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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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Digital transformation will generate significant growth in Latin America in 2020

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Over the last few months, headlines out of Latin America have been primarily related to socioeconomic instability and poor economic growth. 

According to IDC, however, that could change as digital transformation initiatives could generate as much as $48 billion in 2020.

In 2019, growth in the region’s hardware, software, and services market reached 1.3%, but analysts predict an upturn.

Ricardo Villate, IDC Latin America VP, explained that the biggest areas of IT investment within Latin America will be around the “pillars for the third platform” — cloud, big data and analytics, mobility and social enterprise. These will represent 58 percent of all investments in 2020.

“The world is approaching digital supremacy — the moment when the digital economy outweighs the size of the non-digital economy, ” Villate told ZDNet.

Latin America Outlook

What’s on the horizon for the region? As part of their FutureScape 2020 series, IDC’s further predictions for IT trends of Latin America, over the coming years, include:

  • More than 40% of all ICT spend in the region will go directly to DX and innovation, growing by 22% annually. By comparison, 2018 saw 20% growth.
  • Within a couple years, more than half of Latam countries will integrate cloud management through public and private clouds, through hybrid or multi-cloud management technologies.
  • More than half of new business applications will incorporate AI.
    • By 2024, more than 35% of user interface interactions will feature AI.
    • AI spending will continue growing — up to 44.2% in 2020.
  • By 2023, the five largest public cloud platforms will make up more than 80% of the Latam market.
  • In three years, 30% of Latin America’s top 2,000 companies will appoint a Chief Trust Officer.

Latin America Outlook

“In the digital economy, every business has the potential to become a platform,” added Villate, “with a community of outside developers around it to extend its value beyond its own direct reach.”

Related Reading: AI and biometrics could boost e-commerce confidence in LatAm

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Four steps for CIOs undertaking DX

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CIOs are in a unique spot in any organization’s digital transformation (DX) journey. 

With one foot on the business side and the other firmly planted as a technical leader, CIOs are a vital piece of the puzzle, especially with the many challenges and constant management required on the road to digital.

As Gustavo Gomez, founder and CEO of intelligent process automation software provider Bizagi, explained in The Enterprisers Project, “Only CIOs have the broad perspective to ensure that transformation deployments can reach both deeply into organizational silos and broadly across lines of business.”

How can CIOs put their organizations onto a digital transformation path that’ll lead to a better likelihood of success? Gomez outlines four essential steps:

1.) Embrace different perspectives

CIOs aren’t always the catalyst for digital transformation. Frequently, leadership from many parts of the organization will “have a “wouldn’t it be great if we could…” epiphany,” as Gomez explains.

As the bridge between technical implementation and business objectives, the CIO needs to recognize and address this divergence before it undercuts the actual transformation,” he says.

How? Clear and steady communication between the transformation teams and stakeholders, with a goal of understanding what transformation will accomplish.

2.) Focus on incremental wins

According to Gomez, organizations will encounter two competing narratives: “Start immediately on disparate pilot programs (risking control and scalability) or meticulously craft the perfect comprehensive transformation (risking months or years of delay with limited return).

A clear, goals-driven strategy is key, but feasible milestones that are regularly achieved can go a long way in showing steady results to stakeholders or the board. 

3.) Win hearts and minds

Organizational change of any kind is often met with resistance, and it’s no different when it comes to digital transformation. But given that DX is a key part of ensuring long-term success, Gomez explains, employee participation is “a matter of survival.”

The trick to getting everyone on board? Departmental management. By on-board these leaders to the larger vision, their role within it, and bigger-picture business objectives, “CIOs can help evangelize the change, ensuring it trickles down to all levels of the organization.”

4.) Identify a scalable solution

As Gomez explains, it’s one thing to complete a successful trial transformation in a small team, and another to turn around and roll that change out across an entire organization. 

