1
Digital disruption impacts every industry. Here's how to win
in an era of constant change.
WRITTEN BY MIKE SHAW
TABL E O F CO N T EN T S :
2
E X E C U TI VE SU M M ARY
The digital imperative
S E CT I O N
01
S E CT I O N
02
S E CT I O N
03
S E CT I O N
04
6
C H ANG E I S H AR D
The anxiety around digital disruption is that it is happening
everywhere. The reality is that it will change entire industries
for the better.
20
SE A C H ANG E
To truly succeed in the age of digitization, you need to
know what you’re up against.
36
TH E NE W P R O D U CT L I F E CYC LE
Methodical, long-term planning gives way to a “try
and see” mentality.
48
E NTE R P R I SE I T:
STR O NG E R TO G E TH E R
Digital transformation is not an IT issue. In fact, it’s not
a problem at all. Rather, it's an opportunity to rethink
how business is conducted.
S E CT I O N
05
56
C U LTU R E SH I F T
To create an environment primed for digitally fueled innovation,
you have to change your company culture.
70
CO NC LU SI O N
Digitization knows no bounds
2
THE
DIGITAL
IMPERATIVE
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EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
3
The power to innovate; the power
to render obsolete.
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4
ENTERPRISE.NXT | EXECUTIVE SUMMARY
The stakes
Imagine this: Seemingly overnight, your organization has morphed
from a manufacturing company into a software and data company.
This isn’t a radically hypothetical scenario. It’s happening whether
or not you’re prepared for it, to every enterprise in every industry
all over the world — and it’s called digital disruption.
5
Digital disruption can breathe
new life into business processes,
products and employees. It can
also bring flourishing enterprises
to their knees overnight. Done well,
digitization improves customer
experience, creates more useful
products, and results in tighter
and more efficient operations.
It doesn’t matter if you’re a business
leader or a technologist — the
power to drive the digital revolution
is in your hands. You can turn
digitization to your advantage,
but only if business and IT work
together. In a successful digital
enterprise, operating in traditional
silos is doomed to failure because
technology and business are
simply too intertwined.
Having up-ended the retail, music,
video, book and newspaper industries,
digital disruption is sweeping
through the other business.
First, it picks off the low-hanging
fruit by adding automation and
information to simple services such
as automated check-in kiosks at
airports and train stations. As it
evolves, disruption is invading
the kinds of activities that were
previously the exclusive domain
of humans, such as the creation
of music and newspaper reports.
What industries are next, what is
the impact on today’s established
enterprises, where will it end and,
most important, how can each of us
translate disruption into opportunity?
We’re seeing government agencies
and enterprises of all sizes across
nearly every industry and level
of maturity grapple with digital
disruption. We know who is
succeeding and who is struggling,
and we are in a unique position
to share best practices and
perspectives that we hope will
help more enterprises chart their
digital transformation journeys.
We start by describing how digital
technology — something that’s
been around for over half a
century — has suddenly leapt from
the back office into the boardroom.
We argue that this disruption is
the beginning of a broader shift
that will last more than a decade,
and forecast how such a shift will
impact enterprises. We then examine
a number of industries that are
already taking advantage of digital
technology today. We conclude by
explaining what digital disruptors
do differently, exploring some of
the key factors both accelerating
and inhibiting enterprises around
the world.
6
01
CHANGE IS
HARD
<< RETURN TO TABLE OF CONTENTS
EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
7
The anxiety around digital disruption is that
it is happening everywhere. The reality is that
it will change entire industries for the better.
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ENTERPRISE.NXT | SECTION 01: CHANGE IS HARD
What’s all the
fuss about?
T H E S TAT E O F D I S R U P T I O N
BY INDUSTRY
Li
fe
Fr rav
Sc
ei e
ie
gh l &
nc
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T
& ra
Lo n
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gi sp
ub
st or
li
ic ta
c
s ti
Se
on
ct
/
or
en
t
Virtually all enterprises are facing digital disruption, and many industries
are undergoing all three types of transformation in parallel.
Improving Customer
Experiences
63
58
64
61
58
53
54
57
Improving Products
and Services
55
66
56
55
58
53
44
35
Streamlining Business
Processes
20
41
30
35
28
20
27
35
Numbers represent the percentage of respondents by industry
who said they were digitally transforming in the noted areas.
Source: “The Digital Transformation Index,” by Hewlett Packard Enterprise.
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8
9
Why is digital business suddenly gaining so
much attention 50 years after we created the
first business computers?
Applications have moved from data centers and into cars, thermostats,
electric dryers, wearables, sprinkler systems and lights. Thanks to cloud and
open-source tools, applications can now be written by practically anyone, not just
enterprise IT. Mobile data is available at prices and performance levels that make
connected devices and connected smartphones viable. Increasingly, customers
and citizens are interacting with enterprises and government agencies through
digital channels because it’s convenient. And data science (e.g., machine learning,
artificial intelligence, prediction algorithms and recommendations engines), the
smarts behind digital disruption, is moving forward by leaps and bounds.
10
ENTERPRISE.NXT | SECTION 01: CHANGE IS HARD
The truth
about
uneven
disruption
Digitization is fundamentally changing the
way business is conducted, from transportation
and healthcare to banking and agriculture.
Digital transformation isn’t an abstract theory or far-off forecast. That said,
digitization isn’t happening at the same pace across all industries. Numerous
factors expedite or slow the pace of change, including corporate mindsets,
access to technology and willingness to evolve decades-old processes. As with
any revolutionary shift, there are early adopters and there are laggards. Where
does your industry fall?
11
72%
Media
52%
Nonprofit
61%
Consumer
Financial Services
47%
Healthcare
51%
50%
Business &
Professional Services
Education
57%
Technology
43%
57%
Retail
Asset Wealth
Management
39%
Industrial
53%
Insurance
52%
Consumer
Products
64%
Telecom
DISRUPTION
FORECAST
This chart shows the percentage
of C-level executives who think
their own industries are going to be
moderately or massively digitally
disrupted in the next 12 months.
Source: “Digital Pulse 2015,” by Russell Reynolds Associates.
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Transportation
Thanks to ride-sharing apps such as
Uber, Lyft and BlaBlaCar, transportation
was one of the first industries to
experience digital disruption. Today,
the transportation sector is evolving
faster than a speeding Tesla. As one
of the first ride-sharing apps, Uber
struck at the right time and with the
right solution. First, it reduced the
friction of hailing, riding in and paying
for a taxicab. Second, it disrupted the
entire taxicab business model by
introducing a new supply source:
anyone who wants to offer his or
her vehicle and services. Finally, Uber
is an app, an easily accessible tool
tailor-made for its target market’s
preferred mode of communication
— the smartphone.
Uber has no fleet of its own and
often isn’t subject to the same
regulations that govern taxi operators
and drivers. How can cabbies
possibly compete?
The short answer is ­— they can’t.
We are seeing a similar method of
disruption happening to parking
spaces. Apps such as ParkingPanda
in the United States, and the city of
Perth parking app in Australia, make
it easier to find a parking space in a
crowded city by allowing users to
locate, reserve and even pay for spots
using their mobile devices. In a nod
to the sharing economy, there are
even apps like Rover, which enable
parking-spot sharing among citizens.
(Think Airbnb, but for parking
spaces). No more driving around
searching for an open spot.
