Digital Vortex of Opportunity, Not Doom

Is the Global Center for Digital Business Transformation’s new "digital vortex" metaphor a positive one for businesses?Tornadoes are terrifying. These swirling masses of air leave a trail of destruction behind them, which is why the "digital vortex" metaphor the new Global Center for Digital Business Transformation has chosen to explain the business impact of digital transformation can appear frightening. Understood properly, though, the digital vortex will create new ways of doing business as industries caught up in the vortex are pulled together by the forces inside. Although the vortex may leave a trail of destruction behind it—the old ways of doing business and of interacting with customers will no longer work—its largest impact will be a creative one.

Connectivity Requires Transformation

It's a cliché that we live in a connected world. With smartphones, people are always connected. With the Internet of Things, devices are always connected. These constant connections have changed the expectations of how the world will work. The new world requires personalized interactions informed by the data companies collect about their customers. Corporate as well as consumer customers expect interactions tailored to their needs.Finding ways to generate those personal interactions and satisfy those needs is causing companies to look at the data they gather and find new ways to use digital technologies. It's not simply about building information systems to process data faster; it's about using the data in new ways, creating new business models and new business opportunities. The Global Center for Digital Business Transformation was created as a partnership between the networking company Cisco and the International Institute for Management Development (IMD), a leading business school, to help companies cope with these new changes.

Awareness Change Is Coming, but No Preparation

The impacts of the digital transformation are hard to overstate. The Center's survey of executives revealed that most expect 40 percent of today's industry leaders to be displaced as a result of the digital transformation. Despite this awareness, at 45 percent of businesses, the coming change is not discussed at the board level. About one third of businesses plan to wait and see what happens, rather than proactively prepare themselves.Companies will be pulled into the digital vortex whether they are proactive or not. As the Center explains, the rotational forces in a real-world vortex pull everything around it into the center. The Digital Vortex will pull all industries towards the digital center, where companies operate as digitally as possible.In a real-world vortex, the forces are greatest on items near the center. The same is true in the digital vortex. In the Center's view, the items in the vortex are entire industries. The Center ranked industries according to the extent they'll experience digital disruption in the short term. Not surprisingly, the technology industry is ranked number one, hovering right on the central point of total digitization.But industries further out will also be impacted. Whatever their position in the vortex, companies must evaluate their processes to identify the opportunities for digital transformation that will position them for the future.

Strategy Amid Chaos

The chief characteristic of a vortex is chaos. Although the items swept up are moving towards a common central point, their path there is chaotic. The items in a vortex can break apart during their journey, and they can collide with other objects swept up by the vortex. The pressures and stresses can lead to destruction, or transform an object into something new.The same is true in the digital vortex. Inside, the digital and physical worlds separate. These can be combined by digitization in new ways, generating business innovation and creating new ecosystems for business that cut across traditional industry lines.This isn't a hurricane with a calm in the eye of the storm. Companies that reach the center of the digital vortex have completed a transformation, but they aren't in stasis. The digital world never stops changing, and in the center of the digital vortex companies need to be poised for continued, rapid change.

Connectivity Supports Transformation

The same connectivity that requires transformation will provide the support companies need to achieve transformation. The data collected from the Internet of Things, from the way people use their phones to the unstructured information people provide in online comments and review sites, will be gathered and processed to link people, devices and providers in new ways. Through the use of open-source software, cloud computing and application platforms, smaller firms are connected to the same resources as larger firms. Size and geography are not a barrier to capability or competition. Small startups may in fact be better positioned to take advantage of the digital opportunities.With those digital capabilities, the Center expects companies will emphasize one of three digital business models:

1. Cost Value, where the company emphasizes pricing through elements like transparency, usage-based pricing, and auctions. Mobile payment methods make paying for goods easy.
2. Experience Value, where the company emphasizes personalization, access across devices and low latency. Virtual and augmented reality provide new ways to improve the user experience.
3. Platform Value, where the company emphasizes a marketplace, sharing or peer-to-peer interactions. These platforms may be based around the Internet of Things.

Three Questions On the Road to Transformation

For companies to not be crushed as the digital vortex swirls around them, the Center says they need to consider these questions: Why should they transform? What should they transform? How should they transform? Although not every company wants to enter the digital vortex, there's no avoiding being swept up into it. By considering these questions, a company can develop a digital strategy that lets it ride out the storm and emerge from the digital vortex stronger and ready for digital success.