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How to survive the digital trough

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How to survive the digital trough

Kathy Gibson at Gartner Symposium, Cape Town — Digital dexterity, based on network effect technologies running on a digital platform will help organisations make it through the looming trough of depression facing digital transformation.
Executives are frustrated by the slow pace of digital transformation, says Peter Sondergaard, executive vice-president: research at Gartner. “They know that if you don’t capture new opportunities, you are destined to fall off the tracks,” he adds.
According to Gartner’s hype cycle, we are at the peak of digital transformation now — but this means there is a trough coming — the trough of disillusionment.
“How will you speed through the trough?” Sondergaaard asks. “Because you have no choice — you must take the ride.”
Amazon has demonstrated the amount of disruption that is happening in retail.
“Customers flocked to online stores — and the big department stores lost. This year Amazon became the largest retailer in the US. E-commerce and digital is affecting every retail sector.”
A clear pattern has emerged here, Sondergaard says. “Once revenue achieves 20% of a sector’s revenue, disruption happens.”
This disruption is set to disrupt the food industry next, he points out. “Watch out for that 20% mark — it’s the disruption point.”
Digital business also exposes weaknesses in the existing systems, Sondergaard points out.
Some incumbent brands are responding, though, and rising above the rest. Companies like Ford and Toyota score well on digital metrics.
Sondergaard urges companies to create their own set of digital KPIs (key performance indicators) that measure where they are leading.
“Some leaders measure themselves on the number of partners in their ecosystems. You might measure yourself on the numbers of ecosystems you participate in, and the outcomes of each.”
These KPIs would mean a shift to measuring the solutions or services delivered or completed. “Business leaders need new digital KPIs.”
The most important KPI focuses on speed, he says. “Two-thirds of business leaders believe their companies must pick up the pace to remain competitive.”
Board members are getting impatient at the slow pace of change. And this frustration is being felt across all industries.
“A new breed of leaders believes they must use technology to meet our expectations.”
Research shows that customers want an easy, effortless experience, Sondergaard adds. “Beyond a certain point, more interaction truly harms a relationship. Sometimes you have to get out their way to make customers’ lives easier.”
The CIO plays a major part in digital transformation, Sondergaard points out.
“Digital is real, but doesn’t mean the same thing to every CIO. You need to understand where you are and what you aspire to be.
“You could be an IT partner, a digital builder or a digital pioneer. You could even be all three simultaneously.”
IT partners will use digital to drive internal efficiency. Digital builders will create products to drive revenue and digital pioneers will disrupt industries by creating new markets.
“How you measure your success depends on which type of CIO you are,” Sondergaard says. Depending on the situation and the partner, different kinds of leadership could be needed.
Chief strategy officers tell us that small experiments are working on great ideas, with great potential — but organisations are not taking this to the next level.
“Leaders must take the initiative to take these experiments and build them up and out — quickly — to achieve value and scale.”
Value centres around organisational ambitions: where the current business can be optimised; or where it can be expanded. “It is about efficiency and it’s about growth.”
To gain the credibility to change a company’s posture results from improving the customer’s experience to add value.
“If you are not creating new business models, or a new way of engaging customers and partners, you are falling back into the trough.”
Scale, on the other hand, is not necessarily about getting bigger. “In the new world of interconnected platforms and ecosystems, smaller organisations can very rapidly compete with the largest.
“There are three aspects of scale – up, across and out,” Sondergaard says.
Scaling up is about gaining efficiencies, maximising output relative to input.
Scaling across is about quickly taking lessons from one organisational unit into another — it’s about speed, learning and adapting
Scaling out is about adapting, about combining growth and speed.
“This is where digital gets truly transformative — so think about scaling up, across and out.”
Gartner has identified three scale accelerators, Sondergaard adds.
“First is digital dexterity. This is about new organisation design and new talent mix for a new working environment that is more collaborative, agile, analytical, innovating and creative. It’s about strategies for tools and capabilities — putting tools in the hands of your teams to create value.
“It is about creating a high-performing digital workplace. Organisations have to change internally to change externally.”
The second driver is technology — “or what we call network effect technologies,” Sondergaard says.
This could include something like blockchain, which is technology that will have a major impact over time in areas like supply chain and intellectual property management.
“Augmented reality and virtual reality — or mixed reality — will change the customer experience as well as employee development and workplace safety,” Sondergaard says.
“It is the organisations that create virtual patterns of growth, where waves of disruption build on each other exponentially — these are network effect technologies.”
Gartner believes the network effect technologies focus around Internet of Things (IoT), application programming interfaces (APIs) and analytics, including artificial intelligence (AI).
The network effect technologies transform the CIOs work from making tactical technology decisions to building strategic platforms.
The third accelerator is the digital platform, Sondergaard says.
“These three accelerators will help you speed through the trough and create digital business at scale. And you can succeed.”