The sharing economy also has
implications for personal transportation.
Many large cities have carpool lanes
and fast passes to reward ride-sharing
in an effort to decrease congestion
and reduce carbon dioxide emissions.
They also “shape” the traffic that
flows through city centers by giving
stoplight priority to bicycles and
e-bikes while penalizing trucks and
large cars. Some municipalities are
even attempting to micro-charge
drivers based on the type of
vehicles in use, and when and
where they are traveling.
In addition to ride-sharing and
ride-hailing apps, digitization
is happening to the vehicles
themselves. The obvious example
is the Google Self-Driving Car
Project. But other companies are also
well on their way to developing
autonomous-vehicle technology.
Autonomous-vehicle technology isn’t
limited to personal cars. There are
implications for long-haul trucking,
cargo ships and locomotives, too. As
the technology is refined, we’ll see
drone ships piloted from land and
autonomous tractor-trailers that
transport freight cross-country
without drivers behind the wheel.
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Wellness and Healthcare
The healthcare industry dipped its
toes into the digital transformation
pool with the advent of electronic
medical records decades ago. More
recently, the ever-decreasing cost of
gene-sequencing technology has led
to a biotech revolution.
Digitized healthcare has also infiltrated
the consumer products industry by
shrouding itself in fitness apps.
Devices from companies such as Fitbit,
Jawbone, Garmin, Samsung Gear and
Misfit are touted as always-on, holistic
health monitoring for people looking
to get in shape. But they are doing
more than simply tracking steps and
calories, and will soon provide a link
between patients and care.
In fact, advances in biotechnology are
bringing self-monitoring within reach
for many people. Wearable devices
will be used to run routine blood
tests and screen for illnesses such
as cancer, heart disease, diabetes
and more. The information from tests
will be synced to lifestyle-monitoring
apps that will ultimately send
actionable data to clinicians.
The same technology, but in more
extensive form, will also be applied
to monitoring of the elderly and sick
in their homes. We might also see
robots used as home health aides. In
Japan, for example, initial trials have
found that people with Alzheimer’s
disease tend to respond well to
“friendly robots.” These robots may
help more generally with the isolation
and loneliness that many elderly
people feel. Furthermore, robots of
this type can help fill the gap between
the number of elderly in need of care
and the number of nursing-care
professionals available.
Beyond robotic home health aides
and wearable lifestyle monitoring,
we will also see an increase in the
“gearing” of healthcare professionals.
For example, remote experts already
give diagnoses via mobile apps and
websites. Surgeons might even
perform procedures remotely using
da Vinci and similar robotic surgery
systems. Robots are already being
used for delicate surgery like that
required for prostate cancer and
colon cancer. And doctors will
increasingly use advanced analytics
as a diagnostic tool.
Drugs and nutrition will also be
personalized. Research in the human
microbiome is helping medical
professionals understand how to
adjust bacteria in the gut to help
people lose weight. Add 3D printing
to the mix, and the potential for
technology in the medical
community is virtually endless. It’s
already being used in dentistry, and
researchers have even successfully
printed replacement ovaries for mice.
Digital footprints and advanced
analytics will allow people to design
city centers to maximize public
health. Rather than designing
cities for cars and minimizing
congestion, we will design for
human health and longevity.
14
Agriculture
The world doesn’t have enough food,
so anything that can be done to
increase the efficiency of farming is
welcome. In addition, many believe that
there will soon be a strong backlash
against the mentality that “any quality
of food is OK as long as it’s low cost.”
Case in point, a number of countries
have already introduced a “sugar tax”
on food that is made more appealing
through the addition of sugar.
food, which in turn improves its
nutritional value. There are plenty
of rooftop and backyard gardens, but
vertical farms are also sprouting up.
They are illuminated by LED lights
with carefully controlled color
spectrums. The water, food and pH
value of the plants’ environment is
also digitally monitored and controlled.
Vertical farms can be 25 times denser
than conventional ones.
Increasing precision is a common
theme with digitization. It will be used
in medicine and in lease-charging,
wherein consumers pay per use of
a vehicle versus per amount of time
(meaning, if you drive like a maniac,
you will be charged accordingly).
And it will be used in farming.
High-resolution cameras on drones
will film the farm while data analytics
determine precisely where fertilizer,
pesticide, seeds, slug control and
water need to be applied. This
precision application will likely
be performed by robots.
Livestock will be digitally tagged and
their health will be monitored in the
same way that humans continually
monitor their own health. This method
enables farmers to track an animal’s
life and well-being from birth to
slaughter, to prove the sourcing
of their product and to be more
precise in their use of antibiotics.
Farming in cities cuts transportation
costs and speeds up the delivery of
In a large area like Australia,
where livestock are farmed, drones
will be used for herding. Drones
are much safer than manned
helicopters. And robots with
video recognition data analytics
will patrol against poachers.
15
Retail Banking
In 2016, there were more than 2,000
financial technology (FinTech)
start-ups. FinTech currently attracts
the most venture-capital funding of
any sector. It’s unlikely that any one
FinTech start-up will unseat a large
bank. It's more likely that, nibble by
nibble, small parts of the mainstream
banking business will go to start-ups.
For example, peer-to-peer lending,
where people prepared to lend are
paired with those who want to borrow,
will be an $11 billion business this year.
The worldwide retail banking sector
was $1.6 trillion in 2015, so it’s not
large. But it’s growing at about 200
percent annually.
Approximately 40 percent of the
world’s population doesn’t have access
to banks, yet close to 70 percent of
adults own smartphones. As a result,
technologies such as mobile wallets
are increasingly popular. More than
55 million Africans use basic mobile
phones to transfer money from one
person to another, take out insurance
policies and collect payments from
government agencies. Africa’s
mobile-money market was estimated
at $61 billion in 2012. This is greater
than the amount of money sent via
mobile devices in Europe and North
America combined.
While it may not cause disruption in the
financial industry, banking transactions
are being facilitated by digital technology,
including mobile banking and contactless
payment. In China, a system examines
the blood vessels behind the human
face to identify people, effectively
reducing the risk of fraud. Applications
such as WeChat have allowed inter-app
user payment for some time.
Most customer journeys offered by
banks were designed many years ago
in an age of paper and pen. Many of
the mobile-only start-ups aren’t simply
adding mobile-enabled services to
existing customer journeys. Instead,
they are starting from scratch. This
often results in less friction and faster
interaction time for customers.
Investment companies are encoding
their wisdom into digital advisors
based on artificial intelligence (AI)
technology that can help make
investment decisions. Because of the
power of the Web, a smart investor can
offer his or her advice to millions of
people at the same time and at a fraction
of the cost of a more personal service.
In the past, if two parties wanted to
make a payment between themselves,
they did it through a mutually trusted
third party. The introduction of the
third party creates not only trust but
also delay and extra cost. The
sometimes infamous Bitcoin is the
combination of a number of technologies
including blockchain, which allows two
parties who don’t have an established
trust relationship to perform many
transactions, including the transfer
of money. Right now, blockchain is
one of the hottest topics in banking
because it can potentially allow
interbank payments to happen
quickly and at very low cost.
16
Manufacturing
Today, most manufacturing equipment
is either not connected to any
network or connected to a closed,
proprietary network. This will change,
probably not through the replacement
of massive amounts of machinery, but
through the augmentation of existing
equipment with Internet of Things
(IoT) sensors and controllers.
