January 12, 2017

Why Digital Transformation Should Be a Strategic Priority in 2017

While some companies took an active approach to digital transformation in 2016, others have slowly adapted to the reality of a technology-driven business environment. In 2017, we’ll likely see more user-centered design, leadership changes, and strategic IoT & app integrations.

What kind of changes can incumbent leaders expect as digital transformation continues to evolve? Here’s a look at the stunning array of emerging concepts, together with an overview of their impact on key industries.

Operational Excellence

As the technological revolution continues to unfold, it is becoming clear that digital has more roles in a company than just wowing the customer with glossy new shopping experiences. As Forrester puts it, “Digital customer experiences are only the shining faces of a digital business. Those pretty faces quickly lose their luster unless you’ve also transformed your business operations to make them better every single day.” In other words, front-end success depends on back-end support — and that support is increasingly based on a digital infrastructure. Forrester calls this a strategy of “digital operational excellence” and points out that 80 percent of a company’s digital transformation should be directed to this purpose.

Logistic Applications for Augmented Reality

E-commerce retailers trying to compete with Amazon will need to digitize their logistics, connecting warehouses and supply chains more effectively than ever.

Home Depot is a case in point. After budgeting $300M on tech for mobile orders and store pickups, CEO Frank Blake found that the entire fulfillment process had to be overhauled. Creating the necessary infrastructure to support the new ordering options ended up pushing the final budget close to $1.5 billion.

Augmented reality (AR) and other smart technologies are finding a new home in operational settings. This video showcases a successful pilot collaboration between DHL and Ricoh to use smart glasses to speed up warehouse operations. These wearable devices, created by European tech innovator Ubimax, put layers of logistical information in front of what the warehouse workers are physically seeing. The resulting “vision picking” not only streamlines warehouse operations but is also enthusiastically welcomed by workers.

Manufacturing Applications

Recognizing when change is essential, legacy giant General Electric is innovating vigorously within many of its sectors. One single example that has drawn admiring attention is their use of 3D printing to manufacture the 19 fuel nozzles needed for each of their Leap Engines. These items, built up by heating powdered metal, are five times stronger than those created through the older processes of milling and welding. GE Aviation CEO David Joyce comments, “We no longer have to understand what the limits of machining are.” Recognizing the potential of this technology, GE expects to invest over $3.5 billion in this “additive manufacturing” over the next five years.

Truly Holistic Customer Experience

The vector of new technology points in the direction of merging the digital and physical worlds. As the various existing and emerging technologies connect, a true omnichannel customer experience will become mainstream. Forrester forecasts that one-third of businesses will “shift to customer-obsessed operations,” breaking down internal functional silos and replacing them with customer-centric matrices. It’s possible to trace trends in this direction, as smartphones and tablets become control panels for home utilities, while wearables allow people to develop personalized plans with their health insurers. As previously existing boundaries are erased, customers and partners increasingly expect to maintain stable touch points with businesses across every type of device.

One standout to look to in this regard is Canadian shoe retailer ALDO. ALDO has successfully created “a simple, consistent, and seamless buying experience across the brand.” The company’s COO, Bryan Eshelman, describes his company’s perspective: “Customers don’t think, what channel am I buying this from? They think I’m buying shoes from ALDO and don’t want to know that there is a different way to buy shoes from our stores than there is online.”

The Empowered Consumer Must be Taken into Account

Providing a seamlessly delightful and effortless customer experience is more than simply a nice add-on; it’s also a fundamental act of financial self-protection on the part of even the smallest business. It’s now becoming the norm that consumers will reward and punish companies based on a single experience or moment in time. Firms that don’t heed the risk of providing frustrating their customers may suffer revenue losses of 25-50 percent, according to the Forrester study.



Organizational Structure Transforms to Keep Up

New roles are emerging for corporate leaders in the digital-powered age. Chief Marketing Officers (CMOs) will be increasingly expected to demonstrate “whole-brain” approaches, combining the analytic capabilities of left-brain thinking with the intuitive human awareness of the right hemisphere. Forrester even goes so far as to predict that “CEOs will exit at least 30% of their CMOs for not mustering the blended skill set needed to drive digital business transformation, design exceptional personalized experiences, and propel growth.”

