The pace of the digitization and how it changes the current business landscape is dramatic! There is no doubt that the digitization will generate new business opportunities, but could also be a threat if not taken serious. All industries from manufacturing, retail to public sector are in the information business even if they might not yet have realized it. If they not realized it yet, it is high time to start now.
Ever since IT became widespread in the beginning and in the middle of the 1960’s, IT has been used as one of the main tools to rationalize, automate processes and thereby reducing cost. Even if that is still true, new disruptive IT technologies has been entering the market with exponential speed during the recent years – cloud, in memory computing, mobile first, internet of things, predictive analytics etc. When all these innovations are put together, IT will not only support business processes, by automation and cost reductions, but will also drive business transformation and become one of the most important levers in the history to contribute to new and revised business models.
We have all heard about Uber and AirBnB who built their respective business model from scratch as they are in the information business even though they are in transportation and hospitality business. Other companies have been inspired and realized that they need to transform their business model with help of digitization and successfully transform their business models in order to remain competitive. The lowest common denominator is that they all realized that they are in the information business and that they need to use the power of the technology to change their current way of doing business.
Those companies that instead see the digitization as a threat and hoping that it will soon be over will be in trouble. Unfortunately this is nothing unique and it has happened a number of times in the history before. Kodak once had 145,000 employees and a market share near 90 percent. The profit margins were so good that an executive once stated that any products more profitable than film were most probably illegal. The company totally missed the digitalization of the film industry and is today struggling to not enter into bankruptcy. Kodak is not unique. Many companies fail to transition within the window of opportunity when new disruptive technologies enter the market.
Add to this that the fact that over 40% of the workforce in 2020 will be “Generation Y” or Millenials (Labor Force Projections to 2020, Bureau of Labor Statistics, January 2012). This generation takes internet access for granted and views the cell phone as more critical to life than running water. Do you think they want to join the back to the future time machine travelling back to the1980’s when they enter the office?
Most of the CEO’s are aware of this and they expect up to 50% of their earnings growth to come from technology enabled business innovation, while they at the same time are worried that their own organization not is keeping up to speed with the technology change and thereby face the risk of losing their competiveness according to McKinsey, 2013.
Many of the IT systems used today are not rarely designed for over 30 years ago! They are built based on the technology that was valid at that time and designed for completely different business environment than of today. This means in many cases, that today’s IT-systems are more of a hurdle that hinders the business transformation rather than supporting it. The complexity built up over decades hampers the ability to innovate and radical simplification is needed to unlock the potential
In order to be able to drive business innovation with help of IT they need to get rid of the complexity. The businesses that manage to get rid of the complexity and implement something that is easy to understand, with an intuitive user experience, that is mobile ready, able to support the short time to market, is built on a future proof platform will have a solid foundation for the new digital economy.
Not everything boils down to technology of course and in order to enter the digitization era, the corporate culture also needs to be considered and simplified. This means to safeguard that people in managing positions understands the power of the digitization and are able to transfer the possibilities into firm business plans and strategies. It’s also important to define tasks that are to be seen as core business, what to outsource and to standardize work processes, master data and information in order to be able to spend time and resources on the areas that creates a differentiation when it comes to competiveness.
The role of IT has been expanded from only being a tool to improve cost effectiveness by automation of manual routines – to a tool that drives business transformation. Companies that have realized that they are in the information business and have a clear vision of how new technology can support the business strategy, are also able to attract the right talent and simplifying their own business processes. This will put them in good shape to meet the new digital era! The rest…who think the old days will still be the future will repeat the same mistake as many other companies have done in the past. It’s time to act now and utilize the power of in memory computing, predictive analytics and other disruptive technologies that significantly will simplify the transition into the digital era.
This article was written by Anders Nilsson from CapGemini: Capping IT Off and was legally licensed through the NewsCred publisher network.