Integration of information from the
manufacturing plant will connect silos
and optimize the entire production
process. It will enable businesses to
make better predictions, improve
quality and use analytics to gain
insights they couldn’t see before.
Collaboration across the supply
chain and the use of virtual reality
for design and manufacturing
visualization will make it easier to
create new products. As product
functionality becomes increasingly
software defined, new products
won’t have to be perfected before
they are released. That means
digitization will make the creation
of new products easier, faster and
less costly — and that’s great
news for enterprises.
Rather than design a product and put
it into mass production, manufacturing
companies will increasingly conduct
small-scale production runs to check
that the product works well when in
customers’ hands. Technologies such
as 3D printing and arbitrary task
robots (robots that can be taught
to perform a number of tasks) will
make these limited runs relatively
inexpensive. After adjustments,
products will go into mass production.
Certainly, 3D printing and arbitrary
task robots will be used to create
spare parts, thus reducing the need
for parts inventory and shipments.
Maintenance will become less costly
and repair times will decrease. Sensors
inside products will allow remote
diagnostics, and analytics will enable
businesses to proactively replace parts
before they cause costly downtimes.
This is known as predictive maintenance.
Companies will be able to use robots
(including drones), analytics applied
to visual images and connected
sensors to perform continuous
plant inspection for maintenance
and to improve plant safety.
17
Sensors will be used to control
systems and make buildings more
energy and water efficient. Pollution
could be controlled better through
sensors and predictive algorithms.
Desk space will be dynamically
allocated more efficiently through the
same types of applications that are
used today to find parking spaces in
cities. The digital footprints thrown
off by factory and office workers will
result in better-designed workplaces.
There is trepidation around the idea
that robots and smart machines may
take jobs away from human workers.
While there are plenty of predictions
to this effect, all research to date
has shown that robots and smart
machines allow people to do more
without resulting in fewer jobs.
Because of 3D printing,
manufacturing-as-a-service
marketplaces for small manufacturers
such as Etsy, crowd financing and
cloud-based manufacturing
simulation services, the cost and
friction involved in taking an idea to
production has never been lower.
Thanks to the Internet, design can
be performed in one country while
micro-manufacturing takes place
anywhere in the world. In other words,
a small start-up manufacturer can
have a truly global reach.
Sensors in manufacturing plants will
allow for precision leasing, whereby the
lessee is charged not only on a time
basis but also on how much and how
vigorously he or she uses the plant.
Imagine any piece of machinery.
Imagine installing smart, connected
sensors into it. This is what Jeff
Immelt, CEO of General Electric
Corp., is encouraging his research
and development staff to do.
Professional tool manufacturers
are equipping their products with
sensors and connectivity to help
construction workers use these
tools more effectively.
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FPO
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ENTERPRISE.NXT | SECTION 01: CHANGE IS HARD
01
NOW
TO
NEXT
Change Is Hard
Digital is happening now because of the perfect storm of
low-cost communications, compute devices “at the edge”
and sensors. Add to that the ability for virtually anyone
to create apps through cloud and open source, massive
advances in data science, robots, drones and cognitive
systems, and the marketplace is primed for reinvention.
To learn more about how digital transformation affects the
financial industry, read our Banking.nxt report.
19
Next: Two things are different about digitization.
First, the range of different ways in which digitization is being,
and will be, applied is vast. Second, the rate of technological
advancement across all aspects of digital technology is high.
These two factors mean that more than at any time since the
Industrial Revolution, all industries must actively track and embrace
digitization or risk being “Uberized” by a competitor’s aggressive
use of digital technology.
20
02
SEA
CHANGE
<< RETURN TO TABLE OF CONTENTS
EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
21
To truly succeed in the age of digitization,
you need to know what you’re up against.
SHARE THIS WITH YOUR NETWORK
22
ENTERPRISE.NXT | SECTION 02: SEA CHANGE
A model for
addressing
digital disruption
It’s time to stop talking about digital disruption,
and put plans into action.
Open any newspaper (the tablet
version, of course) and you’ll see a
story about digitization. At the time
of writing, trending topics included
the rise of app-only banks, a robot
that walks a farmer’s crops looking for
pests, and how Slack was planning to
use deep machine learning to scan
its customers’ conversations to better
help them achieve their tasks.
When we are overloaded by factoids,
it’s useful to have one or more models
to pin each factoid onto, so we can
understand what’s going on and,
more important, take action.
Probably one of the most useful
models comes from Geoffrey Moore,
author of “Crossing the Chasm” and
“Inside the Tornado.” In his latest
book, “Zone to Win,” Moore suggests
that there is one question to consider
when dealing with disruption: Are
you being disrupted at the level of
your infrastructure model, your
operating model or your business
model? Borrowing from Moore‘s
model and adjusting it to frame three
forms of transformation you should
consider undertaking in response
to disruption, we then have:
• Business model transformation
• Business operations transformation
• IT (infrastructure) transformation
23
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ENTERPRISE.NXT | SECTION 02: SEA CHANGE
BUSINESS
MODEL
BUSINESS
OPERATIONS
INFORMATION
TECHNOLOGY
25
GEOFFREY MOORE’S
THREE DISRUPTIONS
Let’s explore the three layers of transformation. IT transformation is where
we transform an aspect of IT through the use of technology innovations such
as virtualization or moving applications to SaaS. IT transformations may make
a significant difference to the efficiency and effectiveness of IT. However,
customers won't typically feel the effects.
For established enterprises, digital disruption of your business model is
the most vexing and dangerous, as it almost always means the rules of the
game are changing — diminishing your ability to monetize value in the
way you traditionally have. For example, Uber has introduced a new supplier
type in the taxi business (private citizens with cars); 3D parts printing will replace
the manufacture and shipping of the parts shipment supply chain; and YouTube
has introduced a new “supplier” into the video market — anyone can now earn
money making and posting videos.
In the middle is business operations transformation. This is where the
business model remains the same, but the way the business is transacted is
transformed for the better. This might be achieved by improving customer
interactions such as mobile online check-in for airlines or enabling customers
to deposit checks through their mobile-banking apps.
IT transformation is certainly worth doing, but it’s typically not enough
to satisfy the needs of the business in an industry undergoing digital
disruption. Business model transformation is not realistic for many established
enterprises whose significant infrastructure, processes and infrastructure are
already geared toward supporting their existing business model. Most enterprises
will need to transform their business operations using digital technologies to
improve value for customers and counterdisruptors.
Source: Adapted from “Zone to Win: Organizing to Compete in an Age of Disruption,” Geoffrey A. Moore, 2015.
26
ENTERPRISE.NXT | SECTION 02: SEA CHANGE
Flavors of
operational
transformation
It’s useful to break business operations transformations
down into three areas: customer experience, products
and services, and core operations. Let’s look at each of
these areas in turn.
27
Customer Experience
Digitization can improve customer
experience in a number of ways.
We find it's best to start by mapping
out the customer journey, meaning
the steps that occur for a customer
to achieve something like completing
a mortgage or taking a flight. We
can then use digital technology to
improve one or more aspects of
this journey.
Remove friction. Mobile online airline
check-in has made life much easier
for travelers. Netflix has ripped friction
out of the customer journey, first by
renting DVDs and now by streaming
video content direct to consumers.