Chief Innovation Officers

The perfect benchmark for the evolution of leadership in a digital economy is the change in designation of the Chief Information Officer. These information experts are now re-envisioning their roles as guiding their organization’s strategy in the area of innovation. They see their IT departments as strategic partners, helping them to come up with new ways to integrate and connect disparate systems. These officers have their perfect complement in the new high-profile position of Chief Data Officer (CDO).

The CDO

The role of the CDO is essential for managing and leading today’s increasingly complex organizations. This age of limitless connections calls for an expert to navigate the expanding digital landscape and market dynamics. The CDO’s team is being established in forward-looking companies as an operational department, with sufficient resources allocated to it to allow for implementing substantive changes throughout an entire corporation. Gartner estimated that 25 percent of large global organizations had already taken a CDO onboard by the end of 2015, and they expect this number to reach 90 percent by 2019. Interestingly, Gartner notes that those CDOs don’t stay put: Demonstrating today’s tendency toward eliminating silos within organizations, 15 percent of successful CDOs will move on to other C-level positions by 2020.

 Already, over half of the organizations surveyed by Gartner state that they have fully or partially implemented a CDO division, and a further 20 percent are planning to do so in the coming year. Some CEOs will cut roles that are “filling the gap” in skills and will instead seek leaders who are more well-rounded and versed in both data/analytic and customer areas.

AI Is Powering Interactions and Operations

Artificial intelligence is coming into its own as the digital transformation unfolds. Once relegated to gaming flash and dazzle, AI is now driving more and more commercial conversations. It’s the primary technology behind the Internet of Things (IoT), a major feature in the emerging landscape. Forrester’s analysts warn, however, that the complexity of IoT can be hazardous; its protocols and software are almost infinitely varied.

One iconic example, highlighted by Mark Spates, president of the Internet of Things Consortium, is demonstrated by Caterpillar: Working with data analytics startup Uptake, Caterpillar co-developed “predictive diagnostics” tools for their customers to utilize data from bulldozers and hydraulic shovels. These digital tools enable potential maintenance issues to be caught before breakdowns occur, minimizing downtime and saving money. 
With an estimated 50 billion IoT Sensors by 2020 and more than 200 billion “Things” on the internet by 2030, the IoT will continue to disrupt during the decades yet to come.

APIs Will Be Harnessed for Flexible Ecosystems

Digital transformation analyst Daniel Newman calls APIs “a secret weapon for embracing true digital transformation.” These interfaces give companies the ability to leverage their existing resources with whichever platforms offer the most useful enhanced features. The high volume of transactions conducted by eBay and PayPal rely significantly on API technologies, and other companies will need to follow their example if they want to take advantage of best-in-class emerging technologies. A recent MuleSoft survey of IT executives found that most organizations are thinking about or already investing in some sort of API strategy: More than 50 percent said they were already generating revenue through an API or will be in the next year. While APIs drive agility and enhance services, they are also a crucial way for companies to bring products to market. According to MuleSoft, half of large companies with 10,000 employees or more are generating more than $10 million/year through APIs.

Retail Expands Into Adjacent Areas

Just as organizations are breaking down the internal structure and traditional hierarchies, the boundaries between industries are also softening. Under Armour, for example, which was originally only an apparel company, now competes with Nike through their developing tech. Under Armour recently acquired several tech-focused fitness companies (MapMyFitness, MyFitnessPal and European fitness app Endomondo) for a total of $715 million. With their new digital power, they have introduced “connected fitness,” a platform to track, analyze and share personal health data to customers’ phones.

Connected Health Continues to Grow

Today’s tech disruptions to health care are already beyond count, and the ecosystem continues to rapidly transform. The IoT is a major factor here, improving patient life and allowing providers to stay accessible. As millennials age and financial pressures against traditional medical practice continue to mount, remote health care will become the dominant medium. Or at least, this is the prediction of Robert Graboyes, senior research fellow at the Mercatus Center at George Mason University.

Digital Darwinism” is something that every 21st-century company needs to take seriously. Managing resources wisely through an era of internal and external digital transformation will leave the agilest adapters in command of the entire landscape.

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