A Lack of Digital Business Competence Will Cause 25 Percent of Businesses to Lose Competitive Ranking by 2017
Digital business is changing the way organizations use and think about technology, moving technology from a supporting player to a leading player in innovation, revenue and market growth, according to Gartner, Inc. However, digital business should not be considered an IT program and should instead become an enterprise mindset and lingua franca, with digital expertise spread across the enterprise and value ecosystem.
Gartner predicts that a lack of digital business competence will cause 25 percent of businesses to lose competitive ranking by 2017.
"CIOs or IT professionals who hear 'digital business' and think 'IT' will be blindsided," said Ken McGee, vice president and Gartner Fellow. "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."
"Businesses have used information and digital technology for some time as sources of efficiency and productivity," continued Mr. McGee. "However, in a digital business, digital technology, for the first time, moves 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."
Gartner has identified six crucial steps that will enable CIOs and other business leaders to build a successful digital enterprise and change the game.
Step 1: Create the Right Mindset and Shared Understanding
Digital business is not just about expanding the use of technology. Digital business leaders must think about technology in a fundamentally different way than in the past. It is not an enabler to be applied to what the business wants to do but a source of innovation and opportunity for what the business could do. This more proactive model focuses on creative disruption and new business models to gain competitive advantage.
As digital business continues to mature, the pipeline of opportunities that will evolve will take on the characteristics of what Gartner calls a "business moment," defined as "transient opportunities exploited dynamically." In the context of digital business, a business moment is a brief everyday moment in time and the catalyst that sets in motion a series of events and actions involving a network of people, businesses and things that span or cross multiple industries and multiple ecosystems. Business moments are important, because they will force enterprises to rethink the role they play in a value stream. Business moments illustrate a wide variety of possibilities and players and help companies envision and design new businesses that integrate people, businesses and things to do things that were not possible five years ago. The hallmark of a digital business will be the ability to spot these opportunities, however fleeting.
Step 2: Put the Right Leaders in Place
The fast-moving digital world is exposing gaps in digital leadership, especially with regard to front office disciplines (those related to the customer experience) and head-office disciplines (those related to enterprise strategy). Three types of digital business leader have emerged to fill these leadership gaps:
"These are roles and not necessarily titles," said Lee Weldon, research director at Gartner. "The title chief digital officer (CDO) is being used for each of these roles — to date, most often for the digital marketing leader — although the CDO title is best used for the digital strategist. Some CIOs play the digital strategist role already, so it is the most natural digital leadership role for CIOs to evolve into."
These roles are likely to be around for the next five to 10 years, but are really just interim positions. This is because digital will simply become a part of the way we do everything soon, making a single, separate role dedicated to digital initiatives inappropriate, if not impossible. More generally, there will be significant innovation in the way businesses are managed and led in the next decade or two. While three discrete roles are optimal, one person could play multiple roles, and the people fulfilling these roles could also have other responsibilities.
Step 3: Launch a Digital Business Center of Excellence
Create a digital business center of excellence (COE) to provide input, advice and opportunities for the collaborative formation of a digital strategy and the collaborative advice, innovations and capabilities needed for execution.
"Start by accessing digital opportunities," said Mr. McGee. "Examine your strengths, weaknesses and potential opportunities and identify new technologies and how they might pose a potential threat. Engage people from throughout the enterprise and, more importantly, from outside the enterprise and industry, such as current and potential users, as well as recognized and unrecognized thinkers, both associated with and orthogonal to the focus of your enterprise's main vision. Assessing opportunities and especially threats start with identifying what you have not yet thought about — a task that requires requisite variety to ask new questions and suggest new ways of thinking about the issues such as via co-creation and crowdsourcing."
Step 4: Formulate a Digital Strategy to Respond to Opportunities and Threats
Once the necessity of a digital strategy has been established, the following five elements must be addressed:
New Digitally Enabled Business Models — New digitally enabled business models afford new sources of revenue and disruptive competitive advantage for some period of time. Creating new business models will become an almost automatic default position of a digital business strategy.
The Product and Service Portfolio — In an increasingly digital world, products and services can be virtual, with no physical presence.
Information as an Asset — Information, and its effective use, has become a strategic asset and a competitive advantage to the digital businesses best able to exploit it. Although information strategy is a key element of digital business strategy, organizations must balance their desire for competitive advantage against the limitations of regulatory and other legal requirements and the privacy and manifold ethical concerns of their customers.
Technology — In the digital enterprise mobile devices and bring your own device (BYOD) are becoming more commonplace, cloud computing and cloud-based services of all kinds are proliferating, and data of all types is exploding. As a result, evolving and implementing an effective technology strategy are more complex than ever before.
Content, Media and Channels — A successful digital business strategy critically depends on understanding customers' preferences for channels, the segmentation, and the possibilities associated with each instance.
Step 5: Find, Develop and Acquire Digital Business Skills and Roles
Digital business combines the expertise, skills and roles found not just in IT, but across the enterprise. Digital business is not an IT program but an enterprise mindset. 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.
"Digital business leaders agree that the competition for talent will make or break their success in digital business," said Diane Morello, managing vice president at Gartner. "However, according to Gartner's 2014 CIO Agenda survey, 42 percent of 2,339 CIOs from 77 countries surveyed said their IT organization did not have the right skills and capabilities in place to meet upcoming digital business challenges. As digital business picks up speed, CIOs, HR executives and other business leaders must reimagine their quest for talent, emphasizing new approaches that accelerate and widen access to talented people while minimizing the bottlenecks of traditional serial processes."
Step 6: Create New Digital Business Capabilities
With the expectation that digital business expertise will spread around businesses within two or three years, but the acknowledgment by many that their workforce is unprepared and inadequate, organizations will need to explore the kind of disciplines needed to drive digital business initiatives. Traditional recruitment practices will not suffice. Instead, organizations should consider launching boot camps and other learning programs about digital business across all areas of the business. They should mine informal networks and investigate "work mashups" by applying digital business and digital technologies to the distribution of work and look at piloting new channels for finding, building and acquiring digital business capabilities.
More detailed analysis is available in the report "Six Key Steps to Build a Successful Digital Business." The report is available on Gartner's website at http://www.gartner.com/doc/2725917.
Gartner, Inc. (NYSE: IT) is the world's leading research and advisory company. The company helps business leaders across all major functions in every industry and enterprise size with the objective insights they need to make the right decisions. Gartner's comprehensive suite of services delivers strategic advice and proven best practices to help clients succeed in their mission-critical priorities. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has more than 13,000 associates serving clients in 11,000 enterprises in 100 countries. For more information, visit www.gartner.com.
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