Digital Business Paradox: All Technology, But Ultimately Not About Technology

Author

Joe McKendrick, Contributor

March 23, 2015

These days, everyone — entrepreneurs and members of large enterprises — sees the advantages of becoming innovative, disruptive digital enterprises.  There’s an acknowledgement that every business is becoming a technology business. But technology is only one part of the success of a digital business — rather, the path to digital is a mix of astute, forward-looking management, a spirit of innovation, skills, with technology playing a supporting role.

That’s the message coming out of a panel of industry leaders held at the latest CeBIT conference in Hannover, Germany, which explored the opportunities and challenges of digital technology implementation and transformation. Members of the panel, hosted by Software AG, agreed that these are perilous times for organizations not adopting digital approaches to their businesses. But opinions differed on exactly what it takes to go the digital path, the direction that needs to be taken, and how to sustain digital growth.

Within the next five years, 80 percent of the world’s population will be using smartphones, said Eric Duffaut, chief customer officer for Software AG. “That means in the next five years, 80 percent of the people in the world will get hooked to the global digital economy.” At the same time, there will be upwards of 50 billion connected sensors driving information across the globe.

With all this opportunity, why aren’t more businesses completely on board yet? Perhaps one of the most vexing questions of these times is how disruptors coming on the scene – mainly startups – are able to eat the lunches of their much larger, much more well-funded, established traditional competitors?  Why aren’t larger established businesses become the disruptors themselves? Harvard’s Clayton Christensen has an answer for this, of course – the established players are charged with staying after high-margin business, leaving low-margin and underserved markets to new upstarts. However, it’s still notable that it wouldn’t be a huge investment for a limo or taxi company to put out an app that provided for pick-up on demand; and it would have been pennies for a hotel chain to produce an Airbnb type app.

The CeBIT panelists weighed in on this question. The first step on the digital journey is to recognize that “every business is now becoming a software-driven business, said Frank Schinzel, partner with Accenture. “You cannot operate without it anymore.” Schinzel urged that “IT needs to become a fundamental part of the business. Business functions and IT functions need to move closer together, and companies need to move away from monolithic IT.” In a recent survey, he explained, “we found companies spend 60 percent of their IT budgets to just keep systems just running, with the rest for investment. Smaller companies, however, “invest 100% in innovation. That’s why these small companies are revolutionizing business. This is why we’re telling our clients they need to change dramatically the way they do their own businesses and the way they do software platforms. Otherwise, they won’t be in business anymore. It’s really disrupt or die.”

Audi Lucas, senior architect – connected products with Wipro Ltd., pointed to a key factor that may also mire down larger, established companies from achieving greater innovation in the digital space: too much separation between IT and the rest of the business. “The reason you don’t see large companies as digital disruptors is they have developed fixed processes, and when somebody mentions software, they say it has to go over to IT,” he explained. “ What I see being on the business side in those companies is IT is more about managing processes, more about managing the way things are done. But it’s the business that needs to change dynamically. It’s software that is coming out of the traditional IT world into the business and actually enables that. If you look at 20 years ago, such software didn’t exist in its current form that would enable an Uber. Now that it does, even a small company or even a small department inside a company can do something monumentally different.”

Disruption by small groups of innovators, armed with technology, is happening everywhere, observes Dr. Uwe Dumslaff, CTO and corporate vice president of Capgemini. “You have to hijack your own business, or someone else is going to do it for you. You get there by allowing people to be creative, to be open, to allow failure.”

While many enterprises aspire to move more forcefully into the digital realm, they may be held back by the need for more skills and training in this new way of doing business. Even when these obstacles are overcome, the challenge is being able to scale it, Lucas observes, reflecting back to his days with GE. “When we built the GE system, it was very hard to get the right skill set,” he recounts. “I was able to assemble a very small team of data scientists and developers. But what I discovered that is I didn’t have the ability to scale, and from an elasticity perspective, to be able to ramp up.”

The answer to finding the expertise and resources to deliver advanced digital capabilities is not clear at the moment, Dumslaff added. “When you talk about big data, at the end the value is the quality of the question. And to get the right question, you need the right mindset. We are not yet there.” Dumslaff called for greater investment in training and education that will help business leaders and professionals get the most from their digital platforms.  An additional challenge that must be considered, he adds, is that organizations need to have the right kind of culture and opportunities to attract such talent. Timo von Lepel, director of B2B for Telefonica, observed that his organization is actively nurturing startups for such fresh thinking and even providing office facilities in Munich.

“I don’t think our clients can do it on their own,” said Schinzel. “We need are very specialized skills, data scientists. These are jobs of the future. But  we also need people who understand digitization from end to end.”

(Disclosure: Software AG assisted with the author’s travel expenses to CeBIT.)

This article was written by Joe McKendrick from Forbes and was legally licensed through the NewsCred publisher network.

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