At IDC, we’ve coined the term “intelligent ERP” (or “i-ERP”) to describe a new wave of enterprise applications that use the power of the cloud and embedded artificial intelligence (AI) capabilities on curated data sets. These applications offer intuitive and conversational user interfaces to deal with increasing complexity and new customer demands. The enterprise that takes advantage of i-ERP and associated technology apps to effectively create data assets and achieve desired outcomes faster with less risk is called, logically, an intelligent enterprise.
Becoming an intelligent enterprise is part and parcel of digital transformation, which IDC defines as using technology to transform business decision-making and the business itself. When digital transformation (DX) is a company strategy embedded in the business, it is part of a larger initiative driving more revenue and new opportunities. In moving to a single strategy of an intelligent digital core, the business becomes extremely intelligent by relying heavily on technology to augment employees’ actions – thereby becoming much more efficient, agile, and nimble to meet market demands.
Digital transformation shouldn’t be confused with digital technologies – but it is predicated on technologies such as cloud, mobility, Big Data, and AI. DX is an enterprise-wide, board-level, strategic goal for companies serious about ensuring that their businesses are relevant and leading in the digital economy. DX is a multiyear effort with specific goals and objectives around markets and customers, revenue, and profit growth.
CIOs and IT reinvent their worlds
In the digital economy, enterprises are racing to reinvent themselves as the pace of DX becomes exponential. The digital train is leaving the station, and CIOs are rushing to transform their IT organizations before they lose relevance to their businesses. The most effective CIOs are reinventing IT from top to bottom and creating new digital platforms with agile connectivity, while modernizing and rationalizing to jettison the ballast of obsolete systems. They are also reinventing customer, employee, and partner experiences to strengthen trust and resilience – and IT governance – while learning to live with and manage risks posed by AI and machine learning (ML). Moreover, they are reinventing IT leadership by orchestrating armies of bots and automated processes, in addition to leading people.
The CIO and IT are the technology leaders in the DX strategy, as they must direct the platform strategies and innovation technologies to help the business as it embraces a more intelligent enterprise technology. In fact, IDC predicts that, through 2022, 75% of successful digital strategies will be built by a transformed IT organization with modernized and rationalized infrastructure, applications, and data architectures.
Critical CIO and IT considerations
CIOs need to start early in creating, driving, and executing the vision and rationale for modernizing infrastructure, apps, and data architectures before or at least in parallel to pursuing DX initiatives. And they need to devote significant time and energy to sell and evangelize that vision, rooted in business impact, outcomes, and benefits. As de facto owners of IT transformation, the creativity, persuasiveness, and perseverance of CIOs will be the difference between success and failure. Line-of-business executives will want to invest in digital business transformation initiatives, not foundation-building IT transformation.
A key success factor for rationalization and modernization in support of DX is the transformation of the IT organization to new ways of thinking and working. That should involve the use of design thinking; lean, lean startup, and other practices and disciplines that bring product and customer focus.
Also critical is investing in modernized and rationalized infrastructure and applications. According to IDC’s 2018 CIO Sentiment Survey of 150 IT executives in the United States, 37% of enterprises have inadequate infrastructures that are keeping their DX efforts from progressing. Finally, IT can gain critical speed and agility by shifting from meeting checklists of requirements to creating “minimum viable products” – the critical mass of infrastructure, apps, and data that will meet the current needs of the business while preparing the foundation for the future.
Tying new digital KPIs to business processes
While IT will direct the platform strategies, innovation technologies, and intelligent systems, the CIO will oversee the digital changes in the organization and coach the enterprise into a more intelligent enterprise methodology. An important change in the organization becoming more intelligent is recognizing the key performance indicators (KPIs) that must change across the organization. A critical aspect to the change in KPIs is recognizing that the CIO becomes an integral part of setting KPIs across the organization. Every part of the organization has a digital component. According to IDC, three aspects will impact current KPIs as the enterprise digitally transforms and becomes more intelligent:
- Measurement of process repeatability and how much of the process is automated
- Reduction of nonrepeatable processes and an underlying understanding of barriers to repeatability
- Ease of getting the data, timeliness of data being analyzed, completeness of data, and quality of data in the analytic framework
With the CIO and IT working closely with the business to enable the intelligent enterprise, the organization will embrace new digital KPIs tied to new business processes:
- Continuous anytime close
- Digital dashboard
- Real-time operational performance
- Continuous compliance and audit
- Predictive liquidity
- Scenario-based risk assessments
- Integrated performance management
- Evidence-based loss prevention
- 360-degree connected customer management
These will become the new normal in the digital economy.
For more insights and guidance on how to become an intelligent enterprise, watch the on-demand SAP webinar, Shaping the Future of Business as We Know It – The Essential Role of IT.