Since 2000, 52 per cent of the Fortune 500 have either merged, gone bankrupt, or fallen off the list – because of the huge wave of digital change that has occurred, starting with the dotcom bubble in 2000. And those who turn their back on digital disruption do so at their peril, said Ray Wang, founder, chairman and principal analyst at Constellation Research, who presented a keynote at the SAUG Summit 2014.
While it’s easy to get distracted by the technologies themselves – mobile, social, cloud, big data – it is actually the behaviour changes prompted by the technology driving the transformation.
“People are creating brand new business models with these technologies, they are doing something different, and in the course of that disruption, there is massive change,” Wang said.
“They are no longer building products and services, they are focused on the experiences and outcomes, and they are actually now pushing out even further by trying to keep a brand promise. This is very important as we get into an era of digital business, because one bad experience cascades everywhere, and every set of good experiences builds that brand over time.”
This is not confined to the world of the start-ups either – Wang pointed to German medical device manufacturer Siemens as an example of using digital innovation to improve their service to customers.
Once customers have invested in a million-dollar machine from Siemens, on top, they pay for support maintenance – paying more for a higher percentage of uptime. To run this business model, Siemens needs data to tell it exactly why machines go down and when, which can also then be used for consulting and benchmarking.
“They are monitoring that machine on an hourly basis to figure out if a component is going. In this digital world, my business as a manufacturer is now able to take data analytics from a sensor analytic ecosystem, use that data with a rising model, and also deliver services in a way that their customers care about,” Wang said.
While it is easy to get caught up in the hype of big data, the point of having access to these vast repositories of information is actually to get insight in order to take action.
“This is what we call the data decisions pipeline. Every single digital business cannot be done without having a data pipeline. If you don’t have the data, you can’t make the next set of decisions,” Wang said.
Mapping the path
According to Wang, there are seven ‘signposts’ to be truly successful as a digital business in the networked economy.
- Right-time contextual relevancy. This means showing consumers the relevant information that will be important for them to get things done.
- Authenticity. To achieve this, brand methodology is key. “In a world of clutter and noise, we would have to get to this level of authenticity in order to be successful,” Wang said.
- Choose your own adventure – by moving to probabilistic processes that can orchestrate APIs.
- Utilise cognitive and soft warning systems. The programmatic systems we have used in the past are now being trained – going through learning processes to expand and change – and we will have more systems that incorporate artificial intelligence in the future. “We are seeing it in IBM Watson; we are also seeing it in other areas in stock trading systems. They are basically learning on the fly – figuring out patterns in the stockmarket, reacting to those patterns, powering those patterns. That’s actually happening now, whether it’s in healthcare, travel, retail, or medical research,” Wang said.
- Facilitate access to information. Having strong capability around integration and publishing streams of information will be important – and data access will be of higher value than data ownership.
- Rethink competition. “We are not competing with the companies we think we are competing with. We are competing with self-interest, and part of self-interest is the friction we experience when we have to do something,” Wang said. “If it’s easier, you will trade privacy for convenience. Every business at the end of the day is competing for someone’s attention and time, and if you don’t make it easy, you are going to lose. This is about transforming those experiences, so they are simple, easy to use, and instinctive.”
- Collaborate within the networked economy and ecosystem. Companies will build platforms, customers will build their own platforms, ecosystems will be created for co-innovation and co-creation.
“We are seeing these ecosystems pop up everywhere, and they are being organised by industries; sometimes they are led by technology companies, sometimes led by a few industry giants,” Wang said.
“They are pushing markets forward, and you are going to see more and more of these over time. It might even happen in your procurement system, inside something like Ariba.”
Generate true digital disruption starts with thinking about new experiences, and building these experiences around data and new business models.
“Think about how you build an organisation that allows you to create and innovate, and then about where you can put these technologies into existing infrastructure. You want to leverage as much as you can, because every dollar is important here,” he said.
“We are going to move away from gut-driven decisions to data-driven decisions, but you can’t do that unless you are collecting all this data, finding the patterns, getting to the insight. And then do not go it alone – find someone in a different industry that has similar goals, find a system integrator that wants to build with you, find a technology partner that wants to take you out of your current misery.”
The C-suite is also having to think dramatically differently.
“Your CFO needs to understand the impact of pricing models in digital, and the fact that we have moved from massive units of consumption to varying sizes of usage. The HR person is thinking about who to retire and what skill sets are we looking for – are they technical skills or are they aptitude skills?” Wang said.
“The CIO is thinking, how do we enable these technologies, how do we stabilise and actually modernise the organisation? The CMO has got to think about how do we track the next generation of customers and how do we make sure that we are delivering the experiences they expect.”
While the digital road might sound overwhelming, the alternative could be worse – ending up like one of those former Fortune 500 companies. Obsolete.
This article first appeared in the Inside SAP Yearbook 2015 (published November 2014).
