Kathy Gibson reports from Gartner Symposium in Cape Town – As organisations transition to digital business models, they are having to adopt a bimodal structure that allows them to run their traditional functions alongside new and innovative business models.

There are so many trends that are affecting the way businesses will be run in the future, and technology defined by algorithms lies at the heart of most of them, says Peter Sondergaard, senior vice-president and head of research at Gartner.

“Algorithmic business is here,” he says. “Can you calculate the value of relationships with 3-billion smartphone users, the value of access to the Internet of Things or the trust in your business relationships.”

“But this is what’s defining the future of the business.”

He points out that, within the next five years, spending on the Internet of Things will exceed $2,5-million every minute; and 1-million new devices will come online every hour.

“That is a lot of interconnections, creating billions of new relationships.”

These relationships are no longer going to be drive by data, he adds, but by algorithms.

“Digital business is growing across all industries. Businesses are shifting to sources of growth and deriving digital revenues from digital business. E-commerce is now worth $1-trillion annually.”

IT has to change as well, to support these new business models, Sondergaard says. “Digital business is not just a one and done business project. And it doesn’t have to be a threat.”

He points out that established companies have managed to fend off the threat from digital startups by setting up a bimodal business model.

“Digital business is defined as the physical and virtual business models running together.” While leading companies expect their digital revenues to increase by 80% by 2020, this won’t be at the expense of the physical business.

“120 000 large organisations are launching digital business initiatives right now. That’s half of large enterprises, not just startups – and it’s organisations in every industry.

“They are creating innovation units, digital initiatives running alongside the traditional business. They are moving at two speeds: the business itself is bimodal until the two merge and become additive.”

A company’s approach to digital transformation reveals a lot about its maturity, he adds. “An established company starts with old models and processes and attempts to adapt to the customer’s need in the moment.

It builds new business on top of old processes.

“The digital organisation starts with the customer. It doesn’t ask what the customer wants – they watch what he does, using a new set of software algorithms that define the platform and ne platforms that support digital. They recognise that the old platform is insufficient.”

The solution, says Songergaard, is to create a bimodal organisation on a new mode two platform, with a different emphasis.

To manage the bimodal business, he points out, a bimodal IT platform is needed, and this is going to be built on a new platform.

“This year cloud adoption hit mainstream, particularly in SaaS,” he says. “The new platform is less about data gathering and more about intelligent algorithms to act on that data.”

Platforms matter in the new mode, he says, because the business has gone bimodal. “So you need IT that supports a bimodal business.”

Already, more than 45% of companies have gone bimodal; but Sondergaard wonders whether this to tactically manage an old process backlog or to keep up with new business strategy.

“The relationship between IT and other divisions in the company has changed,” he says. “A decade ago it controlled 70% of enterprise IT spend; now it is 58% and it will be just 50% in 2017.

“This means organisations are embedding technology into their organisations, but it means that IT is in control of less of it.

“But IT’s relationship has to be to influence the organisation’s digital initiatives, to create the digital platform.”

While the organisation has changed, Sondergaard says that forces outside the organisation have changed too. While consumer technologies have taken off, it’s a reality that more technically-savvy people work outside the IT department than inside – and this number is growing as the cloud and crowdsourcing will make it more.

“Meanwhile business units are driving technology into the physical world while technology ownership and talent have shifted,” says Sondergaard. “But these new capabilities give IT new resources to tap into.

“CIOs need to accept that they can control a smaller part of the technology spend, but you have more resources to draw on both inside and outside the organisation – where you can have influence but not total control. Remember, influence scales, while control does not.”

This means CIOs need to change their leadership style, Sondergaard advises. “You must change the perception of IT value in your organisations.

“If the most important thing you offer is data you are in trouble. Big data is not here the value is. Data is necessary, but it is transient – by itself it will not be transformative.”

Anyone can gather and store data, he says, and while analysis can add value it’s not where the CIO should be focusing energy.

“Data is inherently dumb. It doesn’t do anything unless you know how to use it and act on it. Algorithms is where the real value lies.”

Algorithms define action, Sondergaard says. They can be simple formulas or more complex, but they drive new business systems.

“Algorithms redefine business processes to create new customer experiences to evaluate suppliers and assess risk. Algorithms define the way the world works.”

In an entirely digital world, Sondergaard points out that agents will act independently, with virtual digital assistants fast becoming a reality.

“By 2020 users won’t use apps on their devices, they will rely on virtual assistants – algorithms in the cloud that they trust,” Sondergaard says. “The post-app era is coming. People will trust software that thinks and acts for them.”

Companies like Microsoft, Google, Amazon and Apple have already launched their agent prototypes, and Sondergaard believes these will develop and change rapidly to become trusted assistants.

Kathy Gibson reports from Gartner Symposium in Cape Town – As organisations transition to digital business models, they are having to adopt a bimodal structure that allows them to run their traditional functions alongside new and innovative business models.