A lot of vendors are starting to drop the term “digital.” We’re at a point in digital maturity where North American and European businesses accept the importance of technologies such as cloud, AI and automation. They ran experiments on these technologies and validated that they work. Now businesses are moving to “digital at scale.” Let’s look at what digital at scale means and why it’s important.
I first want to point out that the COVID-19 pandemic changes the dimensions of the move to digital at scale – but only temporarily. The pandemic is causing a pause in commercial activity for the next couple of quarters. But once the pause is over, the underlying fundamentals for moving to digital at scale are still positive. And the move will happen quickly at that point.
The IT modernization movement is moving beyond the initial euphoria around the potential of digital technologies. Companies taking steps to modernize their IT are recognizing that it’s a very substantial endeavor and will take years to accomplish. In committing to the long haul of the modernization journey, several situations are becoming apparent, causing companies to take a more mature, measured approach in how they evolve their technology.
Most enterprises believe their IT infrastructure isn’t future-ready. Everest Group says enterprises need ‘invisible’ Infrastructure 3.0, underpinned by AI, analytics and automation, to drive digital transformation.
According to Everest Group, nearly 85% of enterprises believe that IT infrastructure is the bedrock of business transformation initiatives; however, most enterprises believe that their current IT infrastructure services model is not ready to cater to their digital needs.
Everest Group asserts that digital enterprises need to consider a new model for IT infrastructure – Infrastructure 3.0, where the focus of IT infrastructure management is on improving business metrics instead of pre-defined IT SLAs and TCO management. Infrastructure services need to be underpinned by artificial intelligence (AI), analytics, and automation to drive self-healing, self-configuring systems that can dynamically and autonomously adapt to changing business needs, thus creating an “invisible” infrastructure model that is highly secure and requires minimal oversight.
“With the concept of ‘invisible infrastructure,’ we’re suggesting that IT infrastructure must evolve to become a proactive enabler of business innovation with minimal human intervention,” said Chirajeet Sengupta, partner, Information Technology Services, at Everest Group. “To achieve Infrastructure 3.0, enterprises must focus their IT investments on the three I’s—invincible, interoperable and intelligent. In other words, enterprise must build a resilient and secure infrastructure that protects the business, is seamlessly interoperable across stacks, and uses intelligent tools to continuously evolve with business needs.”
Detailed recommendations for achieving Infrastructure 3.0 are offered in Everest Group’s recently published report, “Exploring the Enterprise Journey Towards ‘Invisible IT Infrastructure’: Cloud and Infrastructure Annual Report 2019.” This annual research also deep dives into the cloud and infrastructure services (IS) landscape. It provides data-driven facts and perspectives on the overall market. The research covers cloud and IS adoption trends, demand drivers, and buyer expectations. The research analyses buyer challenges, trends shaping the market, and provides an outlook for 2019-2020 for the broader IT as well as cloud and IS market.
Highlights of the Cloud and IS market analysis:
Enterprises’ need for business transformation has increased the number of consulting-led IS engagements: 68% of IS engagements in 2018 had consulting services in their scope.
Change management initiatives will be crucial for service providers going forward, as adoption rates are a crucial metric for buyers.
The cloud and infrastructure market in the telecommunication industry in North America is booming primarily due to focus on 5G implementation. Adoption within the retail industry is driven by buyers focusing on enhancing customer experience with digital initiatives.
Going forward, enterprises expect infrastructure services to enhance business metrics in addition to reducing costs through outsourcing.
Vendor-agnostic behavior will continue as buyers expect agile and continuous innovation and higher value from outsourcing contracts.
Cloud adoption is rising, with hybrid cloud becoming the preferred model for enterprises. Service providers are best placed for solutions that will enable hybrid cloud as well as multi-cloud adoption amongst enterprises.
Service providers need to provide interoperable infrastructure capabilities to enable enterprises in their digital journeys.
About Everest Group Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empowers clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.
