How Digital Disrupts Operations And Business Processes, As Well As Customer Experience – Forbes

Digital technology is improving enterprise performance in game-changing ways. According to a recent Harvard Business School report, digitalization—the integrated use of analytics, big data, the cloud, the Internet of Things (“IoT”), mobile, and application development—is driving change at unprecedented rates. The report states: “Our digital economy is subject to Moore’s law and digital transformation has become the new normal.” Marco Iansiti & Karim R. Lakhani, The Digital Business Divide: Analyzing the Operating Impact of Digital Transformation (Harv. Bus. School Report, 2016). No business leader can afford to ignore digital; it is now a matter of survival. Harvard’s empirical studies show that digitally transformed organizations—so-called “digital leaders”—quantifiably outperform their counterpart “digital laggards”. Robert Brock, Marco Iansiti & Karim R. Lakhani, What Companies on the Right Side of the Digital Divide Have in Common (Harv. Bus. Rev., Jan. 31, 2017). Enterprises must confront a stark reality: integrated digital technology is changing their customer experiences, operation models, and business models – three critical pillars of digitalization discussed in depth below.

Enterprises cannot realize the benefits of digital transformation without answering at least three prior questions to guide them. First, how can they turn existing legacy systems into a strength that can be leveraged rather than a burden that hinders digitalization?  Second, why and how must an enterprise adopt what McKinsey calls a “two-speed IT architecture” for the digital enterprise. Oliver Bossert, Chris Ip, and Juergen Laartz, A Two Speed IT Architecture for the Digital Enterprise (McKinsey & Co., Dec. 2014). And third, why do digital leaders adopt data platforms for application development, the heart of digital transformation? I address these three questions at a business level in the context of the three digital pillars, with future resources to follow.

Digital Platforms and Digital Integration

I.    What is Digital Transformation?

Digital transformation is the manner in which enterprises apply digital technology to their business and operations processes, as well as customer interactions, thereby experiencing changes in their insights into and interactions with customers, as well as to the aforementioned models. Becoming a digital business means applying technology to enable new types of products and processes rather than simply enhancing existing processes and modes of interaction. Digital strategy depends on the use of digital assets in new ways. These include analytics (predictive and prescriptive); big data; mobile; cloud; the IoT; and application development. Digital transformation cannot be separated from technology, but it also requires a culture that encourages the enterprise to change in real time with a business landscape that changes constantly. This is not easy, and often involves a good deal of catching up to digital leaders.

Most enterprises are far from transforming digitally despite acknowledging the effect it will have on revenue in 5-10 years. In this respect, it is important to remember that not all enterprises were (or even are now) “born digital” with all the advantages that status entails, such as remaining unencumbered by disparate, non-integrated technology solutions. This does not mean that traditional brick-and-mortar companies cannot become business leaders. They do. But they must invest in the process and work harder to keep pace with innovation. According to McKinsey & Co., bridging the digital gap requires

“having a more active digital agenda than others, . . . attracting and retaining digital talent . . . and taking more risks in their digital programs, moving faster to implement initiatives and reallocating resources and their best people to digital work.”

Cracking The Digital Code (McKinsey & Co. Global Survey Results, 2015).

Yet many companies are doing precisely the opposite. They “continue to build ever-more complicated IT systems, deploying new features or patches and fixes on the fly to meet immediate needs without any clear road map or consideration of future IT needs.” Id. It’s critical to emphasize that existing “old” systems are by no means irrelevant; rather, they must be leveraged to play an important part in building out new digital capabilities.

The irony of this misguided development is that it assumes falsely that existing investments, including legacy systems, cannot be leveraged on a successful digital path. On the contrary, enterprises must leverage and extend existing systems. Forrester analysts John Rymer and Liz Herbert call this application model “Hybrid Extend”. John R. Rymer & Liz Herbert, Mantra for Customer-Obsessed Software Leaders: Deliver More, Develop Less (Forrester, Jan. 18 2017). Rather than replace existing operational systems, an enterprise must maximize the utility thereof together with new applications that are integrated through the extension of data models. This allows for greater systems harmonization, as well as refactoring of existing work to support new digital models.

II.    Integrating Business With IT: Overcoming Barriers To Become A Digital Enterprise

Deep alignment of business goals and IT’s efforts to support and supply technology to the enterprise is paramount to digital transformation. Enterprises that successfully achieve this have become digitally mature and relevant. Tension between developers’ need for speed and operations’ need for control is a hallmark of modern business. The combined effort of Operations and Development (DevOps) to gain continuous integration and continuous delivery (CICD) solutions are central to achieving the velocity of innovation required to be competitive in the digital world. These terms refer to the collaboration of business-driven developers with IT, enabled by automated tools for software delivery and deployment. This provides a culture and environment where building, testing, and releasing software happens quickly and frequently, and the work of many developers is integrated several times within a given period (often daily) so that each component can be deployed as it is ready and required.

For established companies, including those that are not digital laggards, achieving this measure of agility at scale is no small feat. It is made difficult by the mismatch of existing legacy systems’ cadence and new systems that require different development methodologies; organizational structures; and multi-tiered existing business processes. Each is directly related to a pillar of digitalization. What is needed is a two-speed architecture that bridges both legacy and digital systems so that each can function optimally within its respective development cycle methodology, while still functioning coherently across the enterprise. This allows enterprises to leverage all capabilities in its legacy systems to fully support newer digital business.

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