According to a recent Gartner CIO 2016 Agenda report, the digital journey is deepening and CIOs are under pressure to find new ways of responding to it in order to exploit and explore its potential. Digitalisation is no longer a trend, it’s a core competency that can support the organisation’s strategic vision, provide new revenue opportunities and drive business value.
“Digitalisation is the process by which technology is used to modernise operational structures and business architecture, particularly within an established organisation using lots of legacy systems and infrastructure,” says Rory Headon-Weeks, specialist sales lead and CTO at Microsoft South Africa. “Within a digital economy, it is used to enable agility and help establish new types of business models and revenue streams. Employees are empowered to move at a pace unimaginable in earlier generations, while new communication channels have become available for organisations to be more responsive to customer demands and complaints.”
Digital transformation is key when it comes to the customer. Regardless of industry, niche or market, the customer is demanding more speed, flexibility and capability. Every company must become a digital business as both public and private sectors respond to digital disruption with increasing pressure to act more quickly and reduce time to market for products and services. According to Vernon Thaver, CTO, Cisco South Africa, digital has the potential to reshape markets, possibly at a far greater rate than any other force in history. It can transform infrastructure, change government capability, affect public services and enable diversity in entrepreneurship and education.
“A digital business strategy creates value and revenue from digital assets,” says Kholiwe Makhohliso, country manager, Oracle South Africa. “It goes beyond process automation to transform processes, business models and the customer experience by exploiting the pervasive digital connections among people, places and things. Companies with flexible and adaptive business processes are best positioned to make the transition.”
The CIO advantage
That said, digitalisation presents challenges in terms of talent, structure and the CIO’s role. While it transforms the economy, industry and infrastructure, it introduces skills requirements, strategic implementation and a fresh look at a long-term view. In a recent research report titled ‘Recasting IT for the Digital Age’, the Boston Consulting Group (BCG) found that digital technologies are giving the business the ability to create digital initiatives with limited involvement from the IT department. There are a number of advantages to this, such as new products and services launched to market more swiftly, but there does remain a challenge in the development of a variety of independently driven initiatives with no unifying standards. This, in turn, can lead to ‘high complexity, additional costs, lack of compatibility and security issues’.
“There is a very real risk that the IT department could be largely excluded from the company’s digital initiatives and relegated to the management of back-office applications,” says Hans Kuipers, partner and MD at BCG. “We believe that corporate IT can not only avoid such a risk, but actually increase the importance of its role by challenging its self-perception and determining exactly how it can provide real value with regard to digital technologies. The way the CIO should prepare and implement digital in the company depends on the industry, the company’s current digital maturity and its priorities, among other factors.”
The third era
Gartner has described digitalisation as the ‘third era of enterprise IT’, which is, in layman’s terms, business and systems operating out of the silo mentality, instead forming a cohesive whole that understands the customer, can communicate across channels and is capable of using all forms of technology to drive a competitive advantage. Cisco’s Digital Vortex: 941 leaders whitepaper found that most CIOs are not ready to adopt digitisation, with only one in four leaders globally saying they are being proactive.
“The third era of enterprise IT will bring with it autonomy through the Internet of Everything in a faster and cheaper way than ever before,” says Thaver. “Businesses that do not drive their own digital business transformation will be left behind. Those that do will be pulled toward a digital centre in which business models, offerings and value chains are digitised, driving new revenue streams and substantive business outcomes.”
There is a very real risk that the IT department could be largely excluded from the company’s digital initiatives and relegated to the management of back office applications. – Hans Kuipers, BCG
The CIO Digital Business Transformation Playbook from Forrester Research found that few companies have made the leap to digitising their business strategy, with even fewer companies having the right people, culture and technology to execute a digital strategy. Only 27 percent of leaders ranked recruiting the right talent as a top priority for success and only 26 percent of executives felt confident that their company fully understood the potential for digital. There is a gap between potential and implementation.
