The digital enterprise, coming to a competitor near you
- 16 April, 2015 06:00
The “what’s here now” is the digital enterprise, but it remains a moot point as to how many traditional organisations in Australia and New Zealand have accepted the inevitability and have a comprehensive strategy to address the opportunities and major risks it presents.
Talking to CIOs at workshops before the conference, Dr Peter Weill of MIT Sloan School of Management, laid out the results of his research with Dr Stephanie Woerner, to help CIOs see what is coming, where it fits and what to do.
Weill and Woerner’s research shows that larger firms in Australia and New Zealand fit well into the category they call ‘supplier’ (46 per cent). However, the opportunities presented by digitisation show that higher net margins relative to competitors, come to those operating in the category they call “Open Ecosystem Drivers” (“OED”).
The traditional supplier enterprises work with a value chain model, with generally only partial knowledge of their end customers. Contrast the companies operating in the OED model which have complete knowledge of, and more importantly, own their end customers. They work with third parties who plug and play with the customers and they all focus on customer experience.
For traditional industries (think NZ electricity distributors, few of which own their customers) the move from supplier to OED is difficult and costly (but worth making) and most making the attempt, land in one of the categories between (called “omni channel” and the “modular producer”).
With businesses operating in OED posing the greatest challenge to the large older established supplier businesses, it is going to take tech savvy and the innovative mindset of a CIO, to get the business moving in the right direction and not just the marketing magic of the CMO.
With the research pointing to OED companies surpassing all other models on measures like revenue growth, time to market and net margin, urgent action is needed from CIOs to influence strategy and their boards to seeing a digital way forwards and up the value chain.
Weill and Woerner suggest that boards and CIOs should ask these six questions to quickly identify how immediate the digital risk is to their company. To what extent is your product or service:
1. Electronically specifiable and searchable?
2. Ordered digitally?
3. Delivered digitally (or likely to be in the next five years)?
4. Augmented (or can be) with valuable information?
5. Threatened by enterprises in other industries with relationships with your clients and offering services competitive to yours?
6. At risk of being replaced with an alternative digital offering?
The more questions answered with yes, the more immediate the threat.
Weill and Woesner recommend a mindset change to see business not as a value chain but as a digital ecosystem.
Weill pointed out that successful business initiatives like Westpac’s “Mobile First” strategy and Woolworth Australia’s multi-channel strategy (which evidenced a move from supplier to omni channel) were driven by their IT teams and not by marketing. These examples provide compelling evidence not only of the importance of CIOs taking the lead but the benefits of making that move.
As the evidence points to the benefits to business of CIOs stepping up and driving digital and the dangers to CIOs of being merely backroom resources, seems like the time is right to avoid competitors taking both market share and the prized jobs around the C-Suite table. With reporting by Ania Lang
Jennie Vickers is ANZ director for the International Association for Commercial & Contract Management. Reach her at firstname.lastname@example.org.
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