Digital Transformation: Innovation With A Body Count

For the majority of the IT industry’s history the focus has been on efficiency, how to do more with less. More recently, and now lumped under the catchphrase of ‘ (DT/DX)’, the focus has shifted to effectiveness: it’s no longer a case of just doing things right; the emphasis is changing to doing the right things. Increasingly, DT is an extinction-level event — it’s ‘go digital or die’ — and a new survey from Dell EMC reinforces this dire forecast (or incredible opportunity).

The business phenomenon Digital Transformation (AKA digitization or Industry 4.0) and its related technologies — , , , , and — changes everything… and nothing. New tools and new applications drive new ways of doing things, but ultimately, it’s still about selling more goods and services with acceptable margins. According to the ESG 2017 IT Transformation Maturity Curve study conducted by Enterprise Strategy Group and commissioned by Dell EMC, only 5% of large companies are prepared to meet the IT requirements of the Digital Business era.

As do so many similar studies, Dell EMC found that 95% of survey respondents are falling behind their best-of-breed competitors who are accelerating their digital business goals through IT transformation, while 71% agree that they will not be competitive without IT transformation. Given that 96% of the more mature organizations exceeded revenue targets last year and are more than 2X as likely to meet revenue goals, I have to wonder why only 71% seem worried. As Dell EMC President David Goulden noted in the press release, “… the research shows that most respondents are falling behind a small and elite set of competitors who have cracked the IT Transformation code, and they’re competing more vigorously because of it.”

Trey Layton, VP and CTO with Dell EMC’s CPSD, told IT Trends & Analysis the study reinforces the company’s belief that this “is more than a business agenda, it is a digital transformation at the foundation.” A major concern is that enterprises’ foundations typically consist of separate silos, and many employees and executives feel trapped.

“If you look at the IT organizations we deal with around the world, they’re in various stages of their journey to transformation… but the power centers are siloed… in compute, storage and network silos…” The biggest concern they’re finding when they talk to customers “is that the future space doesn’t have a place for them from a skill-set perspective,” he said. “CIOs are trying to break down those barriers.”

Global Knowledge’s 10th annual IT Skills and Salary Survey, released earlier this month, reported that more than two-thirds of IT decision-makers reported a gap between skill levels and knowledge needed to meet goals. “The typical IT product lifecycle continues to shrink and the skills gap continues to widen,” stated President and CEO Sean Dolan. “Organizations can’t buy their way out of this problem; they have to look inward to embark on an IT skills transformation,” he said.

Whether it’s IT skills transformation or culture change, digital transformation is having a huge impact. Contributing factors to the emergence of DT include the explosive growth of data (actionable data will grow by 9.6x by 2025) and devices (connected devices will grow by more than 50% to 30 billion by 2020, and 80 billion by 2025), and how data and devices will pose both opportunities and threats. The opportunities are literally game changing:

-33% increase in speed to market;

-40% increase in customer satisfaction;

-37% increase in new business revenue;

-an expected increase in annual revenues by an average of 2.9%; and,

-an expected reduction in costs by an average of 3.6%.

Those numbers are impressive, but the “first movers” who combine high investment levels with advanced digitisation, are “already gaining a nearly insurmountable advantage over competitors’. Representing just 4% of the respondents (71 companies), first movers ‘are far more likely to be forecasting both revenue gains of more than 30% and cost reduction of more than 30% at the same time.’

Unfortunately the challenges are equally impressive, including increased complexity, new technologies and skills, a substantially faster pace of decision-making and the consequences of not making the right decisions at the right times in the right places. However the biggest issue is the need for a culture change. Similar to the Dell EMC study, a recent survey of more than 2,700 IT and business decision-makers found that companies are not prepared for the impact of digital disruption.

Gartner reports that 42% of CEOs have begun digital transformation, with IT-related changes the second most important priority, after growth. “Almost twice as many CEOs are intent on building up in-house technology and digital capabilities as those plan on outsourcing it (57% and 29%, respectively),” said Mark Raskino, VP and Gartner Fellow, in a prepared statement. “We refer to this trend as the reinternalization of IT — bringing information technology capability back toward the core of the enterprise because of its renewed importance to competitive advantage. This is the building up of new-era technology skills and capabilities.”

IT’s ability to address the skills gap and change the corporate culture rests on three pillars, according to Dell EMC: 1-modernize your infrastructure; 2-automate IT services; and, 3-transform people and processes. Customers are looking for help in defining their objectives, and the appropriate mix of products and services to meet those objectives, said Layton. For the foreseeable future, those objectives will revolve around digital transformation.

DISCLAIMER: Companies mentioned in this article may be represented in my stock portfolio.

Author: Steve Wexler

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