Cutting edge, forward-thinking, ‘technology first’ businesses have digital business transformation firmly rooted in the domain of their CEOs – as the world changes, the rest of us need to follow suit.
While technology leadership in many businesses is the domain of the CIO/CTO, the emergence of big data analytics, AI and the IoT has created unparalleled disruptive forces that have radically transformed where leadership responsibility resides.
Disruption and attempts to disrupt markets and industries is a bit of a buzz word today. However, disruptive technologies have been radically changing the world around us since the dawn of humanity – i.e. the invention of the wheel. When significant disruption occurs it changes the status quo and causes a lot of upheaval. The aftermath of this upheaval is a settling down and normalisation of the disruptive technology back into a new status quo. For example, traditional landline telephone operators suffered massive losses following the invention of mobile phones, which themselves have been replaced by modern smart phones. Now almost everyone walks around with a mini computer in their pockets and the very way in which we communicate has changed forever – initially a significant disruption, but now the status quo.
If we consider the top 500 companies in any of the countries in the developed world, we see evidence of businesses being bought out, merged or falling into administration. Most of these businesses are being replaced by a new breed of company that puts innovation and digital business transformation at the heart of their business models – Amazon, Facebook, Uber and so on. Businesses failing to keep up with these new disruptive business models all have one thing in common, digital business transformation failure.
Radically Disruptive Business Models
As companies learn to adapt new technologies to radically disruptive business models, digital business transformation becomes increasingly important to CEOs and their strategic plans. Since 2000, the rate of digital business transformation and market disruption has accelerated, and continues to do so. While most of us may think of digital business transformation as something large businesses do to keep up with the disruptive SaaS based offerings of smaller competitors, the picture is actually much bigger.
To give you an idea of the scale of digital business transformation and how it is penetrating all industries, let us consider our national-grid. It contains millions of electric meters, transformers and capacitors, not to mention mile after mile of cables and pylons, and can be considered as one of the largest machines ever built. Millions of pounds is now being spent to implement smart meters across the country, along with a whole range of other digital hardware. The objective is digital transformation of our power-grid so big data analytics and AI can be applied to its operation, eventually making it run more efficiently, cheaply and environmentally.
The beauty of this digital transformation is in the continuous improvement of operation, as more data is gathered and analysed, AI provides more insight and the whole networks operation improves. It is this same approach that enables companies to adapt new technologies to radically disruptive business models and create unrivalled competitive advantage.
Industries like this are being disrupted everywhere. For example:
- Digital sensors are being applied to all medical devices
- Medical records and genome sequences are already being digitised
- Patients will be fixed with sensors to monitor pulse, blood chemistry, hormone levels, blood pressure, temperature and brain waves
- AI will enable accurate prediction of disease development, allowing preventative medical care
- Producers will use predictive maintenance to monitor assets to predict and prevent system failures
- Predicting and preventing failures will lower the cost of production and reduce environmental impact
- The IoT is enabling businesses to adopt inventory optimisation technology to lower inventory carrying costs
- Predictive maintenance systems are lowering the cost of production and increasing product reliability
- Risks associated with supply networks are better mitigated to ensure better product delivery and manufacturing efficiency
CEOs in the Driving Seat
CEOs who are not actively driving digital disruption are working to catch the rising tide through digital business transformation. As we all know, historically the adoption of technology into a business has been the preserve of the CIO/CTO. CEOs were informed, usually due to costs, but rarely involved to any degree. Of course, this is in stark contrast to the modern world, where digital business transformations and disruptions are largely devised and driven by visionary CEOs who are the new drivers of innovation.
CEOs who are not driving digital disruption or business transformation are urged to dramatically change their approach to strategic planning. Michael Porter, from the Harvard Business School, suggests that smart, connected devices bring forth a fundamental change in the dynamics of competition and the IoT is not just an opportunity to develop competitive advantage, it is something that will become a standard prerequisite for all businesses. Cisco Systems’ John Chambers believes 40% of today’s businesses will fail in the next 10 years and while 70% will invest in digital business transformation, only 30% will be successful.
If you need an example to illustrate the point, think of Tesla vs traditional car manufacturers. Tesla has a market capitalisation broadly similar to General Motors, even though General Motors revenues are 20x greater. The reason behind this is Telsa’s cars use IoT technologies that collect terabytes of data from the vehicles it has on the road. The more miles its customers drive, the more data it obtains. The more data is obtains, the more its AI engine has to feed on and the more its AI engine feeds on data the more it can improve things like predictive maintenance, self-driving innovations and the driving experience itself. General Motors and other manufacturers cannot do this and as a result, the more miles Telsa’s cars drive, the more powerful its competitive advantage becomes.
From our experience of delivering digital transformation solutions, we recommend considering the following:
- update your business strategy and include new targets for digital value creation
- think through scenarios to anticipate future disruption
- use scenarios to develop road maps for innovation
- hire the right people to make things happen
The Winds of Change
Digital business transformation and disruption is changing every facet of how products and services are designed, produced, sold and distributed. It also forces businesses to rethink its processes, management structure, operations, IT systems and customer relationships. While many CEOs understand how the world is changing, and are actively involved with digital transformation initiatives, too many appear to be ‘asleep at the wheel’ and do not understand or comprehend the winds of change. When the changes come, they will happen very quickly and any business that has not prepared will not be able to respond fast enough.