Removing friction builds customer
loyalty. If you are an incumbent in
your industry, look to remove friction
wherever you can to reduce the
chances of an Uber-like attack taking
hold — and grabbing market share.
Increase transaction speed. Not
only has Netflix made DVD rental
easier, but it has also sped up the
whole process. Banks are under attack
from start-ups that give loan approvals
(or otherwise) within hours, not days
or weeks. Do your customer journeys
contain delays that will enable a start-up
to sneak in and cherry-pick your most
profitable customers?
Help customers. When our customer
interactions become digitized, we
can start to build up a profile of
each customer. While this approach
enables us to better upsell, cross-sell
and repeat-sell, it also lets us help
customers throughout the customer
journey. For example, Spotify will
recommend tracks you might want to
listen to based on the content of your
playlists. Amazon tells you what other
customers have purchased and what
they think about these purchases. As
data science continues to advance,
technologies like AI-based chatbots
will make it easier to provide customer
service across mobile devices.
Understand customers’ intent.
When customers interact with us,
they are often in the middle of their
customer journey. For example, if a
customer is trying to book a flight,
he or she may be on a “my flight is
canceled, and I have to get home as
fast as possible” journey, rather than
an “I’m booking a business trip for
next month” journey. Or, if someone
is on your website buying light bulbs,
he or she might actually be on an “I’m
creating mood lighting for my new
dining room” journey. If we can intuit
customers’ intent and the journeys
they are on, we can better serve
them. Case in point, if we believe
a loyal customer is in the middle
of a “my flight is canceled, and I
have to get home fast” journey,
we might want to call him or her
and offer personalized assistance.
Understanding customer journeys
and helping these individuals
accordingly is a sure-fire way to
build strong customer loyalty.
28
ENTERPRISE.NXT | SECTION 02: SEA CHANGE
A one-point improvement in customer
experience index score results in:
Annual incremental
revenue per customer*
Annual impact
per company
(millions)
Average number of
customers per company†
$175
$2.13
x
82 million
=
$337.10
x
350,000
=
Upscale hotels
$6.52
x
10 million
=
$65
TV providers
$3.56
x
17 million
=
$61
Retail banks
$3.92
x
15 million
=
$59
Insurance firms
(home and auto)
$3.25
x
15 million
=
$49
Internet providers
$3.09
x
16 million
=
Wireless providers
Luxury autos
PC manufacturers†
(excluding Apple)
$2.07
x
10 million
=
Credit cards
$0.25
x
61 million
=
$118
$49
$21
$15
T H E M O N E TA R Y
VA L U E O F C U S T O M E R
EXPERIENCE
Enterprises that improve their
customer experience index score
by just one point over the industry
average can potentially add millions
of dollars in revenue.
Source: "Make the Business Case for Agile and DevOps-Driven Digital Transformation," Forrester, March 2016.
29
Products and Services
We can use digital technology to
create new products, to augment
existing products and to make
better products, faster.
Create products with digital cores.
Current “digitally powered” products
include Tesla cars, Nest thermostats,
electric dryers, smart TVs and
wearable fitness trackers. Digitally
powered products have applications
running inside them. This technology
gives businesses the ability to
change functionality over the air by
downloading software upgrades. In
the next section, we’ll look at how
this capability transforms traditional
product life cycles.
Digitally augment products. We
can augment products with digital
technology. For example, a professional
tools company added sensors to its
drills. The information from these
sensors is sent back to the company,
which then advises users how best to
set up the drill for the job at hand.
Another example is John Deere,
which now does more than just sell
farm machinery. The company also
offers a service called PowerSight,
which advises farmers on the optimal
way to use their John Deere products.
Once a product is digital, there are
many ways it can be up-leveled into
a service. Spotify started out offering
a whole array of music tracks. Now,
however, through the use of data
analysis of saved playlists, what
people listen to and what experts
recommend, Spotify has become a
music exploration service — a much
more valuable proposition when
10 million-plus tracks are available.
In essence, Spotify changed music
streaming from a collection-based
offering to a curation-based service.
on its drivers. GSN.com, a gaming
company owned by Sony Gaming,
sends back terabytes of data on how
players use their games. This digital
feedback enables product designers
to more quickly and more accurately
improve products.
When designing products, build
in a digitally enabled feedback loop
so product designers can do the same.
Use digital processes to create
better products, faster. Digital
products or digitally augmented
products can tell us how they are
being used. Tesla downloads data
Once a product is digital, there
are many ways it can be up-leveled
into a service.
30
ENTERPRISE.NXT | SECTION 02: SEA CHANGE
Core Operations
There are many ways in which
digital technology can benefit core
operations. It can help production
lines, maintenance, supply chains (or
supply ecosystems as they need to
be called in a digitally connected
world) and in creating more efficient
and more appealing workplaces.
Reduce risk. The Internet of Things
allows us to monitor, inspect and install
an alarm on virtually any physical
object. Perhaps sensors might be
added to an existing machine to
provide a safety interlock, a
function that would prohibit that
machine from starting if, say, a door
were closed. Or, 3D cameras and
video recognition could be used to
automatically monitor and sound
an alarm for people falling onto
railway tracks.
Reduce waste and improve
quality. Digital technology can help
us use resources more efficiently. We
have already talked about how
farmers will use cameras in drones
or robots to apply fertilizers and
pesticides with greater precision.
Smart buildings already turn off
lights and automate climate control
in vacant rooms. A number of cities
are also using smart LED-based
street lights that reduce illumination
intensity when roads are empty.
Sensors and cameras help businesses
manufacture products more accurately,
thus increasing quality and reducing
returns and scrapping.
Automate predictive
maintenance. Maintenance is a
massive cost to many organizations,
and this, added to the lost revenue
when breakdowns occur, means
that equipment monitoring and
maintenance is already a key use
case for the IoT. IoT sensor data can
be fed into prediction algorithms that
indicate when to proactively replace
Technologies will be used to turn us
into superhumans, able to achieve two
to four times what we do today.
parts. GE’s latest locomotives contain
an array of sensors that sounds out
an alarm when it believes a part will
soon need replacement. HPE’s servers
are also able to issue predictive
maintenance alerts. Any time there
is a situation where the cost of
downtime is high, we will see the
use of predictive maintenance.
Other technologies can help us with
maintenance. Augmented reality
(yes, there is a use for augmented
reality beyond catching Pokémon)
can be used to superimpose repair
instructions on a broken piece of
machinery. And IDC estimates that
by 2020, more than 50 percent of
all replacement parts will be 3D
printed close to where they are
needed. In fact, they might even
be shipped by drones.
Creating superhuman workers.
There is much talk in the press about
how robots and artificial intelligence
31
systems are going to replace jobs.
While this may happen for some
occupations, what is more likely is
that these very technologies will be
used to turn us into superhumans,
able to achieve two to four times
what we do today. We have already
talked about how augmented reality
could turn a lightly trained technician
into an expert. Automatic 3D picture
analysis of medical images could help
doctors diagnose disease. Robots could
help firefighters in highly dangerous
situations. And knowledge workers
will soon have “bots” alongside
them in meetings. These bots will
understand what is being discussed
and look for relevant information
and other teams performing similar
work from which colleagues in the
meeting can learn.
