Change or die

The world has changed. Information technology has changed every aspect of our lives: from fundamental things, such as how we purchase goods, interact with brands, and even do our jobs, to how we communicate with each other. In fact, a study by British psychologists suggests that around two billion people use smartphones across the globe, with over half the population in developed countries relying on them on a daily basis. That's over half a billion people worldwide using their phones to do all sorts of things, 85 times on average each day, according to the same study.

Refer to the study Beyond Self-Report: Tools to Compare Estimated and Real-World Smartphone Use for further information on the research mentioned.
http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0139004#pone.0139004.ref001

However, the aforementioned study only focuses on smartphone usage. If you factor in interactions with other devices, such as tablets, personal computers, wearables, and even machines (that is, smart cars and voice assistants such as Alexa), the number of interactions is huge.

What does this hyperconnectivity tell us?

For a start, it is pushing the boundaries of what we thought was possible and making science fiction seem real. Most importantly, it has opened up new avenues for businesses to innovate and disrupt the market, which is exactly what the so-called "digital disruptors," such as Google, Apple, Facebook, Amazon, and Netflix, in fact did, and continue to do. Established businesses, such as Blockbuster and Kodak, couldn't cope with the (digital) innovation introduced by Netflix and Apple, and ended up filing for bankruptcy. Traditional industries, such as the taxi industry and hospitality, are also being severely disrupted by Uber and Airbnb.

Figure 1.1: Apple digitally disrupted Kodak

These companies are just the obvious examples that everyone talks about. With over 100 million new start up businesses launched every year, even if only 10% (as analysts predict) are successful, we are talking about 10 million new companies with the potential to become the new Netflix or Uber, but for different industries.

Further reading: Shocking Number of Worldwide Business Start-Ups Each Year?
http://www.lerumba.com/Directory/shocking-number-of-worldwide-business-start-ups-each-year-article-39.aspx#.WTfmxRPytE5

Now, because of this, it's no wonder that most organizations globally have embarked on digital transformation initiatives in order to avoid being (further) disrupted. As Harvard Business Review (HBR) nicely put it:

"Digital is no longer the shiny front end of the organization - it's integrated into every aspect of today's companies."

According to the same article by HBR, the most disrupted industries are those that relate to Business to Consumer (B2C), with media and telecom at the top of the list, closely followed by financial services and retail:

Figure 1.2: Disruption according to industry

However, these figures should not come as a surprise. A closer look shows that there is a direct correlation between the disrupted B2C organizations and the fact that 2 billion individuals are using their smartphones and other devices frequently. Put simply, B2C organizations that haven't been able to innovate and engage customers in different ways, and through digital channels, are more susceptible to being disrupted by newer and more agile businesses:

"The most disrupted industries typically suffer from a perfect storm of two forces. First, low barriers to entry into these sectors lead to more agile competition. Secondly, they have large legacy business models which often generate the majority of their revenue. These organizations, therefore, have embedded cultural and organizational challenges when it comes to changing at the pace required."

Further reading: The Industries That Are Being Disrupted the Most by Digital
https://hbr.org/2016/03/the-industries-that-are-being-disrupted-the-most-by-digital

The digital dilemma

These organizations that are more exposed to digital disruption are therefore faced with a dilemma. In order to remain relevant and stay in business, they must create a digital strategy that allows the business to innovate and be more agile. However, in order to do so, they can't simply get rid of old systems of record, most of which are legacy and contain critical information assets that support day-to day-operations.

Figure 1.3: The digital dilemma

Bearing in mind that most of these organizations can't afford to start from a white sheet of paper, the digital strategy must therefore cater to the transformation of hundreds (if not thousands) of existing systems, many of which are considered legacy.

Such an undertaking can be huge, not only in terms of costs to the business, but also in terms of the risks. This is exactly where the dilemma lies: do nothing and save costs/avoid risks, and most likely end up being disrupted, or become a disruptor by taking the business on a digital transformation journey, which could be risky and costly.

Access to enterprise information and functionality is king

Is it really that risky and costly to take the business on a digital transformation journey? Well, as with everything, it depends. Organizations that perceive digital transformation as merely an exercise to adopt omnichannel strategies, without first understanding "why" they are doing it, or "what" they are trying to accomplish, will most likely fail to realize any business benefits. For these organizations, such an undertaking will have plenty of unknowns and will therefore be perceived as risky and costly.

Figure 1.4: An accidental multichannel strategy

Organizations that start off with the creation of a digital strategy to articulate the targeted business goals, and also identify what business and technical capabilities are required in order to achieve this, will most likely perceive the digital journey as a key enabler for the business strategy, rather than just another expensive IT project. For such organizations, digital transformation represents a justifiable and calculated risk.

It's no wonder that Forbes listed digital transformation as the #1 priority for Chief Information Officer's (CIO) in 2017:

"Either companies figure out how to outsmart, outpace, and outmaneuver their competitors with the clever, customer-focused deployment of digital technologies, or they will be marginalized-sooner rather than later."

Further reading: Top 10 Strategic CIO Priorities For 2017
https://www.forbes.com/sites/oracle/2017/01/17/top-10-strategic-cio-priorities-of-2017/

However, in order to achieve this, the devil is in the detail. The "how" question should not be forgotten and must be thoroughly addressed while defining the strategy. For example, one of the biggest challenges faced by organizations undertaking digital transformation is around how to get access to core enterprise information assets, most of which are typically locked in hundreds of systems of record. Therefore, without unrestricted, secured, and reliable access to such systems, introducing any sort of innovation will be nothing more than a prototyping exercise.

A system of record (SOR) is a data management term for an information storage system (commonly implemented on a computer system running a database management system) that is the authoritative data source for a given data element or piece of information. Source: https://en.wikipedia.org/wiki/System_of_record