Organisations struggling with digital business transformation can most easily pursue digital business by creating a vision for their own industry, according to Gartner.
According to Gartner’s 2016 CIO Agenda, executives expect that 41% of enterprise revenue will come from digital business by 2020, almost double what it was in 2015. Yet, in 2016 many organisations have not started a digital business transformation.
“Organisations can transform by exploiting business moments or by using digital capabilities to enter or create new markets as Airbnb and Uber have done,” says Jorge Lopez, vice-president and distinguished analyst at Gartner. “However, many businesses will find it easier to start by creating a vision for digital business for their particular industry.
“This approach enables the enterprise to tilt the fundamentals of competition in its favour without limiting digital business to narrow sequences of events and committing to a vast building project. Once the organisation has established its vision, it can more easily tackle business moments or leverage its digital capabilities in new markets.”
To take this approach, CIOs who have been put in charge of digital business need to understand what an industry vision for digital business involves.
“Broadly speaking, an industry vision shows what business could look like if companies use the Internet of Things (IoT) and smart machines to their full potential,” says Lopez. “For asset-intensive industries, digital technologies can automate operations on a large scale — not just individual business processes, but a whole operation end to end.
“Productivity will leap as smart automation makes better, faster decisions, and produces more at lower cost with fewer assets and fewer stoppages. At the same time, optimised production will usually reduce the enterprise’s environmental impact.”
An industry vision consists of four parts:
* Concept — An industry vision seeks fundamental change that will affect many dimensions of the business and operations. For example, an auto parts manufacturer that enables repair shops to 3D print plastic or composite parts, rather than having to order them and wait for delivery. The manufacturer would not have to buy raw materials, manage suppliers, manufacture the parts and distribute them to wholesalers. The economics of the business would change — a lot of costs would disappear. But other challenges would arise, such as creating an accurate digital description of each part and making sure repair shops have the right equipment, process expertise and material to print it.
* Capabilities — The organisation needs a new set of capabilities to make the digital business work. These capabilities will require expertise that the enterprise doesn’t already have. In the above example, the parts maker would have to market the 3D printing service in new way to a new audience, and it would have to provide training to part suppliers on running a 3D printing operation and to maintain a help desk to field any problems the repair shops run into. The company can develop some capabilities in-house (for example, the IT department can create 3D printing files). But it will need to find partners (a 3D printing company and the plastics or metal supplier) to set up the business and may need to acquire companies (perhaps one that runs help desks). Sales and marketing will need innovative contracts.
* Assets — The organisation needs a different set of assets to execute the business, including people, data and intellectual property (IP). The parts manufacturer will have to beef up its 3D modelling skills, its 3D printing knowledge, set up databases and networks to send the right files speedily, and start a digital marketing programme to keep repair shops engaged. The organisation will need to hire people to do this work. Those people will need good data about the parts and customers, plus analytics tools to analyse the business and operations. Since the new approach gives the company a competitive edge, it must develop and protect its IP — a complex challenge since it must collaborate with partners that have their own IP.
* Research — The new digital business is not static; it will expand into new areas. The organisation will have to maintain a research program designed to add to the business and will need to experiment continually with new digital business possibilities. Those possibilities will require new technologies, so the organisation will need research partnerships, especially with universities.