Businesses have conducted change management programs for 20-30 years. Even so, change management programs are systematically ineffective in delivering results. Unfortunately, the ineffectiveness is much worse today.
That’s because companies are engaged in digital transformation, where the degree of change is much greater than in the past. What causes the ineffectiveness, and what is the remedy?
It’s getting harder and harder to do business with third parties because of complications arising from security, data privacy, GDPR, and other regulations. The complications are running headlong into the need to be agile and operate at high velocity. To do that, companies need to be able to move quickly and make things simple. But these regulatory requirements are making that complicated; they take time, thus creating real friction in trying to conduct transactions. This is particularly the case with trying to do business with third-party services. The consequences create a formidable barrier in trying to select the best providers/vendors.
The story we tell ourselves as executives is that we make decisions based on facts, on data. We want our organizations to be data-driven organizations with decisions based on “institutional conviction.” In reality, making well-informed decisions and getting others to support those decisions is a factor of how deep and well supported the convictions are and leaders’ ability to persuade others of those convictions. However, without data and facts, people typically believe the executives’ underlying assumptions are wrong or incomplete.
Change can be painful for companies and individuals. But if you are undergoing a digital transformation, there’s simply no getting around it. In fact, the degree of change is greater, and there is a cascading set of consequences for these deep changes, which each require their own change management.
At Everest Group, executives often ask us, “What is the most effective change-management tool or method for driving the necessary change in transformation?” Answering that question, I first point out two hard truths: Executives cause their own problems with change management – often in three key areas – that make their efforts to drive change ineffective. As a result, they encounter big, expensive problems and passive-aggressive behaviors that delay achieving the objectives or even cause the transformation initiative to fail.
Here’s a sobering fact: Everest Group research found that 78 percent of enterprises fail in their digital transformation initiatives. Failure here can mean multiple things, including unsustainable returns, lack of user adoption, or, even worse, abandoned projects.
The following picture illustrates one of the key reasons they’re failing. What is it?
It’s a Steaming Pile of Technology – what we call a SPOT. And, unfortunately, it’s where most organizations start their digital transformation journey.
Why do I say unfortunately? The truth is that a technology-led approach won’t enable you to achieve the business value you expect from your digital transformation initiative. Indeed, as you see in our holistic, interconnected Digital Success Model, technology is only one of eight components that you need to get right to succeed.
Let’s take a quick look at all eight components, which we categorize under strategy and solution.
With so much at stake, you have to begin your digital transformation journey by defining where you want to go and how you’ll get there. The four critical strategy components you must address at the very onset are:
Vision This must clearly and concisely cover what you specifically want to achieve in both the short- and long-term. For example, is the initiative to drive revenues, cut costs, improve customer experience, extend competitive advantage, be compliant? The objective functions will fundamentally dictate your digital transformation journey’s “rate of spin.”
Economics Typical funding models don’t work in digital transformation programs because they focus on achieving ROI in a short timeframe. Instead, you need to establish the right budget centers in the to-be-transformed business and functional unit/s, and the right funding mechanism – CapEx versus OpEx. Additionally, you should put in place funding gates to ensure your business objectives are met during interim check-points.
Organization and cultural We consider organizational culture and change management the most important element of the digital strategy model. In order to succeed, you must create an empowered, cross-functional journey team that aligns the C-suite, business stakeholders, and IT stakeholders. Emphasis on agility, risk tolerance, and decision-making speed and flexibility are key. And to make sure your new culture takes hold and sticks, you need to adequately budget both time and money for a comprehensive change program.
Performance and governance As management guru Peter Drucker said, “You can’t manage what you can’t measure.” To effectively manage the success of your digital transformation journey, you need to identify and measure metrics that tie back to your vision. You also need to establish interim milestones for these metrics to track progress, allocate funding, and drive any needed course correction. Many enterprises find that investing in a digital transformation Program Management Office can help them handle performance and governance on the operational, tactical, and strategic levels.
