Finally, someone has stood up and said it. Digital business is not about IT, applications, software, the cloud or even — as much as it pains us to say it — information management.
Digital business is a mindset. A different way of thinking about business. It includes all the above elements, but it is more than the sum of those parts. According to new research from Gartner, digital business is the new enterprise lingua franca, with digital expertise spread across the entire organization.
For organizations struggling to develop effective digital strategies, this is probably a bit discouraging. How do you change the way an entire organization thinks and establish a digital culture?
Gartner doesn’t say it will be easy, but it a new report by Ken McGee, Diane Morello and Lee Weldon — Six Key Steps to Build a Successful Digital Business — Gartner lists several steps organizations can take to reach digital nirvana.
It's not a matter of "if" but "when. According to Gartner, organizations that fail to embrace digital will loose 25 percent of their competitive ranking by 2017.
The changes Gartner is recommending is as much about the clever use of human resources as they are about the agile application of new software to new business problems. McGee writes:
CIOs or IT professionals who hear 'digital business' and think 'IT' will be blindsided. Digital business is not synonymous with IT. It is about revenue, value, markets and customers. It is outward-focused. It is a metaphorical combination of front office, top line and downstage compared with back office, bottom line and backstage. True, information and technology help to build the capabilities for digital businesses, but they are only part of a complex picture."
If this sounds a bit like the old way of doing things, there is an important difference. For the first time ever, digital technologies are moving out of a supporting role an becoming key ways to generate revenue. McGee adds:
Digital businesses and digital technology, for the first time, are moving into the forefront, into the heart of what the business is doing and how it generates revenue, seizes competitive advantage and produces value. Digital business represents a more extreme revolution than previous technology-driven changes, and CIOs, with their insight into technology and information, are positioned to develop and promote a successful digital business."
Defining Digital Businesses
So in practical terms what is digital business? According to the report, a digital business is the creation of new business designs by blurring the distinction between the digital and physical worlds.
It promises the creation of new business designs and new ways of doing businesses by the convergence of people, business and things. This will result in the creation and development of new revenues opportunities.
It is different than old business models even if, to some extent, it resembles current e-business strategies. However, if many see it as an extension of the old business models — even those created by the internet and email — going forward this will not be the case.
According to the report, the “digital” in digital business has a much wider application than the typical scope of IT in many enterprises. In this respect, Gartner uses the word digital to denote all electronically tractable forms and uses of information and technology.
Surprisingly, Gartner is already defining digital business in terms of the Internet of Things (IoT), but it is not the only kind of technology. Digital business Includes:
- Third-party technology: This refers to all the technology that is outside the direct control of the organization, but which may have an impact on it
- Social media
- Technology embedded in products (such as cars)
- The integration of IT and operational technologies (such as telecom networks, factory networks and energy grids)
- The Internet of Things (physical objects becoming electronically tractable)
If some of these technologies are only emerging now, they are gaining traction quickly. In the case of the IoT, for example, we saw last week that the jury is still out on the shape it will finally take, even if there was a general consensus that by 2020 it will consist of at least 20 billion different devices.
According to Gartner, it is the combination and application of those and other technologies to new business models and processes that will generate the revenue that defines a digital business.
6 Steps Towards A Digital Strategy
Gartner has identified six steps that will enable CIOs and other business leaders to build successful digital enterprises.
Create the Right Mindset
Digital business leaders need to start thinking proactively about technology and the new business opportunities the new technologies create, rather than think about how the new technologies can be used in old models.
As digital businesses mature they will take on what Gartner describes as “business moment” characteristics, defined as transient opportunities that are exploited dynamically. These moments will set in motion a series of events and actions involving people, businesses and networks across multiple industries that ultimately lead to the creation of opportunity. Identifying these moments will be a key attribute of digital businesses.
Hire the Right Leaders
The digital world exposes gaps in digital leadership across organizations, especially in the front office (those related to the customer experience) and head-office, where the lack of an enterprise strategy becomes clear. Three types of digital business leader have emerged to fill these leadership gaps:
- The digital strategist
- The digital marketing leader
- The digital business unit leader
These are not titles, but roles in the organization, Gartner says, even if the more enlightened enterprises will have created these as specific roles.
These roles will be around for the next five to 10 years, but will end up being interim positions as “digital” will simply become the way organizations do businesses. While the three roles are optimal, one person could play multiple roles.
Create Digital Business Centers of Excellence
Organizations should create their own digital centers of excellence that will be able to address all the issues that digital work creates in all parts of the enterprise. Gartner suggests that organizations should start by examining strengths and weaknesses in the enterprise digital strategy, as well as the role new technologies pose.
Assessing opportunities and especially threats start with identifying what organizations have not yet considered as issues or problems, and requires the ability to ask new questions about the way business is being done and how it is likely to evolve in the future.
Evaluate Opportunities and Threats
Once the necessity of a digital strategy has been established, the following five elements must be addressed:
- New Business Models: Organizations need to develop digitally-based business models that incorporate new sources of revenue
- Product and Service Portfolio: Organizations need to write virtual products and services into their business model
- Information as an asset: Having information is not enough. In the digital business model, organizations need to know how to use it in revenue creation
- Technology: Organizations need to develop technology strategies as more and more technologies become available
- Content, Media and Channels: Digital business depends on understanding customer needs and the channels they are working in as well as the different possibilities of each channel
Define Digital Business Skills and Roles
Gartner notes that enterprises need to have the right people in the right roles. The skills to manipulate digital technology should be spread across the enterprise, not just confined to the IT department.
While digital business has roots in digital technology, it is ultimately about business. Decision making will be owned, operated and potentially influenced by the relationship between CIOs and business leaders. Gartner says that competition for talent will make or break their success in digital business.
Understand Digital Business Capabilities
With the expectation that digital business expertise will spread around businesses within two or three years organizations need to identify what kind of disciplines are needed to drive their digital business.
Traditional recruitment polices are not going to work in this environment and organizations that can should consider developing special boot camps and other learning programs that will push the skills across the business.