He identifies two considerations: First, it’s possible to achieve micro-scale DX wins that end up siloed in a single part of the organization. Two, transformations that work in controlled, smaller settings but fail when scaled up for broad release.

A key indicator can be a heavy reliance on IT involvement in modifications,” says Gomez. “Digital transformation must evolve to meet changing business realities, and anything that leans too heavily on IT for those adjustments will quickly stall.

All digital transformation journeys have hurdles, but through the unique position of CIOs as both business and technology leaders, success is more likely when they actively work to effectively hear from all sides, embrace smaller-yet-frequent milestones, win over stakeholders, and ensure that the DX journey goes where it’s needed. 

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IDC: Digital transformation spending will take up 50% of IT budgets by 2023

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It’s a staggering number, but as organizations look to build off existing strategies, direct digital transformation investment spending will approach $7.4 trillion between 2020 and 2023, reports IDC, resulting in organizations becoming digital-at-scale future enterprises.

In unveiling their FutureScape: Worldwide Digital Transformation 2020 Predictions report, IDC highlights the critical business drivers that are helping to accelerate DX initiatives and investments — in the face of business challenges, the speed of scaling, and rising customer expectations.

The 2020 report marks the fourth installation of IDC’s digital transformation predictions.

According to IDC analyst Shawn Fitzgerald, investment in direct digital transformation “is growing at a compound annual growth rate (CAGR) of 17.5% from 2020 to 2023, and is expected to approach $7.1 trillion as companies build on existing strategies and investments, becoming digital-at-scale future enterprises.”

The report adds that digital transformation spending will grow to more than 50 percent of all ICT investment, from 36 percent today. The largest growth will be seen in the areas of data intelligence and analytics.

Fitzgerald, along with fellow IDC analyst Bob Parker, detailed the ten industry predictions that will, over the next one to five years, impact DX efforts of CIOs and IT professionals:

Prediction 1 – Future of Culture: By 2024, leaders in 50 percent of G2000 organizations will have mastered “future of culture” traits such as empathy, empowerment, innovation, and customer-and data-centricity to achieve leadership at scale.

Prediction 2 – Digital Co-Innovation: By 2022, empathy among brands and for customers will drive ecosystem collaboration and co-innovation among partners and competitors that will drive 20 percent collective growth in customer lifetime value.

Prediction 3 – AI at Scale: By 2024, with proactive, hyperspeed operational changes and market reactions, artificial intelligence (AI)-powered enterprises will respond to customers, competitors, regulators, and partners 50 percent faster than their peers.

Prediction 4 – Digital Offerings: By 2023, 50 percent of organizations will neglect investing in market-driven operations and will lose market share to existing competitors that made the investments, as well as to new digital market entries.

Prediction 5 – Digitally Enhanced Workers: By 2021, new future of work (FoW) practices will expand the functionality and effectiveness of the digital workforce by 35 percent, fueling an acceleration of productivity and innovation at practicing organizations.

Prediction 6 – Digital Investments: By 2023, DX spending will grow to over 50 percent of all ICT investment from 36 percent today, with the largest growth in data intelligence and analytics as companies create information-based competitive advantages.

Prediction 7 – Ecosystem Force Multipliers: By 2025, 80 percent of digital leaders will devise and differentiate end-customer value measures from their platform ecosystem participation, including an estimate of the ecosystem multiplier effects.

Prediction 8 Digital KPIs Mature: By 2020, 60 percent of companies will have aligned digital KPIs to direct business value measures of revenue and profitability, eliminating today’s measurement crisis where DX KPIs are not directly aligned.

Prediction 9Platforms Modernize: Driven both by escalating cyberthreats and needed new functionality, 65 percent of organizations will aggressively modernize legacy systems with extensive new technology platform investments through 2023.

Prediction 10 – Invest for Insight: By 2023, enterprises seeking to monetize benefits of new intelligence technologies will invest over $265 billion worldwide, making DX business decision analytics and AI a nexus for digital innovation.

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