Digital Crunch Time

Posted 12/07/2017 by Nigel Williams

This is the first blog in a six-part series on digital transformation. Part one focuses on why tech-driven economics create a competitive playing field, putting traditional companies in a position where they just can’t win.

If you are suffering from digital transformation fatigue, you are not alone. Since the term digital transformation has been adopted as the latest industry buzzword, it has been used indiscriminately by vendors whose offerings have often only had the most tenuous connection to the underlying issues.

This is a shame because behind the forced associations and hot air lies a substantial milestone that we should all be paying close attention to.

In "The Third Great Wave," published in The Economist in 2014, the report said: "This wave, like its predecessors, is likely to bring vast improvements in living standards and human welfare, but history suggests that society’s adjustment to it will be slow and painful.”

Comparing the shift to digital business to the industrial revolution might sound like yet more overstatement, but actually that perspective is defensible. The fact is that digital business is, first and foremost, an economic phenomenon. Granted, it is supported by technology, but what really matters is that rules of economics and the basis of competition are being re-written by new thinking based on new technology.

Accordingly, business strategy is the most basic aspect of digital we have to get to grips with for our digital initiatives to be successful. "The Digital Business Imperative," a report published by Forrester in 2017, stated: “Digital fundamentally changes your relationship with your customers. You can't address this change with a bolt-on digital strategy that adds an app here or a site there. To remain competitive, you must re-engineer how your business creates value for your customers in the digital age.”

Gartner, however, pointed to another change driven by business strategy in the "2017 CIO Agenda Seize the Digital Ecosystem Opportunity." The report said: "Many will need to shift their enterprise from a linear-value-chain business to being part of a faster and more dynamic networked digital ecosystem."

The report showed that business requires a wider ecosystem than we have seen previously, one that takes us from collaborating with known organizations such as customers, partners and employees in the same industry to encompass known and unknown developers, agencies and even things (devices).

Re-engineering value is a good way of thinking about digital transformation because that can take us beyond the boundaries of technology to encompass the people, process and cultural aspects of digital business. The challenge for the majority of companies trading today is that they are, or will soon be, competing with technology-driven companies that have already re-imagined and re-engineered how they create value for customers.

As you read this, the five most valuable companies in the world are Apple, Alphabet, Amazon, Facebook and Microsoft. Competing with these companies is tremendously difficult as a recent article in Harvard Business Review suggested this: “With products that rely on network effects, these players enjoy economies of scale and dominant market share – they have deep resources for innovation with the ability to accelerate the penetration and adoption of digital technology.”

What is perhaps even more important is that any company with a digital core will be conducting business with fundamental advantages. Digital businesses typically need less capital, have a smaller workforce, possess fewer physical assets, have faster product cycles and run faster business processes. What it means to them is that it enables the business to generate better profit margins, and grow faster and create a steeply-sloped playing field for their competitors while they quickly gain massive economies of scale. What it means to you will depend entirely on where you work, but for most of us ‘business as usual’ will not do, and change is an economic imperative.

Want to learn more about the road to digital transformation? Download Digital Transformation: The Move to Digital.

Nigel Williams is responsible for Marketing in EMEA at Commvault. Prior to his current role, he held the same position at OpenText and a variety of senior positions at EMC/Legato and EMC/Documentum. He has more than 25 years of experience in Information Management, Enterprise Content Management and Search, and is a keen industry watcher. He holds an Honours Degree in English Literature and also studied Electronic Engineering as part of his entry to the IT industry.