A business is ‘elastic’ when it has the ability to scale at will, to cope with peak demands and shrink back afterwards. It also can try new things and explore new areas while remaining connected to the core enterprise. Being truly elastic therefore requires an approach to cloud solutions that incorporates them fully into the existing, core IT landscape. To be agile and flexible at the edge of business requires integration at the core. The IT department that enables business users to test and learn with new digital services and SaaS solutions at will – while staying connected to core data and applications – help their business become true Digital Masters.
For large, existing, traditional businesses, the new digital world can seem full of risks and challenges. Big enterprises are undoubtedly slow to change, hindered by long-established processes, and operating models that have been built for efficiency – not flexibility. New competitors emerge in next to no time, born in the cloud and unconstrained by years of carefully planned capital investment. You only need to see the effect that Amazon and Netflix have had on main street brands, or how Hailo and Uber have reshaped the taxi business.
Yet these same risks can provide tremendous opportunities to those that find a way to harness them. New business models at the edge of an organization are likely to go straight to using cloud services, mobility and advanced analytics to ‘test and learn’ new offerings or improved customer interaction. These organizations are the disruptors – not the disrupted. They are the ‘elastic businesses’.
Elasticity implies the ability to expand quickly and then shrink back just as fast. For a business, this means rapidly scaling up in response to managing peak demands, such as the launch of a new service or a holiday promotion, or supporting the fast development of prototypes and new concepts. Central to the fleetness of foot is the ability to harness the cloud, providing the capability to exploit new opportunities at a speed previously unseen.
But the real trick is to link and integrate these elastic, agile, ‘edge’ investments to the core business strategy and a well-governed digital transformation. Capgemini’s on-going collaborative research with the MIT Center for Digital Business shows that, over time, the businesses that get this right (the ‘Digital Masters’) can be up to 26% more profitable than those who spend just as much on their digital technologies (the ‘Fashionistas’), but crucially fail to coordinate, extend and integrate it across their broader business.
The truly elastic business isn’t there to respond to change – but to lead it. This requires a number of components: a clearly-defined digital strategy; governance across the C-Suite; willingness to test and learn (including making mistakes and the courage to shut initiatives down); adoption of ‘outside-in’ customer-centric thinking; use of data analytics to support and prove hypotheses; and integration of all new services within existing, back-office IT systems. Certainly, don’t build new initiatives without knowing how they fit into the current IT landscape and use (and enhance) customer data.
Organizations that establish the right IT principles of adopting new digital services can become truly agile at their ‘edges’. They can set up new services quickly and test them out in small (but real) areas of their business – such as in a single store, with one customer segment, or with a proportion of website traffic (A/B testing). We call this ability to test and learn at the ‘edge’ Digital Hothousing – and, because it is fully integrated from the outset, you know that you can commit to rolling out the successful services at speed.
This isn’t just a ‘nice to have’ flexibility; it is absolutely essential for the future integrity of the business. It is all too easy for business users to adopt new SaaS services, or employ niche agencies to write cool mobile Apps. But this can lead ‘the edge’ to becoming a series of islands of innovation, and eventually what the customer sees is a disjointed mess, and the concept of the seamless ’omni-channel’ is long forgotten.
What is interesting is that our digital research shows that it is not just the new, ‘born in the cloud’ start-up organizations that are taking advantage of digital technologies. It is organizations in any sector, of any background, of any age. From mining companies to paint manufacturers, Digital Masters are transforming at the edge, becoming truly elastic, growing, reshaping, and trying new things. A true hothouse of innovation indeed and yet, all carefully managed and controlled.
Elasticity is provided by the cloud and SaaS services; integration by a more traditional service-orientated architecture –increasingly also delivered from the cloud; and governance incorporating strategy and delivery into an agile, iterative approach that thoroughly checks new ideas in the real world.
Regardless of industry, there is no time like the present to take the first steps. Perhaps the question isn’t fight or flight, but how to embrace this elastic opportunity. But without doubt, the time to act is now.
Contribution by Simon Short
Part of Capgemini’s TechnoVision 2015 update series. See the overview here
This blog post is the personal view of the author and do not express the views or opinions of Capgemini.