Last week, we discussed the rapidly approaching digital economy and outlined the nine new agenda items for CEOs. We also drilled down into the 3 CEO agenda items related to new customer requirements. In this blog, we’ll explore the three new capabilities needed to compete in the digital economy, the new critical infrastructure, and new ecosystems.
Digital Transformation: Developing Company Capabilities
To thrive in the digital economy, organizations will need to develop new and improved capabilities around being an intelligent organization, delivering digital innovations through software, and operating a new dynamic work model.
Use Intelligent Ecosystems to Create Competitive Advantage
Organizations are just now beginning to see the possibilities of incorporating artificial intelligence and other intelligent ecosystems into their strategies. In the digital economy, being an intelligent organization will create a competitive advantage.
A truly intelligent organization, one that has the capacity to learn and access to the data needed to learn, will have data collection, analysis, and learning mechanisms employed throughout the entire enterprise. This collection of use cases shows just how much potential there is for introducing intelligence across all functions within the organization.
Creating an intelligent enterprise will bring tangible advantages to the organization. By 2025, AI-powered enterprises will see a 100% increase in productivity and new product introduction success rates that are 25% higher than those of their non-intelligent peers. With their ability to anticipate market and operational changes, intelligent organizations will respond in half the time of their peers and will be agile enough to adapt to changes in the market.
While technology suppliers are all chasing the AI opportunity, it will be important for you to find your white space. Three times more money will be spent on the AI-powered apps than the platforms themselves. Figure out where your technology can add intelligence to enterprise business processes.
Foster Digital Innovation
As organizations innovate, much of their innovation will be digital experiences and services that will need to be developed and distributed at scale. This will require organizations to develop a new capability around being a software producer. IDC predicts that by 2025, over two-thirds of the G2000 will be high-performance, large scale producers of software-based digital innovation.
To develop these capabilities, the software development model will need to change. Three elements will change significantly.
- Sourcing – The amount an enterprise sources from development tools versus developing in house will switch dramatically.
By 2025, 80% of code used by enterprise application development teams will be from 3rd party marketplaces, code repositories, and platforms. The other 20% will be sourced in house as organizations will see this as their competitive advantage.
- Development – The rate of software development will increase drastically.
60% of organizations will release code to production daily, as opposed to the only 3% of organizations doing this today. Agile development approaches will be critical to success.
- Delivery – Enterprises will need to develop their own software ecosystems to distribute their digital innovations.
By 2023, 60% of the G2000 will have created their own software ecosystem.
To take advantage of digital innovation, tech software providers need to abandon the traditional mindset that any company building software is a competitor. Enterprises developing their own software are new customers. They are building the long tail applications. Figure out how to be part of their supply chain.
Embrace Dynamic Work Models
The future of work itself will change in the digital economy. Dynamic work models that encourage agility, flexibility, and intelligence will prevail. The core tenets of this future of work are:
- Reconfigurable Workforce – a team that can be reconfigured as the organization’s needs change will create a competitive advantage.
By 2024, two-thirds of employees in the G2000 will shift from persistent teams organized around a process or function to reconfigurable teams focused on outcomes.
- Digital Coworkers – In the digital economy, “coworker” won’t just refer to people, but technology as well as more tasks and processes become automated or augmented by technology.
By 2021, the contribution from digital coworkers will increase by 35%.
- Intelligent Spaces – Physical and digital spaces that foster intelligent and collaborative work will not only increase organizational outcomes, but employee engagement and retention.
Organizations with intelligent and collaborative workspaces will see a 30% reduction in turnover, and 30% higher revenue per employee.
- Agile Learning – Employees will need to constantly fine tune and add to their skillsets. Successful organizations will use dynamic and AI-driven learning pathways to identify training needs and dynamically serve up the needed content.
33% of the G1000 will offer these learning programs by 2022.
Dynamic work models will require lots of technology to support the human workforce. 30% of that workplace transformation budget sits with HR; don’t neglect those buyers in your strategic planning.
Digital Transformation: Supporting Critical Infrastructure
Digital products and pervasive experiences are dependent on digital infrastructure and connectivity. CEOs will come to appreciate that critical infrastructure is not merely manufacturing plants and buildings; it is also data centers and networks. But the new critical infrastructure is not going to be easy to manage. It will require:
Increased Complexity and Volume in the Digital Infrastructure
Digital infrastructure is growing in volume and complexity. For example, 60% of infrastructure will be deployed in edge locations rather than datacenters, and the number of applications running in the datacenter and edge locations will increase 300% by 2023. Digital infrastructure will need to be more intelligent and scalable.
CEOs are already pivoting their thinking; 73% agree that IT infrastructure is a critical asset to support their digital business as opposed to a cost to be managed efficiently, according to IDC’s CEO study. To do this, organizations need to change the conversation about infrastructure from expense to revenue. Help them understand that reliable digital services and experiences are critical to successful business outcomes, and a strong digital infrastructure is required to support these efforts.
The number of people and devices that are connected is growing exponentially, but the organizational investment in that connectedness is not. In fact, IDC estimates that 85% of consumer-facing businesses fail to incorporate a connected element as their channel to market. This becomes a barrier for delivering seamless pervasive experiences.
In the digital economy organizations will take charge of their connectedness problem with new roles and roadmaps. By 2022, 25% of large enterprises will identify a senior leader responsible for ensuring a pervasive and seamlessly connected experience across its workforce, operations, customers and partners. Additionally, over 70% of large enterprises worldwide will have a technology roadmap that stitches together next-generation-networks by 2024.
These fully connected enterprises will enjoy at least twice the ROI they currently realize through gains in revenue, customer retention, infrastructure longevity, and process/cost efficiencies. Help your clients create pervasive experiences by helping them to develop a unified roadmap that orchestrates connectivity across workforce, customers, operations and partners.
Digital Transformation: Finding New Value in Industry Ecosystems
In the digital economy, an increasing portion of an enterprise’s ability to generate value will be tied to its participation in a new economy. As new business models, customer requirements and ways of operating emerge, new ecosystems are created. Traditional industry value chains that were limited in the number of partners give way to scaled up digital ecosystems that leverage software platforms to deliver scale and speed. These open, agile and scaled ecosystems facilitate the sourcing and distribution of new innovations.
The biggest challenge for CEOs is the unknown. By 2025, one fifth of revenue growth will come from white space that combine digital services from previously unlinked industries. Additionally, by 2025, one third of an organizations partners will be from industries they have never partnered with before.
Organizations must continually search for shifts in consumers and technology trends that will disrupt their industry value chains. As they understand these shifts, they need to form new partnerships in digital ecosystems that deliver value.
There is a distinct advantage in the digital economy for technology vendors that can demonstrate competencies in integrating ecosystems.
The Digital Economy is Almost Here
Pivoting to prepare for the digital economy will require strategic shifts throughout the organization and can have trickle-down effects on customers and other stakeholders. Stay tuned to hear how IDC plans on adapting its global coverage to help technology suppliers evaluate opportunities, better understand buyer needs and preferences, and strengthen their partnership strategies and go-to-market with increased insights and a faster path to value.
There are a lot of components CEOs must prioritize to succeed in the digital economy and help from the rest of the C-suite will be crucial to that prioritization. Just as CTOs will need to align their roadmaps to support the CEO’s agenda, CMOs can support their CEO’s agenda through strategic marketing planning. Learn where to start with IDC’s “Technology Marketing Leader’s Checklist.”