Once you have your strategy in place, you can move on to shaping the solution.
Technology When selecting your technology, a “one-off, one and done” approach may deliver very short-term spurts of success, but it won’t deliver sustained business value. To achieve ongoing success, you need to embrace a platform-based operating model as the foundation for your digital transformation journey. What we call a Digital Capability Platform helps you look at all your users – your employees, your customers, and your partners – in the context of all the technological enablers to drive the customer experience, decisions, process efficiency, and scalability and performance.
Talent The best strategy, funding mechanisms, technology, etc., can’t deliver to your expectations if you don’t have the right talent. Indeed, your ability to compete in the digital era depends on having the right talent, at the right time, in the right places. You need to prioritize using an elaborate sourcing ecosystem to find the talent you need today, and establish a robust resource management program to help you plan for future skill requirements.
Data Not surprisingly, data is a key enabler of your digital transformation success. Consider this: our research found that 100 percent of successful enterprises use digital initiatives to collect data and perform analytics for better insights that drive better outcomes, and 94 percent use some form of data and analytical solutions to augment their strategic decision-making. You need to be able to convert your existing volumes of data into a high-quality, actionable enterprise asset to achieve longer-term digital transformation success.
Ecosystem and sourcing And finally, digital transformation cannot happen within the boundaries of your organization, or even the boundaries of the industry in which you operate. By partnering with start-ups, academia, government, tech vendors, staffing companies, transformation partners, orchestrators, and peers, you can unlock breakthrough value from your digital efforts.
This full-scale realignment of your digital strategy and solution ecosystem is challenging and can feel overwhelming. But it’s critical to your short- and long-term success. Our IT and digital transformation membership offering can help. To learn more, please click here.
Companies widely recognize the potential power of artificial intelligence (AI). They instinctively understand that it feels like we’re on the cusp of something that will change our lives and our businesses in a profound way. Yet, many struggle with where to apply it. Executives can’t shake the feeling that they should have use cases for AI and use it productively today, even recognizing that AI is not mature yet and will be far more powerful tomorrow and in the future. If you’re looking for how and where your company should use AI, let me give you a perspective on a great application of AI today: your digital platforms.
There is no business we can think of that is immune from the shifting demands of consumers in our digital world.
I was recently doing working with a 125-year-old insurance company headquartered in the American Midwest to develop a digital transformation strategy. As with most insurance companies, its policies are sold through a network of financial professionals, who, in this instance, are predominately male, “middle of America” seasoned investment advisors. They have their ways of doing business that have worked for them for decades.
But here’s the challenge they are facing. Their customers are aging and, in a few years, their wealth will transfer to their children. Connections need to be made today with this generation of people set to inherit their parents’ wealth. Most likely, the old ways of doing business will not work with them.
One of the first exercises I performed with the senior executives of this insurance company was to ask them to individually share digital positionings of other companies that they admired and could be used as examples for their own transformation. In total, they provided 25 names with 11 of them being digital natives. The significance of this is that a group of senior executives of a 125-year-old, Midwest-based company competing in a highly conservative industry offered companies such as Amazon, Uber, and Zappos as ones they wanted to emulate.
The impact digital native companies are having on customer expectations is so pervasive in the marketplace that not even this group of conservative executives could escape it. Regardless of your industry, customers will expect a digital experience.
Elements of the pervasive digital expectations that are currently in the market include:
Anywhere, anytime functionality, including a fully functioning mobile-first user experiences
Minimal wait times with preferably near real-time processing of everything
Micro-customization of the user experience based upon data and analytics
Self-serve service and delivery options
As you think about and plan your digital transformation journey, do not think you are immune from the massive shift in consumer expectations – even if you are in a B2B industry. The reality is that all businesses are filled with humans that consume goods and services in a digital marketplace every day. Once exposed, they cannot help but bring the same expectations of convenience, speed, and customization to all of their business and commerce interactions.