Our world today is undeniably digital. New technologies – from social media and GPS systems to artificial intelligence and digital twins – make the planet we inhabit unrecognisable from even 20 years ago.
If you’re feeling queasy at the speed of change, hold tight. It’s only going to get faster. The pace at which new disruptive technologies are being launched is accelerating – and they’re changing how we live. Today, you don’t have to be a digital native to behave like one. Mid-lifers are nurturing their social media profiles and tracking their exercise regimes on Fitbit. Seniors are choosing tablets over newsprint and FaceTime over phone lines. More and more of us are spending more and more time connected. The average is 11 hours a day.
The same technologies are giving rise to new business models, with organisations using digital to create and monetise new forms of value. Increasingly, this value is delivered through new cross-sector, outcome-based propositions, rather than traditional sector-specific products and services.
We’ve reached an age where digital assets do more to drive revenues, margins, productivity and market capitalisation than physical assets. If that sounds outlandish, consider this – according to analytics firm Craft, value per employee at Marriott hotels was $300,000 in 2017, at Airbnb the equivalent figure was $3.9m.
All or nothing
Start-ups and digital giants move easily in this world. And their confidence, know-how and ambition is reshaping entire industries. By contrast, successful incumbents tend to tread cautiously. Most focus on what they do well today, enhancing and refining their current propositions. Many adopt a ‘digital at the edge’ approach, typically using digital to improve the customer experience or perhaps to make processes more efficient.
But the world has moved on and digital technologies have reshaped the entire value chain.
In the supply chain, information technology and operational technology are converging to transform manufacturing and logistics. In the demand chain (or the ‘front office’ of organisations), the distinction between physical and digital channels is blurring so consumers no longer need to choose between a face-to-face and an online interaction. And in the newly emerging consumption chain (where people actually use what they pay for), organisations can see how their products and services are being consumed. Data from integrated sensors lets them anticipate and fix problems, and spot new ways to create value.
The truth is, adopting a ‘digital at the edge’ approach leaves money on the table. Follow this path and you miss vital opportunities to create and monetise value. Meanwhile, bolder players will seize their chance to dominate the new landscape. The only way to compete in the new world is to embrace the concept of Total Digital.
It’s what’s inside that counts
The Total Digital enterprise is built on technology that’s distinctly different to legacy systems. Old technology stacks were built to serve particular functions and processes. Linking them up and reconfiguring them to deliver new digital propositions is expensive and time-consuming. By contrast new technology platforms are flexible, modular and typically cloud-based. They’re what digital-first businesses choose and they create a particular type of enterprise:
Agile and innovative
With flexible modular technology, digital enterprises can bring new products and services to market faster, and drive growth. There’s no need to buy and commission a bespoke technology stack for each new initiative. Advanced modularity (such as approaches based on APIs, micro-services and cloud-based components) are becoming easier to deploy. And if the enterprise needs to flex its technology up or down in response to opportunities or threats, that becomes easier too. Many CIOs lament only being able to dedicate around 20 per cent of their resources to new things, while the other 80 per cent is used to keep the lights on.
Total Digital enterprises use new technology to easily link up data and gain a single view of the customer. This lowers effort and friction at every touchpoint. Data on how customers use products and services, even in real-time, helps the enterprise anticipate and respond more accurately to customer needs. NEST, which lets people manage their heating and hot water from their phones, is a great example. Data on how individual customers use energy and when they’re home lets NEST give custom recommendations that help cut bills.
New technology that collects and manages data delivers a step-change in data analytics. It generates sophisticated insights to sharpen decision making and creates new opportunities to reduce costs, increase revenue and protect assets. In the car industry, for example, geo-fencing is helping manufacturers speed up the process of handing new cars over to dealers, and making it more accurate and less risky. Sensors built into cars detect the exact moment the car transporter passes onto a dealer’s premises and software instantly transfers the asset from the manufacturer’s balance sheet to the dealer’s.
The Total Digital enterprise runs collaboration platforms that actually work, so people actually use them. Service engineers can collaborate directly with customer service agents, or customer service agents can collaborate with product development experts. This collaboration helps break the silos, increase efficiency, drive innovation and make the organisation look more coherent and purposeful in the eyes of the customer.
How will you get there?
We believe that every business must eventually become a Total Digital enterprise. Businesses that don’t will become increasingly poorly equipped to compete in a digital world. And even businesses that acquire digital capabilities as bolt-ons to their legacy cores might unwittingly end up tying themselves in knots, as a rigid core will prevent the whole thing from becoming truly flexible.
What’s less clear-cut is how far and how fast different businesses will go. Some will survive for now by adding digital bolt-ons. Others may run a dual universe for a while, with legacy and new digital technologies existing side by side. The boldest, or the newest, will move straight to Total Digital. They understand that future advantage will come from creating new value from digital technologies and digitally-enabled business models, not from trying to protect current value in existing business models. Are you ready to commit your business to becoming Total Digital?