Organizations Need Industry Vision for Digital Business Success
IT leaders have been told to lead digital transformation efforts at their organizations, and that best starts with creating a vision for their own industry, according to new research from Gartner, Inc.
According to the Stamford, CT research firm, more than 40 percent of enterprise revenue is expected to come from digital business by 2020. This is nearly double the percentage of 2015. But many organizations have yet to start a digital transformation effort.
Gartner addresses this struggle in its report, "Create an Industry Vision for Digital Business." This report is part of the larger Gartner Special Report "Industry Visions for Digital Business Set the Terms of Competition," a collection of research that offers examples of industry visions that can help business and tech leaders define their own visions for digital transformation.
Recognizing the challenge of such a dramatic undertaking, Gartner recommends that organizations wanting to start the digital transformation process begin with a vision for their own industry.
"Enterprises can transform by exploiting business moments or by using digital capabilities to enter or create new markets as Airbnb and Uber have done," said Jorge Lopez, vice president and distinguished analyst at Gartner. "However, many enterprises will find it easier to start by creating a vision for digital business for their particular industry. This approach enables the enterprise to tilt the fundamentals of competition in its favor without limiting digital business to narrow sequences of events and committing to a vast building project. Once the enterprise has established its vision, it can more easily tackle business moments or leverage its digital capabilities in new markets."
Lopez offers the example of an organization envisioning changes within its industry if the Internet of Things or smart machines were used to full potential.
"For asset-intensive industries, digital technologies can automate operations on a large scale — not just individual business processes, but a whole operation end to end,” Lopez said. “Productivity will leap as smart automation makes better, faster decisions, and produces more at lower cost with fewer assets and fewer stoppages. At the same time, optimized production will usually reduce the enterprise's environmental impact."
Leading digital transformation also requires an understanding of the four parts of an industry vision that determine success, the Gartner research explains. Those parts are:
“An industry vision seeks fundamental change that will affect many dimensions of the business and operations,” Gartner explains.
As an example, Gartner cites an auto parts manufacturer that enables individual repair shops to 3D print plastic or composite parts, rather than having to order them and wait for delivery. The manufacturer would not have to buy raw materials, manage suppliers, manufacture the parts and distribute them to wholesalers. This scenario would change the entire economics of the business, and many current costs would disappear.
On the flip side, other challenges would arise. These include creating an accurate digital description of each part; and making sure repair shops have the right equipment, process expertise and material to print it.
Many organizations would need a new set of capabilities to make the digital business work. These capabilities could require skills and expertise that the enterprise doesn't already have on staff.
Using the auto parts example above, Gartner explains that the parts maker would have to market the 3D printing service in new way to a new audience; and it would have to provide training to part suppliers on running a 3D printing operation and to maintain a help desk to field any problems the repair shops run into.
The organization could develop some capabilities in-house (for example, the IT department can create 3D printing files). But it will need to find partners – such as a 3D printing company and the plastics or metal supplier -- to set up the business, and it might need to acquire other companies to bring in needed capabilities.
The enterprise will need a different set of assets to execute the digital business vision. These include people, data and intellectual property, Gartner says.
Again using the above example, Gartner says the parts manufacturer will have to beef up its 3D modeling skills and its 3D printing knowledge; set up databases and networks to send the right files speedily; and start a digital marketing program to keep repair shops engaged.
“The enterprise will need to hire people to do this work. Those people will need good data about the parts and customers, plus analytics tools to analyze the business and operations. Since the new approach gives the enterprise a competitive edge, it must develop and protect its IP — a complex challenge since it must collaborate with partners that have their own IP,” the Gartner study explains.
Digital transformation will trust an organization into new areas, making research of vital importance. Digital organizations will need to experiment continually with new business possibilities and adopt new technologies, making research partnerships -- especially with universities – an important part of the process.