Since the new approach gives the enterprise a competitive edge, it must develop and protect its IP.
Enterprises struggling with digital business transformation can most easily pursue digital business by creating a vision for their own industry, says Gartner.
According to Gartner's 2016 CIO Agenda, executives expect that 41 per cent of enterprise revenue will come from digital business by 2020, almost double what it was in 2015.
Yet, it points out, this year, many enterprises have not started a digital business transformation.
"Enterprises can transform by exploiting business moments or by using digital capabilities to enter or create new markets as Airbnb and Uber have done," says Jorge Lopez, vice president and distinguished analyst at Gartner.
"However, many enterprises will find it easier to start by creating a vision for digital business for their particular industry, he says.
He explains this approach enables the enterprise to tilt the fundamentals of competition in its favour without limiting digital business to narrow sequences of events and committing to a vast building project.
“Once the enterprise has established its vision, it can more easily tackle business moments or leverage its digital capabilities in new markets,” states Lopez.
To take this approach, CIOs who have been put in charge of digital business need to understand what an industry vision for digital business involves.
"Broadly speaking, an industry vision shows what business could look like if enterprises use the Internet of Things (IoT) and smart machines to their full potential," explains Lopez. "For asset-intensive industries, digital technologies can automate operations on a large scale — not just individual business processes, but a whole operation end to end.
“Productivity will leap as smart automation makes better, faster decisions, and produces more at lower cost with fewer assets and fewer stoppages. At the same time, optimised production will usually reduce the enterprise's environmental impact."
In a recent report, Gartner lists the four parts of an ‘industry vision’:Read more: CIO upfront: Continual change or 'why the road cones are always out!'
Concept: An industry vision seeks fundamental change that will affect many dimensions of the business and operations, says Gartner.
An example is an auto parts manufacturer that enables repair shops to 3D print plastic or composite parts, rather than having to order them and wait for delivery. The manufacturer would not have to buy raw materials, manage suppliers, manufacture the parts and distribute them to wholesalers.
“The economics of the business would change — a lot of costs would disappear,” says Gartner. But expect other challenges to arise, such as creating an accurate digital description of each part and making sure repair shops have the right equipment, process expertise and material to print it.
Capabilities: The enterprise needs a new set of capabilities to make the digital business work. These capabilities will require expertise that the enterprise doesn't already have, says Gartner.Read more: CIO Upfront: ‘Why you need a business strategy for digital, not a digital strategy for your business’
For instance, the auto parts maker would have to market the 3D printing service in new ways to a new audience, and it would have to provide training to part suppliers on running a 3D printing operation and to maintain a help desk to field any problems the repair shops run into.
The enterprise can develop some capabilities in-house (for example, the IT department can create 3D printing files). But it will need to find partners (a 3D printing company and the plastics or metal supplier) to set up the business. It may also need to acquire companies (perhaps one that runs help desks). Sales and marketing will likewise need innovative contracts.
Assets: The enterprise needs a different set of assets to execute the business, including people, data and intellectual property (IP), says Gartner.
The parts manufacturer will have to beef up its 3D modelling skills, its 3D printing knowledge, set up databases and networks to send the right files speedily, and start a digital marketing program to keep repair shops engaged. The enterprise will need to hire people to do this work. These people will need good data about the parts and customers, plus analytics tools to analyse the business and operations.
Since the new approach gives the enterprise a competitive edge, it must develop and protect its IP. This is a complex challenge since it must collaborate with partners that have their own IP, reports Gartner.
Research: The new digital business is not static; it will expand into new areas, says Gartner.
The enterprise will have to maintain a research program designed to add to the business and will need to experiment continually with new digital business possibilities.
Gartner says those possibilities will require new technologies, so the enterprise will need research partnerships, especially with universities.
Send news tips and comments to firstname.lastname@example.org
Follow Divina Paredes on Twitter: @divinap
Follow CIO New Zealand on Twitter:@cio_nz
- Pervasive trust services to deception tactics: Gartner’s top 10 information security trends for 2016
- Peter Yates of Spark Ventures: Eight pointers for standardising service management
- Gartner on smart machines - separating fact from fiction
- Potentia picks New Zealand’s next top ICT talent
- David Oakley of ServiceNow: Digital disruption is ‘a Silicon Valley term for finally getting it right’
- Shall we fight or befriend the digital giants?
- CIO100 2017 #31-100: Lukasz Zawilski, NZ Qualifications Authority
- Vector's latest investment: IoT energy software
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.