OK, so perhaps this sounds a bit alarmist. After all, there is little risk that highly skilled personalized services (Singapore Airlines flight attendants, for instance?) will be fully digitized anytime soon. On the other hand, if you run an enterprise that is in the cross-hairs of change driven by the fourth industrial revolution, then the digitize-or-die statement is very real.
The rise of Exponential Technologies like AI and Machine Learning, dictates that you keep an eye out for opportunities to disrupt or be disrupted. The first step is to understand how vulnerable you are to digital disruption from exponential technologies, and where you are on the digitization map.
The digitization journey in an enterprise
The work of digitization in an enterprise has typically fallen into one of the following quadrants. These quadrants frame the depth of automation vs. the breadth of work-processes being automated. Typically, as enterprises mature in their digitization they move from one quadrant to another.
- BASE PACK: This was the early use of IT for base business operations. Pre-1990, much of the digitization was about automating structured transactions (Financial transactions, Order Processing, Payroll). It also helped with internal productivity, such as collaboration and communication technologies. IT technology established individual beach-heads on several functions in the enterprise, but not too deeply. Assuming we’re well past this stage of evolution, we won’t dwell on it.
- CONNECTED WORK PROCESSES: This quadrant was more about connecting and digitizing work processes. The MRPII/ ERP(Enterprise Resource Planning) systems work in the ’90’s, or CRM (Customer Relationship Management), or P2P (Procure to Pay) systems are all examples. Essentially, this leveraged advances in computing and software capabilities to digitize a given work process across organizational groups. What could not be automated was packaged into Shared Services organizations, so that the enterprise could benefit from scale and wage arbitrage. Again, assuming that we’re past this stage, we can move on.
- EMBEDDED IT: Over the past 15 years, the emergence of the internet, mobile, social and big data, combined with the maturing of the connected-work-process stage started to blur the lines between what was traditional IT and traditionally other Business Functions. IT technologies and people started to become embedded into other core Functional areas. So for example eCommerce was neither pure IT or pure Sales, but a combination of the two. Most Business Analysis work is in a similar situation. Shared Services organizations evolved into Global Business Services, with IT and other multi-functional work and staffing becoming highly inter-twined. This is the stage at which most good organizations are today.
- EXPONENTIAL BUSINESS MODELS: This is the Digitize-or-die quadrant. It is the 4th generation of IT and Shared Services capabilities. What is causing this is the effect of massive and almost free computing combined with sensors, nanotech, biotech, green tech, AI, machine learning, crowdsourcing, drones, robotics, mobile, 3D printing and so on. This creates opportunities for new business models, both internal and external to the enterprise.
So what does this 4th quadrant of Exponential Business Models mean?
External to the enterprise, new business models are being created by combining the Exponential Technology ingredients. Uber vs. taxis, Airbnb vs. hotels, digital news vs newspapers, personalized medicine vs. traditional, shopping via subscription versus physical stores and so on.
The disruptions internal to the enterprise are just as significant, although less well understood. Chatbots that use AI are doing Customer Support at customer-centric companies such as banks, telecoms carriers, and consumer goods companies. They can even answer highly contextual questions like “why is this application running slow”. Other AI tools like Natural Language Processors and Generators actually digest and write articles for most of the online news organisations. Open ecosystems and new platforms including blockchain, real-time data pipes using technologies like Kafka, Cassandra and Spark, and data pools of IoT (Internet of Things) sensors can fully eliminate transactions or at a minimum, eliminate the middle party in many transactions.
These disruptive technologies are redefining the future of entire Business Functions in the enterprise. This affects staffing, as people will need to get upskilled from transactional labor to programmer-analyst type labor. And it disrupts the need for large offshore shared service centers as software robotics and machine learning do the work. The work of financial experts, accountants, sales, marketing, logistics, operational planners, legal, purchasing and even HR will inexorably move towards managing the “software machines” that do the work.
Where to start?
Exponential technologies are both an opportunity and a threat to your enterprise. You need to create new business models internal and external to the company. The best starting point to address this is via your Digital Strategy. Your Digital Strategy should be embedded in your Business Strategy, not be a separate exercise.
What do you think? Agree? Disagree?