Digital Enterprise – Overview

The evolution of digital technology has disrupted the global business environment. Since recent times, an unprecedented wave of innovation presents certain opportunities and threats for all businesses. The availability of advanced analytics and social media, the explosion of big data, and the fact that mobile technology will become the new face of business engagement mean that in a very near future the words “digital” and “business” will be synonymous. Engaging effectively with the ecosystem to drive ROI requires a shift in both technology and culture. To digitally reimagine an organization’s capacity, enterprises need a new framework of strategy. 

The digital enterprise is an organization that incorporates the use of technology as a competitive advantage in its internal and external operations. The digital enterprise isn't driven by mastery of the technologies, but by the ability to articulate the value of digital technologies to an enterprise’s future. The digital enterprise is the one in which digital technology is at the center of how the organization will:

  • Operate
  • Generate revenue
  • Produce
  • Create advantage and value

The enterprises that can leverage the above digital attributes can become more competitive, economically fit, and capable to dynamically adapt new competitors and shifts in the market.

The Changing CIO Role and Responsibility

In 2015 Cognizant surveyed 200 North American CIOs and IT leaders within healthcare, banking, insurance, and pharmaceutical industries to understand how their roles are evolving in today’s digital environment. The study identified the following three essential elements for CIOs to excel in today’s digital age: 

  • Leadership: The CIO must play a key role in strategy setting and execution.
  • Organizational and financial readiness: The CIO must have a deeper and better understanding of digital program costs and ways of measuring ROI.
  • Digital strategy ownership: The CIO must articulate a digital strategy that is consistent and aligned with business objectives across the company. 

This won’t be easy, given that the traditional CIO role has relied more on the principles of engineering than on marketing and communication competencies. 

Below is the statistical presentation of the study results. As noted, 42% of respondents said the CEO is the sponsor of major digital projects. And 24% of respondents said the CIO sponsors such initiatives. The study concludes that the CIO’s responsibilities are radically shifting, they are the key contributors to transform the enterprise digitally and promote an open and innovative culture.

The CIO as a Digital Leader

The above-mentioned research also explains how a CIO can become a good digital leader. Let us find out how is the role of a CIO is changing in terms of digital leadership.

  • As a digital strategist: the CIO helps in identifying digital opportunities in the marketplace, developing a digital strategy, and go-to-market strategies and technologies.
  • As a transformational leader: CIOs can articulate the digital business vision and help the enterprise in aligning digital initiatives with business goals.
  • As a functional leader: CIOs can more effectively find, evaluate, and deploy new digital technologies feasible to their business objectives. They can prioritize operational cost take-outs over innovation. To accomplish this, CIOs must completely reassess their organizational role. 

Are Education and Experience Necessary For an Ideal Digital CIO?

A survey was initiated by Cognizant to identify the importance of experience and education for becoming a digital CIO. About 88% indicated that hands-on experience in leading digital programs or initiatives is the best way to move forward.

And about 86% believe that a degree in information technology is required to secure a career as a CIO. Not surprisingly, respondents expect the CIO to have a solid IT education and business management training. The two graphs present the detailed study results:

The Digital Enterprise

Digital transformation involves four pillars of technological disruption, namely Big Data and Analytics, Mobility, Cloud Computing, and Social Networks. These elements can provide major benefits to the enterprise, including easier customer reach, improved productivity, better collaboration and innovation, personalized customer care, etc. leading to increased revenue, and reduced cost. Although each of these pillars is influential by one another, their collective usage can provide robust collaborations and endless possibilities for innovation. However, investing here without a well-thought-out digital strategy will lead to ineffective implementation. The IT department and the CIO today have a pivotal role to play in ensuring the effectiveness of a digital enterprise. 

The Synergy Between the Four Pillars

Each of the above-mentioned four pillars is individually powerful and leveraging them collectively produces synergy and provides possibilities for innovation. Let’s take an example to understand the synergy between the four pillars: a highly valued customer is on business travel, who raises a complaint on a social network. This triggers a message to the customer service executive, who connects to the analytics system, deployed cost-effectively on a public cloud, to know the complete customer history and the problem. He then uses a mobile application to get approval for the additional expenses required to resolve it without delay, fixes the problem and informs the customer on the same social network. Hence, the customer is not just satisfied but delighted as his problem has been resolved within minutes.

There has been an exponential growth in mobile-connected devices and in the future, there will be more connected to mobile devices than people. Social and mobile client interactions are ad-hoc by nature and their volumes are unpredictable. The cloud that is elastic by nature can cater to wide load fluctuations, making it the ideal platform for social and mobile interactions. Enterprises that own independent cloud infrastructure, especially for non-transactional applications are also assured that the performance and security of the underlying applications are not affected. 

There was a study conducted by Capgemini group to understand how organizations use the technology, or how it might or might not be important in the future. The study shows how often these firms who responded to the research, used each digital technology to improve their operational processes and customer experience. Social media, mobile, and analytics are widespread in these organizations.

