If you haven’t read about the digital transformation last year, you might have had a wi-fi connection issue. Digital transformation is everywhere. Connected networks provide access to new (un)structured data. In-memory platforms provide the capabilities to process stunning amounts of information, and the Internet of Things allows us to connect and follow to almost any device or object.
Digital transformation is about the use of technology to radically improve the performance and reach of enterprises. Digital transformation is also about change and adapting to turn technological capabilities into transformation.
How are enterprises doing with digital transformation today? What are they focusing on, and where do they see opportunities? Time to write up a status of digital transformation and examine where are we today and what we can expect in the near future.
Digital transformation in 2016
To get a grip on where enterprises are with digital transformation and—more importantly—what they plan to do with it in 2016, I consulted briefings from IDC, Gartner, and Forrester. These are well-grounded and provide good insights. Here are some predictions from those insights:
- The various initiatives on digital transformation within enterprises will be consolidated into one “digital vision” showing how their businesses will generate revenue by delivering new digital experiences.
- Next year, it’s expected that 60% of enterprises that have a digital strategy will raise it to top priority and even assign an executive to oversee the implementation.
- 67% of the Global 2000 enterprises will have digital transformation at the center of their corporate strategy in 2018.
- Rising customer expectations will force business-to-business (B2B) enterprises to close the digital gap with business-to-consumer (B2C) enterprises (today B2C market segments are in the lead when it comes to digital transformation).
- With 35% in 2018 (and 50% in 2020), IT budgets will shift onto the creation of new digital revenue streams. This will have a huge impact on HR, since access to talent at the right moment and place becomes a big differentiator.
- Digital skills like mobile app development, business analytics (yoohoo J) and design thinking will become the “new normal” for software development.
- Since this brings a greater reliance on IT and its budget, the IT’s budget for governance, risk, and compliance (GRC) staff will increase by 10% in 2017.
- Interactive exploration of Big Data analytics becomes the foundation of digital transformation.
- A successful adoption of digital transformation will lead to newly established data streams in and out of the organization and the monetization of them.
- The growth engine of digital transformation will be the Internet of Things (IoT).
- Greatly expanding the range of digital interactions between the consumer and the enterprise, 2018 will bring 22 billion (!) IoT devices driving the development of more than 20,000 new IoT apps.
- The support for almost 6 billion connected “things” will create new business models for support services.
- Even more dazzling, it’s expected that in 2020, 1 million new connected “things” will come online every single hour.
- Competitive advantage will be redefined by IoT devices and by consumers interact with them.
- Predictive analytics will continue to rise.
- It’s expected that in 2018, at least 20% of all workers in some way will use automated assistance technologies for their decisions. These technologies are driven by new algorithms and predictive models.
- By 2020, it’s expected that 5% of all economical transactions will have some automated software agents participating. These agents are outside human control.
Where customers see opportunities for digital transformation
It’s interesting to hear what customers see as opportunities as part of the digital transformation. Recent studies from IDC, Gartner, CapGemini, and Forrester showed that customers see three domains with opportunities taken from the digital transformation:
- Digitally transforming customer experience
- Digitally transforming operational processes
- Digitally transforming business models
Let’s sort these out a bit more.
Transforming customer experience
My customers see three areas of opportunities when digitally transforming their customer’s experience:
- Customer understanding
The majority of the enterprises will use business analytics capabilities to better understand their customers. In-memory computing, Big Data and business analytics, and the closed-loop portfolio are just three examples of how they plan do this. Self-service BI also helps to quickly assess new sources of data and gain valuable insights. Other initiatives include more effective promotion of brands through digital media and further exploration of social media data and GEO-based data.
- Top-line growth
Many enterprises plan to start using digital technology to enhance in-person conversations. The aim is to have applications that allow salespersons to have customer-tailored functionality and data that transforms the selling process into a better customer experience. One example is an app that has customer purchasing data embedded to provide more personalized sales.
- Customer touchpoints
More digital touchpoints for customers prevents the necessary physical contact customers have with their suppliers. Governments are creating massive electronic desks, like portals that act like a landing zone for citizens to request information, and enterprises are providing media apps to help customers find interesting places in cities they visit.
Transforming operational processes
Though transformed customer experiences are more visible and probably more exciting, the opportunities to transform operational processes due to digital transformation cannot be underestimated. Here are some examples of where customers see opportunities to transform operational processes:
1. Process digitization
Digitalized automation of processes has many flavors, but they all aim to free up resources to focus on more strategic activities. Many examples can be found in the area of shortening and simplifying product development cycles.
2. Workers’ enablement
Separating work processes from work location while also transforming collaboration processes is something I have heard many times. This is obvious, since today’s cloud capabilities facilitate this transformation perfectly.
3. Enterprise performance management and the closed-loop portfolio
Transforming into a closed-loop portfolio for analytics and performance management is also on the list of opportunities customers see to transform operational processes. The availability of real-time insights at the highest-detailed level available – in a governed way – for all applicable people is a huge opportunity. It saves everlasting discussions on both the availability and the quality of insights.
Transforming business models
Applying the digital transformation brings new opportunities for digitalizing business models or even creating new ones:
1. Digitally modified businesses
Integrated and in-memory platforms are big facilitators for digitally modifying businesses. One obvious example is growing e-commerce platforms. But there are many more examples of how the Internet of Things (IoT) will radically change and modify business processes: A hotel group that uses IoT devices to check each room’s supply of toilet paper instead of sending personnel, or a tire company putting “connected things” in their tires to measure the tire condition, just to name a few. Huge opportunities are found in this space of business models.
2. New digital business
Digitally modifying businesses almost automatically implies finding new business models. Have a look at these examples from the finance & insurance sector, in which the modification of the business process is to use “connected things” to link to an insured object, but the new process is the partner network for preventive maintenance of the insured objects. Another example is the tire company mentioned about that applies a new business model to sell back (!) its IoT data to transport companies who can use the data to improve their maintenance and service.
3. Digital globalization
Enterprises are increasingly transforming from multinational to truly global operations. Digital technology, coupled with closed-loop analytics, allows businesses to gain global synergies while remaining locally responsive. These enterprises benefit from global shared services for finance, HR, and even core capabilities like manufacturing and design. Global shared services promote efficiency and reduce risk. They even promote global flexibility. One manufacturer can shift production around the globe with only a few days’ notice in response to interruptions or excess demand.
Digital transformation requires strong leadership to drive change. But it also requires a vision for what parts of the company you want to transform.
Companies in all industries and regions are experimenting with—and benefiting from—digital transformation. Whether it’s in the way individuals work and collaborate, how business processes are executed within and across organizational boundaries, or how a company understands and serves customers, digital technology provides a wealth of opportunity.
Want more insight on digital transformation? See 5 Digital Trends Changing Business And Enabling The Possible and visit discover.sap.com/hana.
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