Digital Enterprise— Still an Unfulfilled Dream?

Digital technologies hold the power to unleash new business opportunities, bring efficiencies and take customer experience to another level, yet why most enterprises are still not ready to walk the path?

If companies could give their relationship to digital transformation a Facebook status, it would be ‘it’s complicated. A study on digital transformation by MIT Sloan’ Management came up with this interesting and much valid statement. Digital technology transformation is still a complicated reality for most organizations, even globally. Of course, there are successful cases of the likes of Burberry and Starbucks who turned their fates around by going digital. Burberry’s transition is often touted as a historic example of transformation through digital technologies turning the underperforming, aging brand into a highly-valued, customer-centric digital enterprise of today.

A similar change happened at Starbucks when the company after hitting a rough patch in 2009 took the digital route to re-engage with customers and saw massive improvements in its overall performance. These are truly inspiring cases of digital innovations that any enterprise would love to replicate. But if we look deeper we see that such cases are a few and far between as most companies worldwide are still struggling to grasp the true meaning and extract the true value of digital.

If that is the scene globally, the India picture is not much different. The emergence of the more disruptive forms of digital technologies like mobile, social and analytics has been quite recent and most enterprises are still not prepared to handle it, and weave the different technology elements together into a unified digital strategy.

With increasing Internet penetration and explosion of smartphones, tablets, and other devices, and a booming e-commerce industry, the case for digital technology adoption in India looks pretty strong. Enterprises are facing a generation of customers that has all time access to information and demands an equally satisfying experience across all channels. Any failure or disappointment in doing so could do a lot of harm to brand image. At the same time, there is a huge opportunity for enterprises to leverage digital information to understand their changing customers and connect with them at a more personalized level. Sumeer Goyal, Director, Digital Technology, PwC India says, “While digital definitely helps to drive efficiency in enterprises, it also improves customer engagement and significantly brings down the time to market. It also adds to the revenues of a company by opening up newer sources of revenue.”

Experts suggest that India holds a lot of potential for digital technology adoption. A recent study on Enterprise Digital Transformation (EDT) by Zinnov Management Consulting estimates that India is home to digitally ready talent pool of 500,000 engineers suitable to execute digital transformation projects. This is expected to increase to around a million engineers in 2020. The study also reveals that over the last few years, a majority of CIOs have been focusing on IT modernization. However, the approach for digital transformation is distinctly different from IT modernization.

Vikram Sundarraj, Engagement Manager, Zinnov Management Consulting says, “Most CIOs in India have just started to think about EDT. The concept of digital is at a very nascent stage.” He adds that the transition will be easy for the new age companies that emerged in the digital era, also called digital native companies. For the traditional enterprises it’s going to be a tougher ride. These companies will have to modernize their technology infrastructure before embarking on the digital journey.

Customer-The Strongest Pillar

Customer experience, business operations, and business models form the three pillars of a digital enterprise. Yet it is the ‘customer’ aspect that is driving most of the momentum. Global surveys indicate that customer engagement and improved customer satisfaction tops the list of expectations from digital transformation. Subsequently, customer facing industries like retail, ecommerce and travel are seeing more disruptions in the digital space. Uday Tembulkar, Co-founder, Empacus Outsourcing Management Services, says, “Most impact of digital transformation is on the customer experience pillar more than the other two.” Although experts believe that some amount of investment is happening on the operation side as well, the business model transition is the most difficult to achieve.

A New Hat for the CIO

The emergence of digital technologies has also led to an overwhelming role change for enterprise CIOs. From heading the IT department to spearheading digital technology led business transformations and for that being able to present the vision of a digital enterprise, the burden of expectations is pretty huge. Most could falter under the pressure, but that’s why having the right mindset is so important while embarking on new digital initiatives.

IT has a pivotal role to play in not just embracing digital technologies but also in inculcating and developing the right culture within the team and the organization. CIOs should be able to manage disruptive changes and make the road clear by removing the technology complexities that could stall the digital objectives. For a smooth transition, the underlying technology has to be modern and flexible. Experts indicate that Indian CIOs are acknowledging the significance of going digital and are giving it serious thoughts yet there is lack of maturity and understanding about what needs to be done.

Mukul Jain, Senior Vice President & Head IT, DLF Pramerica shares his views, “We acknowledge the disruption the digital technologies will drive; value chains will fragment, industries will converge and new ecosystems will emerge. Although in the insurance industry this will be tempered by regulation, privacy considerations and the fundamental nature of risk, insurers cannot escape the changing mechanics.”

According to the EY report, ‘Born to be Digital’, the most essential characteristic of a digital ready CIO is to have a vision for how technology will transform business and a roadmap for implementing that transformation. Most organizations lack the leadership vision. The need is to navigate through the technology complexities and look at how digital technologies can be effectively executed to bring improved customer experience, streamline operations, and optimize business models. Lack of clarity at the top derails the digital initiatives and fails to generate confidence within the organization.

The Roadblocks

Most CIOs are willing to look at digital investments, but they are not sure about where to start and how to start. As the digital enterprise transformation is based on three different elements, very often the problem is to decide what to transform first—customer experience, internal operations or business model. What makes setting up a digital enterprise so challenging is the need to develop a completely different set of skills and investments than a regular brick and mortar enterprise. The digital world is so fast paced that decisions have to be quick and technologies need to be agile and flexible enough to match changing consumer needs. “Digital technologies also mean managing and addressing demands of the always connected and globally distributed populace. In a digital economy, businesses will have to be available 24X7, says Goyal.”

Another hurdle for CIOs is the difficulty to establish RoI for digital technologies. Hence, CIOs often struggle to present a strong case for digital transformation. According to a report by Altimeter Group, ‘The 2014 State of Digital Transformation’, globally many companies are currently not investing in journey mapping, which leads to challenges in proving the validity of and making the case for digital transformation. The report also states that digital transformation doesn’t mean digital investment alone. Making separate investments into mobile, social or analytics without having an integrated view of a combined digital entity just spoils all the efforts. “The challenges we are experiencing are around the rapid evolution of all these technologies which makes adoption of one version or one direction difficult. Further the customer behavior including our intermediaries and employees are changing rapidly. Making a bet on certain solution/technology and weaving that into your organization architecture is a risky proposition and hence a challenge,” says Jain.

Taking the Right Path

To effectively implement digital technologies, it is important to have an enterprise wide digitization strategy. The impact of digital changes on different business units should be evaluated and clearly laid out. Also since the digital landscape is continuously changing, the digital roadmap should be constantly assessed against changing trends and market conditions.

Digital enterprise has the power to grab massive customer attention but at the same time it carries a lot of risk. Heading on to digital initiatives without having a clear strategy in place can cause irrevocable damages. Also the inventory has to match the high demand being generated every second. The recent Flipkart ‘Big Billion Day’ mishap was an example of how things could go wrong in case of lack of coordination and adequate resources. Sundarraj suggests that companies that are starting their digital journey should not try and do everything all at once. Start off with few things and see how it works. “Building digital trust is critical for organizations. They also need to ensure the security of customer data and security of their own systems,” adds Goyal.

Global surveys indicate that integration of independent digital efforts and coordination between IT and business is a key to digital success. The Altimeter report states that Digital transformation requires more than the intention to invest in the relevant digital channels connected customers are using. Ultimately, customers are the losers when the experience becomes or remains disconnected.

It is clear that digital will decide the future winners and losers in the enterprise race. As entry barriers are lowered in the digital space, more and more players will come to the scene. Those that are able to do some magic with their ‘digital wand’ will be the ones that stay ahead.