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MIT Sloan scientist shares digital transformation lessons for older companies

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Not sure how examples from Apple, Amazon, Uber, or Airbnb can apply to your older organization currently on its digital transformation journey?

Not all of us can be digital natives, but a new book from MIT Sloan’s Center for Information Systems Research principal research scientist Jeanne W. Ross (along with Cynthia M. Beath and Martin Mocker), is exploring lessons from established organizations that have made substantial progress in their own digital transformation work.

Designed for Digital: How to Architect Your Business for Sustained Success distills five years of research, which includes case studies and surveys from hundreds of business and IT leaders. Most companies represented were very early in their DX journey, but examples of established companies that found success in navigating the digital waters include DBS Bank, LEGO, Philips, Schneider Electric, and USAA.

David F. Carr, in an article from The Enterprisers Project, outlined five key takeaways from the book:

1) Your business needs a digital design

Instead of trying to be Amazon, your organization should be figuring out how to continue to do what it does well and add digital products that enhance its products and services,” explains Ross.

To figure out what makes sense for the organization, you need a design for your business, Carr elaborates. That means better distribution. As the book explains, “The accountability framework for digital devolves many decision rights to autonomous teams while creating the context to help these teams make the right decisions.”

2) IT architecture is important, but not the point

Frequently overstated by marketing experts is that digital transformation is more about business strategy than the technology. 

The point is not to design an elegant digital system that will impress other IT architects but to use technology to create business opportunities,” Carr summarized.

3) A robust operational backbone is necessary but not sufficient:

An important distinction Ross and her fellow authors make is between the operational backbone and the digital platform.

The former means the systems at the heart of operational efficiency, like ERP, supply chain, and CRM systems. “If your organization has been around a few decades, your operational backbone includes all the things you were supposed to have been integrating and optimizing all along.”

The digital platform, however, involves the new technologies your organization needs to create digital products. This platform will be a custom creation, due to the diverse needs of business design.

A major reason organizations have for not reaching digital innovation is that their operational systems are holding them back, which pivots to the next takeaway observed by Carr.

4) Pivot to digital ASAP

The need for a robust operational backbone may mean your organization needs to devote more energy to boring but important backend systems before it can do the cool new digital stuff,” explains Carr. “On the other hand, be alert for the point where it makes sense to declare your operational backbone ‘good enough.’”

An example used in the book is of Schneider Electric, a multinational headquartered in France that makes electrical distribution and management products for utilities and industry. Management recognized the wasted potential of divergent IoT and cloud efforts, gathering them into a coherent cloud platform.

5) Create a digital platform, not an isolated app

While a series of apps might be the “cooler” approach, a digital platform offers reusable components with support for all digital products — both now and future ones — ingrained in its design. 

A perfect, flexible, and scalable platform isn’t going to happen immediately, so evolution is a necessity once the work is started. As the book explains, “Digital companies will be tempted to simply code the functionality for any given offering in a one-off, monolithic fashion.” This strategy could work in the early stages, but will culminate in a rework when customer demands create opportunity for adaptation.

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Sustainable datacenter region coming to Sweden in 2021, accelerating the country’s digital transformation

Microsoft is investing in Sweden thanks to the Scandinavian country’s strong commitment to sustainability and innovation.

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In May of last year, Microsoft announced plans to develop new data centers in Sweden. The goal? Making them “among the most sustainably designed and operated in the world.”

The company is now making good on their pledge with a press release from November 24, confirming they’ll launch a “world-class, sustainable datacenter region in Sweden in 2021 with presence in Gävle Sandviken and Staffanstorp.”

Investment details

The news comes on the heels of Microsoft’s announcement of a significant digital transformation investment in Greece, involving the construction of new datacenters. This also includes a plan to skill approximately 100,000 people in Greece in digital technologies by 2025.

“Building on Microsoft’s 35-year history in Sweden and strong partnerships across the energy, manufacturing and retail sectors, we are looking forward to delivering the Microsoft Cloud from this new datacenter region in 2021,” said Jean-Philippe Courtois, Executive VP and President of Microsoft Global Sales, Marketing and Operations.

“We believe that digital transformation should always be both inclusive and sustainable.”

Elaborating further, Hélène Barnekow — General Manager of Microsoft Sweden — explained that Sweden is an ideal environment for such an investment because of its renowned leadership in sustainability, innovation, and gender equality:

“It is one of the places in the world where IT and tech have the greatest potential to create new opportunities for the individual, the organization and society, she said.

“In this time of change, we invest in the digital infrastructure and our Swedish ecosystem to accelerate digital transformation that will empower public and private companies to innovate, providing a strong digital foundation for the country’s future growth,”

As a result of these datacenters, Microsoft explains, Swedish businesses can “empower employees, engage customers, transform products and optimize operations — all through connected experiences and supported by advanced data privacy and security.”

Microsoft will also invest in skills development, providing digital skills training for up to 150,000 Swedes. 

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Investing in digital resiliency

A new index from IDC shows growth in cloud, collaboration, and security investment.