 

The Challenges to Overcome

Undeniably, there are many organizations that have successfully used the four pillars of the digital enterprise to turn around their failing fortunes and there are many success stories on how successful companies have further fueled their own growth. However, there are also a few companies that failed to gain value from their investments. In 2013, a Big Data study was conducted by TCS, surveying 1,217 companies in eight countries across Europe, North America, Latin America, and Asia-Pacific. 43% of them predicted an ROI of 25% or above while about 24% had negative or no return. Some organizations have said that they have ended up wasting resources and increasing the complexity of their ecosystem, leaving customers and employees disappointed. Here are some challenges involved with this failure: 

  • Increased use of social networking laid an impact on employee productivity and exposure to legal implications.
  • Increase in system complexity of IT resulting in the need to manage multiple mobile platforms and ensuring compatibility across all channels.
  • Overuse of analytics, thereby increasing the number of users with information and making it difficult to manage.
  • Ineffective use of cloud resulting in increased financial outlay.
  • An increase in security risks which creates a difficulty for the protection of IP due to more social and mobile interactions.

The biggest challenge is to create a vision for the journey towards digital transformation with a justifiable reason for the change. Next is the management buy-in followed by the need for a focus on that common vision.

Need for a Well Thought-Out Digital Strategy

Enterprises that approach to overhaul the entire organization with the digital initiative without a well-thought-out digital strategy pose a major risk, thereby involving a serious financial threat as well as damaging the organization’s image. 

Enterprise Architecture (EA) with its guideline-based framework and big picture approach is ideal for developing an appropriate digital strategy. However, in the new digital enterprise, EA should go hand-in-hand with innovation, collaboration, and empowerment. The digital strategy ideally should be driven by the business with active involvement from customers, vendors, and partners, and supported by IT. 

The digital strategy is a guiding force in setting high-level business priorities, policies, investment limits, and objectives rather than being prescriptive and thereby curtailing innovation. An ideal digital strategy must have the following four aspects in place:

 

Becoming a Digital Enterprise

Transforming an organization to a digital enterprise will be a significant effort. To hit the digital sweet spot, enterprises need to understand the key exhibiting characteristics of a digital enterprise and its enablers. The following figure shows the key characteristics and enablers of a digital enterprise.

The following four aspects must be considered to successfully transform to a digital enterprise:

  • Firstly, understand the value of digital and where it lies in your organization. Is it in marketing? Is it in automating operations? Is it in sales or a combination of all of those?
  • Secondly, prioritize your digital portfolio, and focus only on the ones that are important.
  • Thirdly, take an end-to-end view, ensuring that customers receive an integrated experience from all corners that all functions are working together.
  • And then, finally, look at your portfolio of businesses and understand what impact digital may have on valuations. Focus mainly on your organizational capabilities and perhaps rebalance the portfolio accordingly. 

Perhaps the most challenging part is operating in different geographies. Digital customers expect a consistent and integrated experience. This requires the enterprises to think quite differently about the way they govern, organize, articulate, and standardize their system. The organizations need to virtually address every business aspect: processes, organizational structure, operational functions, and of course, technological strategy. The journey of transformation does not begin in these areas. It will, instead, begin with people and culture. The team must embrace the vision of becoming a digital enterprise and comprehend the fundamental magnitude of digitization.   

Conclusion

Digitization is revolutionizing the world’s economy. The evolving CIO is the one who crosses the milestone of embracing digital enterprise. ROI cannot be considered as a metric to measure the success of digital investments as it is mostly about innovation. The CIO must arrive at a realistic vision of the Digital Enterprise and prioritize initiatives coordinated with business benefits. The CIO must keep the expectations under control, and strive for long-term outcomes. Since this is a path-breaking advancement, for the digital enterprise to be truly effective, the CIO must inculcate the change required in the thinking and culture at all levels—IT, business user as well as top management. 

References

 

  1. https://www.linkedin.com/pulse/six-steps-cios-lead-digital-transformation-johannes-vogel https://www.institutefordigitaltransformation.org/defining-digital-enterprise/
  2. http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/the-digital-enterprise
  3. http://www.cio.com/article/2835275/it-strategy/top-cios-start-the-journey-to-the-digital-enterprise.html
  4. https://dupress.deloitte.com/dup-us-en/focus/digital-transformation.html
  5. https://www.capgemini.com/resources/digital-transformation-a-roadmap-for-billiondollar-organizations
  6. https://w3.siemens.com/mcms/mes/en/mes_suites/Documents/Siemens_industry_software.pdf
  7. http://www.tcs.com/SiteCollectionDocuments/Perspectives/The-Digital-Enterprise-Vol-5-1013-1.pdf
  8. http://reports.weforum.org/digital-transformation/wp-content/blogs.dir/94/mp/files/pages/files/digital-enterprise-narrative-final-january-2016.pdf