32
ENTERPRISE.NXT | SECTION 02: SEA CHANGE
A proactive
approach to
transformation
The way to fend off a disruptor’s attack is
by transforming business operations.
There is probably a start-up
somewhere looking to disrupt your
business. But if you are the incumbent
in your market, the ruthless and
continuous application of digital
technology to transform your business
operations will make full-on disruption
of your business less likely. You will
be in a much better position to repel
digital disruptors if you have smart
products, digitally enabled core
operations and fabulous, digitally
fueled customer experiences.
For example, while Uber most
certainly did disrupt the taxi market
through the introduction of a new
source of taxi-driver supply, it also
applied digital technology to the
customer experience and core
operations of taking a taxi ride. If the
taxidrivers of San Francisco already
had a mobile-based hailing app, a
taxi-tracking functionality and easy
mobile-based payment, would Uber
have had the same impact on the
San Francisco taxi market?
33
34
ENTERPRISE.NXT | SECTION 02: SEA CHANGE
02
NOW
TO
NEXT
Sea Change
While digital technology is often used for change that
improves cost, efficiency and agility for IT, those changes
are likely invisible to customers and employees. At the other
extreme, digital technology can be used to disrupt business
models, like Airbnb has done for hotels. Such disruption is
certainly important to look out for, but the more likely and
fruitful application of digitization is in the transformation
of business operations.
Read the “Winning Digital” SlideShare for insights about the role digital
transformation plays in creating better customer experiences.
35
Next: Digitization impacts the entire business.
It can be used to dramatically change customer experience
(streaming a movie on Netflix is totally different than renting
a physical DVD).
It means that IT is no longer simply supporting the product.
It is the product. It's inside the product giving it functionality.
And it can be used to massively improve a company's core operations.
Digitization means that IT is no longer solely the domain of the
enterprise IT department; IT is embedded within the business.
36
03
THE NEW
PRODUCT
LIFE CYCLE
<< RETURN TO TABLE OF CONTENTS
EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
37
Methodical, long-term planning gives way
to a “try and see” mentality.
SHARE THIS WITH YOUR NETWORK
38
ENTERPRISE.NXT | SECTION 03: THE NEW PRODUCT LIFE CYCLE
Toss tradition
out the window
You can no longer rely on 18-month product cycles to rectify
all uncertainties before bringing a product to market. It’s time
to embrace a fast-fail approach.
E I G H T WAY S O U T L I E R S D I F F E R F R O M T H E N O R M
01
02
03
04
They do a
significant
amount of
innovation and
experimentation.
They adjust
and readjust.
They make a
number of
smaller bets
rather than few,
large, big bets.
They get into
new markets
early, often
using small
acquisitions.
The average size of their
acquisitions is much
lower than the 2,347 that
don’t grow predictably.
They are good at making
these acquisitions work.
Outliers always look for
a new way to do things.
Experimentation is par
for the course.
They take a small step.
Adjust. Take a small step.
Adjust. They move their
resources around as part of
this adjustment. There is
no organizational rigidity.
39
VIOLENT LURCHES,
O R I N C R E M E N TA L
I N N O VAT I O N S ?
Rita McGrath, professor of
management at the Columbia
Business School in New York,
wondered if there was something
that companies achieving solid,
predictable growth did differently.
Professor McGrath looked at 2,347
established companies and
analyzed the difference between
those that achieved at least five
percent growth per year over a
10-year period and those that
did not. Only 10 companies met
her criteria.
05
06
07
08
They have
diverse but
related
portfolios.
Innovation is
everywhere in
the company.
The whole
company strives
for speed and
flexibility.
They are stable.
They don’t lurch from one
business area to a totally
unrelated one. A pizza
manufacturer might try 3D
pasta printing. Yes, companies
are working on this, but they
would not go from pizza to
robotic sheep-shearing.
Anyone can innovate,
and top management asks
about and praises innovation.
Innovation is not limited to a
special innovation unit.
Flexibility is valued above
efficiency. They are OK
having flexible but slightly
inefficient systems.
This seems like a
contradiction, but it’s only
because they have stable
management, a secure
company strategy and loyal,
long-term customers who
enable flexibility. And while
they love experimentation,
each step is a small one
so that they don’t lurch
into instability.
40
ENTERPRISE.NXT | SECTION 03: THE NEW PRODUCT LIFE CYCLE
First to market
makes a lasting
impression
The biggest shift in thinking as disruption takes hold
will be the end of lengthy planning and production cycles.
Digitization enables us to change a product’s life cycle,
which in turn allows enterprises to conduct business in
a different way. This change of life cycle occurs because
products have software applications inside them and thus,
changes of functionality can be downloaded to them.
This new approach to life cycles can be applied not only
to products but also to digitization of customer
experience and core operations.
The central concept of the new product life cycle is taking
numerous small steps. In the past, we have favored large,
18-month or two-year projects. Taking smaller steps lets
us continually test within the confines of reality — with our
customers and our employees.
In addition, digital technology is moving so fast that there
is no way a designer can predict what will be doable 18
months or two years from now. Further, we don’t know how
customers will react to these new technologies, so we have
to take a step and see. For example, could anyone have
predicted how enthusiastically the world would embrace
the augmented reality in Pokémon Go?
Venmo
41
Robinhood
NuBank
Acorn
Cover
Hound
Banking
Goji
Loans
and Credit
Credit
Karma
Insurance
Betterment
Investing and
Retirement
Lending
Club
Wealth
Management
Avant
Credit
Home
Lending
Wealth
Front
Borrowing
and Credit
Learnvest
Retirement
SoFi
Financial
Education
Student Loan
Applications
Lending
Home
Nerd
Wallet
Common
Bond
U N D E R AT TAC K F R O M E V E R Y A N G L E
Disruption can happen to every aspect of core business functions,
from products and services to the customer experience.
Source: htp://banknxt.com/42060/disruption-digital-banking.
Privlo
42
T H E D I G I TA L
P R O D U C T L I F E C YC L E
Let’s now look at the attributes of the product life cycle that
digitization makes possible:
01
1. Minimum Viable Functionality (MVF)
Enterprises can release products before they are market ready because
digitally enabled products can have functionality added as businesses learn
how customers use the product.
At present, releasing minimum viable functionality products is something for which
start-ups have developed a reputation. Traditional companies don’t tend to think,
“Let’s release our new product idea and see how customers react.” This will change.
Business leaders will move from a traditional thinking approach to more of a “Let’s
try it and see what happens” approach.
The concept of minimum viable functionality can also be applied to digital
technology in customer experience and core operations. We might, for example,
attach sensors to the pumps in water-pumping stations and see what data is
generated. Then, after a couple of months, we might feed the data of a pump
prior to failure into a prediction engine to build a model that enables us to predict
when pumps will fail. We might then deploy an augmented reality system that
displays a pump’s schematic for maintenance engineers. And so on — a series
of steps, starting with minimum viable functionality.
02
2. Experimentation
Minimum viable functionality leads us to the second attribute of a digitally
enabled product life cycle. Because product behavior can be changed through
software updates, and because the software can send data about how customers
are using the products, we can experiment. We might, for example, release a
version of the product in just one country, monitor the data sent back by the
product, and then adjust accordingly.
Today, such experimentation is the domain of newer companies such as Twitter,
Yammer (now part of Microsoft) and GSN.com. In the future, it will be adopted by
business managers in larger, more traditional businesses as well.