“Organisations that don’t transform risk being disrupted by newcomers that are digitally aware. The IDC predicts that by 2018, one third of the top 20 market share leaders in most industries will be significantly disrupted by newcomers that use the third platform to create new services and business models,” says George Kalebaila, senior research manager, International Data Corporation, Sub-Saharan Africa. “Digital transformation can be daunting, especially for large organisations, as it entails cultural and leadership transformation. The best advice is to follow the ‘eating the elephant’ strategy of taking small bites to achieve a larger goal.”
An uncomfortable truth
Ultimately, it isn’t so much a case of if digital transformation should take place, but rather when and with what level of insight and agility. There is a need to avoid the lengthy and complex IT implementation programme of the past and, instead, focus on solutions that are easily adapted to shifting markets, customers and organisation requirements.
This type of solution typically shines a bright, and sometimes uncomfortable, spotlight on an organisation’s IT architecture. – Hans Zachar, Accenture Technology Strategy, South Africa
“This type of solution typically shines a bright, and sometimes uncomfortable, spotlight on an organisation’s IT architecture,” says Hans Zachar, MD, Accenture Technology Strategy, South Africa. “Digital solutions require a much greater focus on real-time, always-on-type interactions and this can expose integration complexity and an inability to operate in real-time. As businesses become more comfortable with the digital concept, however, we see its role in the business environment evolving to a more partnership-type mindset, where digital is allowing businesses to collaborate and develop integrated offerings outside of their traditional business focus areas.”
Finding the value in digital transformation
It’s one thing to laud the potential of digitalisation for the organisation, but how can it drive value and deliver results? The experts weigh in:
- Rory Headon-Weeks, Microsoft: “The ability to convert big data into actionable insights will provide companies with a strong competitive advantage in the near future, by enabling business leaders to take intelligence-based decisions.”
- Paul Swarz, Argility: “The failure of CIOs to understand the customer, their needs and preferences, will mean that business will decline, customers will vote with their feet and your competitor, who has adopted a digital transformation strategy, will get your business.”
- Vernon Thaver, Cisco South Africa: “South Africa needs to leverage technology differently to the rest of the world so that it can benefit as many people as possible, as fast as possible. It’s up to business and government leaders to lead the way with innovative and creative ideas on how we can achieve this.”
- Mark McCallum, CTO, Orange Business Services Africa: “Enterprises must think of themselves as part of an energised ecosystem that connects digital resources both inside and with outside partners.”
- Mpumi Nlapho, head of Demand Management, Intervate: “CIOs need to be advisors and thought leaders, guiding a business towards evolution of its practices and using technology to introduce new business models. Traditionally, ways of increasing revenue and staying ahead of competition was the onus of financial, operational and sales departments. Now, IT departments need to guide these departments towards implementing a digital way of doing business.”
- Henk Oliver, director, RubiBlue: “The question is not really the preparation for digitalisation, but rather to be sure that the organisation has the correct CIO who can accomplish and grow with the digital era. They need to know the current trends and solutions and understand the industry and business.”
- George Kalebaila, IDC: “Digital transformation is one way of creating ‘anti-fragile’ businesses that not only bear such disruptions, but also leverage and thrive on them.”
- Matthew Kibby, regional director, Sub-Saharan Africa, VMware: “The digital future presents South African companies a unique opportunity as it enables IT to deliver global enterprise-class services at the speed of business.”
- Leane Hannigan, director cloud solutions, Westcon-Comstor Southern Africa: “IT can become the innovation hub it needs to be – developing applications and solutions for the business outside of just delivering the infrastructure needed to host it.”
- Craig Terblanche, Outsystems: “New business models and value streams – as companies use their technology architecture as a springboard to test, learn, rapidly iterate, and attack the most profitable areas of opportunity.”
This article was first published in the June 2016 edition of ITWeb Brainstorm magazine. To read more, go to the Brainstorm website.