need to compete in an ever-changing business environment.

Footnotes
[1] Bob Violino, “Digital ‘window of survival’ only three years for most firms, says study,” Information Management, 15 January 2020.
[2] Birger Thorburn, “Three Ways Digital Transformation Is Changing How We Do Business,” Forbes, 9 January 2020.
[3] Brian Solis, “Rise of the Cognitive Enterprise in a Post-Digital Transformation World,” eWeek, 17 January 2020.
[4] Paul E. Benninghove, “Digital Transformation And The Danger Of Leading With Efficiency,” Forbes, 27 January 2020.
[5] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[6] Amit Zavery, “Digital Transformation Isn’t A Project, It’s A Way Of Operating,” Forbes, 22 January 2020.
[7] Steve Ardire and Charles Roe, “Cognitive Computing: An Emerging Hub in IT Ecosystems,” Dataversity, 2014.
[8] Kamalika Some, “Leveraging Cognitive Computing for Business Gains,” Analytics Insight, 19 September 2018.
[9] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.