03
3. Lower the Cost of Experimentation
One would have thought that as the price of commodities like fuel falls, customers
will bank the costs saved. Not so. In 1865, the English economist William Jevons
observed that as coal prices dropped, consumption rose so that the amount
spent on coal remained the same.
Anecdotal evidence suggests that Jevons’ paradox also applies to experimentation.
If we make it easy and inexpensive to experiment, then we will have more
experiments, and our rate of innovation will improve.
Lowering the cost and friction of experimentation and reducing the cost and
friction in collecting and analyzing data from these experiments are an essential
components of the new product life cycle.
4. Continuous Innovation
Related to both minimum viable functionality and experimentation is the concept
of continuous innovation. If our product can have its functionality changed by an
overnight download of new software, then we can continuously innovate, adding
exciting functionality on an ongoing basis.
04
We need to ensure that we have IT systems that support this.
5. Embrace, Don’t Punish, “Fast Fail”
Anyone who has been involved in innovation will likely say that not every step on
the road is a forward one. The wonderful Picasso Museum in Barcelona shows the
route that Pablo Picasso took to his first cubist painting. He tried one approach.
That didn’t work, so he backtracked. He attempted another route. That wasn’t
quite right, but a combination of the first and second path, with a slight twist, led
to something that changed art forever.
Picasso didn’t dwell on a route that didn’t work. He stepped back and tried
another one. This is the essence of fast failure.
Successful innovators tend to fail fast. And people involved in the creation of
the failure are supported, not sidelined. Their learnings from the failure are highly
valued. As Thomas Edison said: “I have not failed. I have found 10,000 ways
that don’t work.” Or, as Bill Gates said: “It’s fine to celebrate success, but it’s more
important to heed the lessons of failure.” So how do you inject their advice into
your organization’s DNA?
05
43
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ENTERPRISE.NXT | SECTION 03: THE NEW PRODUCT LIFE CYCLE
Industrialize
your digital
transformation
steps
Digital transformation is a continuous process. Maybe once a
month, when we look across customer experiences, products and
services, and core operations. The people driving transformation can
come from anywhere in the business. They won’t just be hardened
application development experts working in enterprise IT.
So, we have non-expert app developers doing the same
type of thing every month across a number of different
departments. In this situation, any smart organization will put
in place a foundation that allows them to “industrialize” these
steps; to standardize them so they don’t reinvent the wheel
every time, so they can ensure a certain level of quality,
and so the non-experts from the business don’t need years
of training and experience before taking their first digital
transformation step.
In the next section, we will look at industrializing digital
transformation. This is done by building a foundation that
enables enterprises to essentially automate continuous
digital transformation steps.
45
CONTINUOUS INNOVATION:
HOW THE LEADERS DO IT
SMALL, CONTINUOUS
STEPS, NOT
LARGE LURCHES
ENTER EARLY WITH
MINIMUM VIABLE PRODUCT
EXPERIMENT
FREQUENTLY
B E OK WITH
" FAST FAIL"
PRACTICE MAKES IMPERFECT
The leaders of digital transformation understand that it hinges
on continuous innovation.
FAST MEASURE
AND ADJUST
46
ENTERPRISE.NXT | SECTION 03: THE NEW PRODUCT LIFE CYCLE
03
NOW
TO
NEXT
The New Product Life Cycle
When it comes to digital transformation, large,
18-month waterfall projects are out. It’s all
about continuous innovation steps, perhaps
one a month across your whole organization.
Read more about how advances in computing change the product life cycle
in the “Everything Computes” section of our Technology.nxt report.
47
Next: Digital technology enables us (and, sadly, our competitors)
to adopt a more adaptive way of developing functionality —
customer experience functionality, product and services
functionality, and core operations functionality.
We start with a minimum viable set of features. Enough to get
going quickly and get something out there to see what our
customers and employees think about it.
We experiment. We try something, collect data from our effort and
adjust or fast fail.
We continuously innovate. We release something new every
month or so.
The new product life cycle is a huge change over how we used to
create technology-based solutions. We used to engage in large,
18-month projects. Now, we take a series of small steps, many of
them experimental, some of them resulting in failure. Not only do we
need to put in place the technology to help us support this new way
of working, but we also need to change the attitude and behaviors
of the whole company.
48
04
ENTERPRISE IT:
STRONGER
TOGETHER
<< RETURN TO TABLE OF CONTENTS
EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
49
Digital transformation is not an IT issue.
In fact, it’s not a problem at all. Rather,
it's an opportunity to rethink how
business is conducted.
SHARE THIS WITH YOUR NETWORK
50
ENTERPRISE.NXT | SECTION 04: ENTERPRISE IT: STRONGER TOGETHER
The dangers
of isolation
Digitization will bring about the
rise of the business IT developer.
As we can see from the diagram, the business is leading the
majority of digital transformation developments. This is fine.
The business is, after all, closest to its customers, products
and services, and its core operations.
What won’t work well is the business operating in total isolation
from enterprise IT. Why not? Ultimately, you can use public cloud
for your development, testing and production environments.
You don't need to talk to an enterprise IT person.
Enterprise IT, quite rightly, owns the systems of record —
those systems that log customers’ details and the details of
the transactions they make with the company. At some point,
our wondrous, new, product, customer experience or core
51
WHO’S LEADING
T H E WAY ?
72%
BUSINESS-LED
operations solution will need to interact with these
systems of record.
For example, a large bank recently released a person-to-person
banking product. Users of this new product couldn’t access
their existing bank accounts. Instead, they had to set up a new
account using the new product and transfer money from
their existing account to the new solution on an ongoing
basis. This inconvenient step introduced significant friction
for users of the new product, reducing its competitiveness
and causing derision in the press. How did this situation
arise? The new application was developed by the business
without any reference to enterprise IT; thus, no access to the
existing customer accounts — the systems of record.
VS.
28%
IT-LED
If you want to perform analytics on how your product is
bought and used (as you most certainly should), you will
need to access the systems of record for this, too.
Enterprise IT has a wealth of experience in keeping
applications up to date, supporting applications, performing
analytics across multiple sources, keeping data safe,
ensuring availability and performance, and security.
It is wasteful to throw away all this knowledge.
We believe that we can satisfy all the criteria required to
continuously digitally transform and meet the needs of the
line-of-business developers by creating what we call the
digital transformation foundation.
Source: “IT Transformation in the Digital Age,” IDC, July 2016.
Digital transformation isn’t just an
IT challenge — it involves the entire
enterprise. In fact, business often
leads the way.
52
ENTERPRISE.NXT | SECTION 04: ENTERPRISE IT: STRONGER TOGETHER
THE DIGITAL
TRANSFORMATION
FOUNDATION
Let’s look at what our digital transformation foundation needs to provide.
New Digital Pro duct Life Cycle
Continuous Innovation Steps
Applications on Anything
Advanced Data Science
N E W D I G I TA L P R O D U C T L I F E C YC L E
Enterprises must deliver minimum
viable functionality and continuously
deliver updates and innovations.
Gone are the days of the 18-month
product development schedule.
Continuous Innovation Steps
We are able to continuously deliver
new functionality, quickly putting
this functionality into production
so we can measure, adjust and
then try again (or fast fail).
