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CEOs don’t get digitalisation

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CEOs don’t get digitalisation

Kathy Gibson reports from Huawei Connect in Shanghai – Digitalisation is a reality and companies know they have to transform their businesses – but remarkably few of them understand how they will accomplish this move.
Nigel Fenwick, vice-president and principal analyst at Forrester, explains that every company that exists today must become a technology company. “The revenue they generate will be driven by technology, by leveraging technology to drive sales.
“We see the signs of this every day: companies are changing right now,” he says. “For instance, fintech companies are using artificial intelligence, machine learning and predictive analytics to deliver better outcomes for their customers.
“They are using technology to drive better outcomes. In manufacturing, sensors are being used throughout the supply chain – not just with in the company, but within supplier companies as well.
“To tailor manufacturing output to the needs of the individual instead of mass production. It is changing the profile of manufacturing companies.”
Through big data and analytics, connected through cloud, these components are connected to deliver what customers want, when they want it, Fenwick says.
Media is changing to digital as well, along with a shift to the cloud that allows entertainment to be delivered to the individual consumer.
“Individual consumption is about delivering what the customer wants, when he wants it.”
Training and learning can now be delivered to a global population. And the design developed in games is being used to tailor learning to the individual – to create better outcomes.
“In the public sector, cities are being digitised, competing with each other to capture young entrepreneurs. There are massive changes to the public sector to empower citizens like they haven’t been empowered before.”
With all of this technology change, it could be thought that business leaders would have a clear understanding of how to apply digitalisation to their business, Fenwick says.
However, only 4% of business leaders actually understand their company’s digital strategy – and only 9% of technology leaders have confidence in their company approach to digital business.
“Part of the reason is that the technology is changing so fast. But it’s also a mindset,” he says.
Transformation demands more than a bolt-on strategy, Fenwick adds. Only 25% of companies have a digital business strategy in place that defines how their business will transform to create new sources of customer value as a digital business.
The remaining companies either have a bolt-on strategy or are considering one. However, these strategies won’t change the way they create value for their customers, Fenwick says.
“The new post-digital business model revolves around digital experiences as an essential element of the product design process. So we need to design the products and services that match the outcomes customers expect.
“And customer expectations change every day. With it, businesses have to change their model.”
To do this, the architecture of the company has to be rethought. The Forrester research shows that the companies that are changing their business model are heavily dependent on cloud. They are using it to gain a competitive advantage.
“We are starting to see these cloud ecosystems starting to connect manufacturing companies together, allowing them to share capabilities with other companies to deliver outcomes that customers want – and to change at the speed that customers want them to.”
The expectation of revenue enabled by cloud services is shifting quickly, Fenwick says. By 2020, most companies are expecting a significant part of their revenue to be driven by cloud based services.
More than half of companies expect that cloud-base services will drive at least 40% of their revenue by 2020.
“Companies need to understand they need to design he experiences that create value for customers. They need to drive the business from the outside in. It’s a new way of thinking about business.”
To achieve success though, CIOs are going to be critically important. “Technology is something that is going to drive revenue in the future.”
But there’s a problem, because in many organisations, line of business doesn’t see the technology organisation as a partner but as a supplier – and CIOs need to manage this perception.
“CIOs and CEOs have to change the business model: from looking at the business from the inside out, to looking at customers, to driving value and understanding industries and their outcomes. They also need to focus on agility, changing the business so they can change quickly. They also need to design digital experience into every product and service.
“We need to think about technology differently.”
Leading companies are no longer looking at keeping the cost of technology down – but investing more in technology where it can trigger a growth curve.
Customer-driven technology architectures must be delivered that can flex and change according to customer needs, Fenwick adds.
To this end, companies are urged to select technology partners based on their ability to deliver on these needs.