Part 2 in the “Digital Optionality” series
In Part 1 of our series, we introduced the concept of “digital optionality” to address market opportunities and/or mitigate the risks of digital disruption and to quickly determine its applicability to your company’s transformation roadmap.
Here, we introduce a framework to help you assess your roadmap, with suggestions for incorporating sources of information on emerging technologies that may be relevant to your business.
Assessing your digital optionality
A more comprehensive assessment considers the dimensions of business value and risk mitigation for digital disruption for each roadmap initiative and scores them on a common scale, as represented in the sample digital optionality matrix shown below:
Example Digital Optionality Matrix
Each sector of the matrix is assigned a scoring value representing a relative scale of value and risk mitigation for your company’s roadmap initiatives that fall into that sector. The example uses a linear set of scoring values (1 through 9) in a 9-sector matrix.
You can then aggregate and average the scores to derive a digital optionality rating (DOR) of the overall roadmap. A DOR above the average for the matrix scoring indicates high digital optionality for the roadmap.
The following is a simple example assessment of a roadmap’s DOR using the matrix:
- The company has only two initiatives on its transformation roadmap:
- An on-premise ERP upgrade, which the company assesses as providing low incremental business value and limited risk mitigation of digital disruption. The initiative is placed into quadrant A for a score of 1.
- A blockchain-enabled logistics initiative, which the company assesses as providing medium business value and moderate risk mitigation by building key blockchain capabilities. The initiative is placed into quadrant F for a score of 7.
- The aggregate score of the roadmap initiatives is 7 + 1 = 8. With only these two initiatives in this example, the average score is 4.0, which represents the DOR for this roadmap.
- Since this DOR is below the midpoint of 5.0 of the range of scoring values (from 1 through 9), the company should consider further adjustments or additional initiatives on the roadmap to improve its digital optionality.
Each company needs to define its own consistent set of scoring values for the matrix, based on the relative importance of the value and risk dimensions for each sector. In addition to the linear approach above, other scoring-value approaches, such as weighted or exponential values for each sector, may better reflect your company’s preference in the assessment for high business value and/or significant risk mitigation. These decisions will have a clear impact on the prioritization of the initiatives and the overall DOR of the roadmap, so they should be made carefully and consistently over time.
Leveraging trend reports for emerging technologies
The potential disruption of an emerging technology to a company and/or industry depends on many factors, such as the business capability, company strategy, customer acceptance, and industry response. Gartner’s Hype Cycle for Emerging Technologies, 2017 (July 2017) provides an expected timeframe for dozens of emerging digital technologies to reach a productive (disruptive) status of acceptance at the “plateau of productivity.” More than half of the Hype Cycle technologies are expected to achieve broad acceptance beyond a 5-year timeframe. Below is a general depiction of a Gartner Hype Cycle:
There are numerous other credible perspectives on emerging technologies, such as SAP’s Trend Reports for Emerging Technology. These and other trusted sources provide recent insights, statistics, and observations on emerging digital technologies for you to consider on your transformation roadmap.
Constructing your roadmap using digital optionality
Every company has its own strategy and process for identifying and prioritizing transformation roadmap initiatives. Trusted insight on expected timeframes and disruptive impacts, along with DOR, are key criteria for your investment decisions. However, since each emerging technology is attracting high interest and heavy investments by companies seeking the next big disrupting solution, selecting initiatives for emerging technologies can present a major challenge.
A company could be lulled into a “wait and see” approach to its transformation roadmap, simply delaying decisions to develop or acquire digital capabilities until commercialization and/or market impacts occur. Alternatively, an “all of the above” approach leads to digital fragmentation, the over-planning of many disconnected technology initiatives, with greater integration challenges and unproductive investments. Each of these approaches carries a higher risk for a negative impact from digital disruption.
Given the increasing speed of innovation and risk of digital disruption, you should expect the digital optionality of your roadmap to change over time. Gartner Hype Cycle expected timeframes for commercial acceptance are estimates that can change dramatically with new commercial breakthroughs, regulatory changes, or new market entrants such as a “digital giant.” Hence, you should periodically reassess DOR and revise your roadmap, as these disruptive indicators are identified and updated trends from trusted sources become available. For example, performing a reassessment of the DOR with the release of each Gartner Hype Cycle update would be a simple approach.
In the upcoming Part 3 of the Digital Optionality series, we will discuss whether there is a DOR “sweet spot” for a company’s roadmap and will explore how digital optionality and agile concepts augment each other.