Applications on Anything
If a processor is inside it, we want
to be able to create a connected
application on it that links to a powerful
server component. For example,
Google Maps may seem to be a very
powerful client application, but
actually, it’s the thousands of servers
back in the Google data center that
are doing the heavy lifting. So our
client applications are actually
seamless client/server applications
based on flexible technology
foundations that permit rapid
experimentation and updates.
Advanced Data Science
We need an advanced data science
platform that allows us to put analytics
into our products as Uber, Airbnb,
Google Maps, Spotify and Netflix do.
Such platforms help us understand
our customers and their true intent
when they interact with us. They
also help us build better products
more quickly, optimize our core
operations and help us create
superhuman employees.
We need the capability to rapidly
collect insights at the edge ­— our
customer experiences, digitally
powered products and core operations
(manufacturing shop floor, oil-drilling
platform, telecommunications or
ATM network, etc.). This allows us
to securely transfer data to the
core for analytics.
53
Fearle ss Innovation of Busine ss IT
Security
Composable Applications
Performance Flexing
and Assurance
APIs onto Systems
of Record
Automated
Quality Assurance
F E A R L E S S I N N O VAT I O N O F B U S I N E S S I T
Because our developers are likely
to be from the business and won’t
necessarily be 20-year application
development veterans, we need to
put in place a foundation that lets
them innovate without fear.
Security
Developers need to be able to create
secure applications without worrying
about the details of how to make
these application secure. They
know that security is important, but
they don’t want to be mired in
the intricate details of how to do it.
Performance Flexing
and Assurance
Business IT wants its applications’
performance to be flexible, and
wants to ensure the availability and
performance of these applications;
but again, they don’t want to know
the details involved.
Automated Quality Assurance
They want to ensure the quality of
their applications without having to
be bogged down with the details of
how to set up testing and automation.
Composable Applications
The new product life cycle is all
about speed — quickly taking small
digital transformation steps, rapidly
receiving the feedback, and either
fast failing or adjusting. You may have
heard of the “API economy.” This
phrase refers to the rise of “functions
as a service” — useful functions from
cloud providers, accessible through
APIs. The resulting applications are
called composable applications.
We need our digital transformation
foundation to support the development,
testing, deployment, management
and governance of such applications.
APIs onto Systems of Record
We need APIs on the enterprise’s
systems of record; APIs are created
so business IT developers can
fearlessly innovate without damaging
an organization’s data.
This is a technology-oriented view of
our digital transformation foundation.
Based on extensive experience working
with customers, we believe that even
more important and more fundamental
than the technology are the people and
processes involved.
54
ENTERPRISE.NXT | SECTION 04: ENTERPRISE IT: STRONGER TOGETHER
04
NOW
TO
NEXT
Enterprise IT: Stronger Together
Unlike the installation of IT systems in the past, being
successful at digital transformation is about more than just
the application of technology. If we don’t have the right people
and processes in place, we will fail. Absolutely guaranteed.
55
Next:
Create an “act then adjust” mentality, not
just in IT, but across the whole business.
Fuel continuous innovation effects in a
more venture-capitalist-oriented manner.
Set up a
system that
actively scouts
for new digital
technologies.
Give employees the time and resources to explore how these
technologies might be used.
Silos and waterfall processes simply won’t work in this new digital
world. Form and support teams that are cross-functional.
56
05
CULTURE
SHIFT
<< RETURN TO TABLE OF CONTENTS
EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
57
To create an environment primed for
digitally fueled innovation, you have to
change your company culture.
SHARE THIS WITH YOUR NETWORK
58
ENTERPRISE.NXT | SECTION 05: CULTURE SHIFT
Just try it
Stop overthinking. Start experimenting.
Based on our observations across
thousands of enterprise customers,
we believe that digital transformation
efforts will fail if they are isolated
within application development
groups and lack broader support
from both business and enterprise
IT. They will fail because business
management has to behave
differently. Funding must be
revamped, measurements need to
change, team compositions have to be
altered and go/no-go decisions must
be reached after careful thought.
Let’s look at a management
framework that must be in place
for digital transformation to work.
Organizations have a working style.
Some are slow and careful; some
move at lightning speed. Some take
risks; others are risk-averse. In order
for digitally fueled innovation to thrive,
the organization must have the correct
attitude in order to accomplish its goals.
Some organizations are hierarchical.
Everyone adheres to a set of
procedures and rules. Unfortunately,
a hierarchical organization will weigh
down the experimental nature of
digitally fueled innovation.
Other organizations are highly
discursive. Ideas are valued and
discussion can be, and usually is,
endless. Such organizations believe
they can know how customers will
react to, say, augmented reality,
if they discuss it at length with
enough stakeholders.
What we are looking for is an
organization that is biased toward
action. These organizations know that
much of their digital transformation
work will be in uncharted territory,
so rules won’t work. They know that
no amount of talk can help them
know what customers will think of
a new, digitally powered product
or a customer experience.
While you're unlikely to move
your entire organizational culture
from rules-based or discursive to
action-biased overnight, you can
ensure that the teams working on
your first few digital transformation
projects behave in this way. “Let’s
try it and see” should become
their mantra.
59
POWER TO
THE PEOPLE
Digital transformation isn't just
about technology. People and
process also matter.
5%
8%
Technology Issues
37%
Process Issues
Source: Survey Analysis: DevOps Adoption Survey
Results,” Gartner, September 2015.
50%
People Issues
Information Issues
60
ENTERPRISE.NXT | SECTION 05: CULTURE SHIFT
Invest in
the moment
As business accelerates, managers must
fund good ideas when they arise.
Funding needs to be provided differently. The traditional funding model is
centralized and is typically biannual. We have to leave room in our funding
model for ideas that pop up outside of the planning cycle. We need to allocate
money as venture capitalists do. And we must measure the success of these
projects like venture capitalists, using more than a pure measure of revenues
to determine success.
Finally, we have to change the criteria we use for deciding what to fund. ROI is
out the window. It’s unlikely Steve Jobs considered only the ROI of the Apple
iPhone before he sank multimillions into its development.
61
BACK TO S CHO OL
Because customer
experience, products
and services, and
core operations will
increasingly be digitally
fueled, it is important
your management
team understands
the technologies and
capabilities involved
so they can make
informed decisions. Take
a leaf out of GE CEO
Jeff Immelt's book and
go back to school on
software and analytics.
62
ENTERPRISE.NXT | SECTION 05: CULTURE SHIFT
All work
and
no play
Successful enterprises allocate
resources to encourage
experimentation and exploration.
We need to adjust our attitudes toward play and exploration,
and its funding. Google, which truly embraces this new
product life cycle, deliberately gives its staff time and
resources to explore fresh ideas. Management doesn’t
consider play a waste of time. It’s seen as part of the creative
process and as a chance to learn how new technologies can
be used to solve problems.
Play requires funding, both in giving people a proportion of
their week for it (Google allocates one day a week) and for
funding of “play pens” where employees can try out their ideas.
It’s not just product engineers who need time to play.
Customer experience, manufacturing, maintenance and
support, and supply ecosystem teams need playtime, too.
63
64
ENTERPRISE.NXT | SECTION 05: CULTURE SHIFT
Technology
scouting
Digitization is a tall order, and you likely won’t have the
resources in-house to make it happen. Assemble scouting
teams and recruit the necessary talent from wherever it hails.