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Is your business digitally resilient? 

IDC’s new Digital Resiliency Investment Index is a look at the progress of organizations in their investment towards digital resilience. This is especially important now with this year’s digital transformation acceleration.

Results from the initial index show an overall steady increase in investment toward resiliency. 

Organizations have placed priority in cloud, collaborative, and digital transformation projects. Thanks to the pandemic-related shift to work-from-home and the aforementioned increase in cloud adoption, significant investments have been made in security.

According to IDC prediction, investment toward digital resiliency will increase in 2021, in tandem with economic recovery.

In terms of geography, digital resiliency investment had the fastest growth in the Asia/Pacific region. While US investment increased in October, Europe’s had a slight decline in the same period — as the continent was experiencing a significant surge in COVID cases and restrictions. 

Background

Two factors make up the index:

  • Digital Core Investments, described by IDC as “spending on the core components of digital resiliency: cloud, security, collaborative support for remote workers, and digital transformation projects.”
  • Digital Innovation Investments, which are “measured using a monthly survey of enterprises on their current and anticipated IT investment focus, including how much new or reallocated spending is targeted at digital resiliency and business acceleration versus crisis response measures.”  

“Digital resiliency refers to an organization’s ability to rapidly adapt to business disruptions by leveraging digital capabilities to not only restore business operations, but also capitalize on the changed conditions,” explains Stephen Minton, VP in IDC’s Customer Insights & Analysis group. 

Organizational success in the midst of a global pandemic has largely hinged on the ability to react quickly to change, he says. The difference between rapid adaptation and simply responding to disruption? A plan.

“Investments in digital capabilities not only enable an organization to adapt to the current crisis but also to capitalize on the changed conditions.”

Looking ahead

“The next several months may put increased pressure on some organizations to respond to second waves of COVID infections and economic lockdowns, which will be reflected in our monthly surveys throughout the winter,” adds Minton. 

“What we have learned already this year is that the organizations which were among the early adopters of cloud, digital, and collaborative technologies were best-positioned for a crisis no one could have predicted.”

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Digital transformation for economic recovery

“With the right steps and actions, businesses and governments can take the crisis as an opportunity to build for the future,” explain two World Bank economists.

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Digital transformation is having a moment. 

Over and over, widespread reports and surveys show that — in the wake of the COVID-19 pandemic — DX efforts have accelerated. “Business-savvy CIOs who deploy highly adaptive strategies and technology to rapidly respond to the impact on their firm’s operations and customers will lead from the front,” explains Forrester’s recent Predictions 2021 report.

Can the momentum keep going? How can DX be leveraged so everyone can be better off, post-COVID? 

As two World Bank economists argue in Harvard Business Review, “technological advancements were already changing the world over the past two decades,” and that in the midst of threats from automation and offshoring, it’s important to realize that tech can act as a job creator for economic recovery. 

According to Federica Saliola (Lead Economist in the Jobs Group of the World Bank and co-Director of the World Development Report 2019) Asif Islam (Senior Economist for the Middle East and North Africa Region of the World Bank Group), “to reshape technology as a job creator, it’s important to understand what, exactly, the current wave of technology is changing, and how policymakers and businesses can adapt to it.”

Where we were

The economists laid out three foundational truths about the pre-COVID state of technology:

  1. It has always been a disruptor. Tech has been “challenging the traditional boundaries of firms, changing global value chains and the geography of jobs.”
  2. As tech evolved, there have been massive changes in what skills are needed by a successful workforce. “The premium for skills that cannot be replaced by robots has been increasing,” they explain. What are these in-demand skills? Critical thinking and socio-behavioral skills, for starters, as well as adaptable skills. This leads to point three.
  3. Thanks to tech, the very nature of work has been changing over the last few years. The standard of permanent and full-time work has given way to a gig economy.

What’s next?

Simply put, “it is likely that the pandemic will reinforce these pre-existing trends and increase the urgency of corresponding policy responses,” explain Saliola and Islam.

Digital-first companies are thriving, the gig economy certainly isn’t going anywhere, and “firms may also have more incentive to invest in automation and reshore production to shield against value chain disruption.”

The aforementioned barrage of surveys and reports showing the acceleration of DX efforts reported on the mostly-successful shift to work-from-home. Saliola and Islam reference World Bank and World Economic Forum reports that show (unsurprisingly) positions and organizations that have put WFH measures in place are more prevalent in wealthier countries and regions, and that women and young people are more likely to hold positions where WFH isn’t feasible. 

Ultimately, Saliola and Islam explain, organizations and governments have to turn to policy to ensure that digital transformation can lead to a more successful economic recovery.

What does this look like? Reskilling and upskilling on the part of businesses, and “incentives and regulations to infrastructure projects and taxation” for governments. 

It’s similar to the approach of the recent OECD report showing that DX is critical for recovery in Latin America and the Caribbean — but on a global scale. 

“Technology can be a boon to society if businesses and governments prepare and adapt,” they write. “With the right steps and actions, businesses and governments can take the crisis as an opportunity to build for the future.”

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