As digital evolves, it’s unleashing forces that are notoriously difficult to control. Understand how these will impact your business and how new EA can help.
Digital disruption will impact every industry and will profoundly affect your organization. Many business leaders have lulled themselves into a false sense of security, imagining that once they have tackled the challenge of social media or mobile, they have mastered digital and success will follow.
However, digital transformation is an ongoing process. Digital technologies are constantly evolving, over cycles that are becoming drastically shorter. Very soon they will disrupt value chains, organizational structures, operational processes, and revenue models – that is, your entire business.
Preparing for change is not an option – it will decide whether your firm will survive into the future or not. However, business leaders are struggling to predict the changes that digitization will cause. As a result they can't identify the specific impact it will have on their business models and define the steps they need to take to transform.
An effective starting point is to deal with the biggest threats first. According to Gartner, the strongest forces shaping the coming wave of digital transformation are emerging from a complex array of factors external to the organization that are beyond its control, robbing business leaders of the ability to effectively steer the business. Therefore, addressing this loss of control should be a chief priority.
Digital's five disruptive external forces
Understanding these disruptive forces and how they will affect your business is the first step in developing a strategy to keep you in control of your business.
The business ecosystem
Before digital, businesses could be managed as discrete entities – a single business operating in an industry. In the digital era, this no longer holds true. Digital shifts value creation into the ecosystem that surrounds the organization – the set of relationships and interactions in which an organization participates.
This digital business ecosystem consists of customers, partners, organizations, and things (through the Internet of Things), as well as the business itself. Each affects the other in a constantly evolving relationship. The ecosystem is complex, dynamic, and real-time. Events can come from anywhere, anytime. No single entity has overall control.
To survive the volatility and unpredictability of the digital business ecosystem, your organization will need to develop the capability to continually innovate and constantly adapt.
The complexity of digital business ecosystems is increasing rapidly. A recent Gartner survey revealed that CIOs are expecting their number of ecosystem partners to grow by around 100% every two years. The current average is 42. Even at this point, the ecosystem is beyond the control of most organizations.
The technology needed to participate in the ecosystem is also growing in complexity. Digital businesses rely on digital platforms that allow a community of partners, providers, and customers to share and enhance digital processes. The platform provides a means of facilitating exchanges between the participants in the ecosystem.
As the ecosystem evolves, so does the digital platform. New services can be added, and the platform can be extended to include complementary collaborators or even segmented to target specific groups in the ecosystem. The technological foundations of the platform can become very complex, very quickly, while the business models are in a constant state of change.
Rate of change
Enterprises used to have the luxury of reacting to technology cycles over periods of three to five years, or for some industries, even ten years. That period has now drastically shortened. New technologies are arising so quickly that digitally-savvy competitors can enter the market at speed and disrupt rapidly.
The window for reacting effectively has drastically shortened. Two years is barely enough. And making predictions into the year ahead is virtually impossible, due to the constantly evolving nature of the digital business ecosystem. The rate of change is likely to accelerate to the point where as soon as a business has implemented one set of changes, it must immediately start on the next program.
In this hyper competitive environment, your business must develop capabilities for rapid analysis and quick change so that it can pivot with the market.
Due to the great number of people, businesses, and things connected to each other through the digital business ecosystem, the risk to cyber security remains very high and very difficult to control.
At the same time, cyber criminals are becoming more sophisticated and relentless. Computerweekly.com reports that European digital businesses were hit by 80 million fraud attempts in the first quarter of 2018 alone, a 30% jump from the year before. Increasingly, these are sustained, high-volume attacks executed across a number of days or even weeks.
Your business must be able to identify and plug gaps in its digital defences on a continuous basis with real-time security capabilities. In fact, many businesses are recognizing that robust digital security is not only essential but can lead to competitive advantage. Upgrading digital security to prevent cyber attacks was cited as the first priority by 36% of CIOs in a recent poll.
AI and machine learning
Digital business ecosystems are too complex for any individual to understand and react to in real time. Businesses are now looking to emerging technologies such as smart machines and Artificial Intelligence (AI) that offer the promise of better understanding and more control. Not only can these systems crunch vast volumes of data, but they can learn and respond.
However, these technologies are still in the nascent stages of development. They require higher investment, take longer to implement, and need more extensive configuration. There is a common view that the uses of intelligent systems are potentially limitless, which raises expectations and can lead to misconceptions and poor procurement decisions.
For example, while intelligent systems are increasingly capable of human abilities, such as recognizing natural language, they cannot think like humans. With increasing reliance on these technologies comes the temptation to replace human decision-makers. However, in the absence of human reasoning, there will be no one to second-guess the machine.
Without fully understanding AI and machine learning, your business runs the risk of spiralling implementation costs with little value to show for it.
EA is evolving to meet the challenge
All these areas are crucial to business performance, but in the era of digital, they have become notoriously difficult to control. Businesses are looking to EA to help them solve this problem. Just as digital has forced businesses to transform and evolve, so too does EA need to change and adapt.
What businesses urgently need is a new EA that is less about rigid architecture and more about helping business and IT leaders effectively navigate the digital business ecosystem and regain control of their direction. Only with a new approach that takes into account the realities of digital can EA deliver on its true potential and guide businesses in formulating enterprise responses to disruptive forces and identifying technology-enabled business opportunities.