65
When it comes to digitally fueled
products, customer journeys and
back-end business processes, many
of your partnerships are going to be
relatively straightforward. You might
create an application using a series
of functions as a service — cloud
services that provide a certain
function you need. Assuming
these functions as a service don’t
introduce friction for your customers
and risk for your business, they will
probably allow you to create new
functionality quickly. For example,
many FinTech start-ups provide
functions as a service (such as Twilio,
which offers APIs for video and voice,
messaging and authentication),
providing leading-edge, innovative
functionality. Two former Google
engineers developed Thought
Machine, a modern, cloud-based
operating system that helps
banks reduce friction and
update legacy systems.
As you start on your transformation
journey, you might want to think like
a sports team. Manchester United and
Barcelona have networks of scouts who
watch teams throughout the world.
They're looking for up-and-coming
players they can take into their
academies. Companies that are seriously
embracing digital transformation do
similarly, deploying scouts to tech
hubs like Israel, Berlin, London and,
of course, Silicon Valley.
Even if you don’t physically place
technology scouts in innovation
centers, you can at least track digital
developments: sensors, AI, robots, drones,
deep learning, prediction engines,
recommendation engines, wearables,
3D printing, blockchain, cloud computing,
edge computing, video recognition, voice
recognition and image recognition. These
technologies are evolving quickly. We
need to keep abreast of developments
in order to take advantage of them.
66
ENTERPRISE.NXT | SECTION 05: CULTURE SHIFT
A new attitude
toward teams
Multidisciplinary collaboration is vital in the era of digital disruption.
In 1776, Adam Smith published
“An Inquiry into the Nature and
Causes of the Wealth of Nations,”
a foundational text of modern
economics. It is rumored that Margaret
Thatcher kept a well-thumbed copy
of the book in her handbag.
In “Wealth of Nations,” Smith famously
described the division of labor
occurring as the Industrial Revolution
took hold. For example, rather than
having one person create the whole
cart by himself, Smith noted that one
team should specialize in the wheels,
another in the suspension, another in
the body and a fourth in assembling
the entire cart. This is how we’ve
arranged our manufacturing from that
day forward. And if the product being
manufactured doesn’t change that
often, this system works very well.
However the age of digitization has
changed the product life cycle. We
release a product with minimum viable
functionality. We experiment. We
continuously innovate. We fast fail.
And the idea that we can optimize the
whole by optimizing each individual
function breaks down. Product
management can no longer ignore
the designers. The designers can no
longer disregard the quality team.
And everyone needs to consider how
the product is going to be deployed,
operated and secured.
Enterprises must form and maintain
multidisciplinary teams. Technologists
require an understanding of customer
journeys and how back-end
processes work. Customer journey
experts have to understand what
is technologically possible and how
it can be applied to customer
journeys. Likewise, operations specialists
ought to know how technology can
speed up, simplify and reduce the
friction in their business processes.
We need to create mutual respect
and trust between all these
disciplines. Research has found that
trust is one of the strongest
predictors of excellent performance
in a multidisciplinary team. Mutual
respect and trust can be built, and the
attitude of management plays a very
important role in this.
For example, it’s disappointing for
line-of-business workers to hear,
“Hi, I’m from enterprise IT and I’m
going to be involved in your project.”
A more collaborative approach is to
say, “Hi, I’m from enterprise IT and I’m
measured in exactly the same way
as you, and I’m going to be rewarded
(or penalized) in the same way as
you.” We need the same measures
and commitment from everyone in
multidisciplinary teams.
67
THE BENEFITS OF
T R A N S F O R M AT I O N
Digital transformation initiatives
are driving real results for enterprises
across the areas of customer
experience, products and services,
and business operations.*
Number of
Respondents
*Figures are approximate.
1600
1200
Improve the
customer
experience
620
Improve internal
communication
Enhance our
existing products
and services
630
615
Launch new
products and
services
1000
800
Automate our
operational processes
Expand our reach
to new customers
and markets
455
420
600
490
400
200
Ensure
cross-channel
consistency
176
CUSTOMER
EXPERIENCE
Transition physical
products/services to
digital products/
services
90
PRODUCTS
AND SERVICES
Enhance the
productivity of
workers
380
0
BUSINESS
OPERATIONS
Source: : https://www.capgemini-consulting.com/resource-file-access/resource/pdf/embracing_digital_technology_a_new_strategic_imperative.pdf.
1400
68
ENTERPRISE.NXT | SECTION 05: CULTURE SHIFT
05
NOW
TO
NEXT
Culture Shift
This is not like other IT-powered disruptions. If we simply
give resources to IT, whether business or enterprise IT, and
tell them to “do some digital disrupting,” they will fail. The
whole of the enterprise needs to be fully engaged because
digital technology fundamentally changes the way we do
business. It can no longer be about long-term planning,
carefully written specifications and annual resourcing cycles.
69
Next: The new approach to conducting business is a “Let’s try it and
see” model, which includes the following tenets:
Experiments are good, and experimentation should be conducted
quickly and easily.
Failure is to be embraced. As Thomas Edison said, “I have not
failed. I’ve just found 10,000 ways that won’t work.”
Play should be encouraged because it generates innovation.
Multidisciplinary teams must be formed to facilitate diverse
thinking and ongoing collaboration.
70
DIGITIZATION
KNOWS NO
BOUNDS
<< RETURN TO TABLE OF CONTENTS
EXECUTIVE SUMMARY
01
02
03
04
05
CONCLUSION
71
Digital transformation isn’t a revolution restricted
to those in power. It’s by everyone, for everyone.
And it’s going to change every enterprise.
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72
ENTERPRISE.NXT | CONCLUSION
It’s not
the end of
the world
Digitization is different from other
technology shifts. It’s different because
it’s so wide ranging and affects all
industries. It’s different because it can
wipe out long-established players. It’s
different because we have software
applications inside products, and
this means we must work toward a
different product life cycle. It requires
whole new levels of agility — relying
less on multi-year projects and much
more on a series of small steps of
continuous innovation.
The shift is not only about technology
but also who uses digital technologies
and how. Lines of business are
increasingly taking the reins as they
create and even “code” the digital
customer experiences, digitally
augmented products and services,
and digital operations that deliver
value to customers and employees.
Enterprise IT has the opportunity
to enable digitization by creating a
robust, secure and agile technology
foundation that propels the
business forward.
a month or every few weeks. This
platform also should enable business
people, often non-experts when it
comes to application development,
to create the applications and data
analyses these steps require.
In order to take advantage, of and
not be negatively disrupted by, this
digital resolution, we need two things:
Second, because of the new product
life cycle, we must change the way
our organizations behave — their
attitudes, the way they fund and
govern new projects, the composition
of teams, and their attitude to playing
and exploring.
First, we must put in place a technology
foundation that lets us make hundreds
of continuous innovation steps — once
We will be articulating both the
technology and the people and
process aspects of this digital
73
transformation foundation in more
detail in an upcoming report.
The changes required are fundamental.
But it’s going to be well worth it
because we can turn ideas into
business value faster than ever.
Digitization can completely transform
customer experiences. It can turn
your employees into superhumans.
And it enables you to create products
that were simply not possible before.
In short, digital disruption will change
the world. What part will you play?
74
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