8 Challenges Digital Enterprises will face in 2015

The great shift – As Kondratieff would put it, is knocking at our doorsteps as we gradually move away from analog to digital systems. But just adopting these digital systems is only a part of becoming digital, there are many essential ingredients needed for businesses to call themselves truly digital.

Courtesy: Global Shift 2011; Diagram adapted from Kondratieff Waves.

Global use of internet has risen dramatically from 500 million to nearly 3 billion, this means any and every business has to operate on digital platform using internet as the medium for transportation of goods and services.

Courtesy: ITU.INT

Digital Enterprise – What is it?

Digital enterprise or digital business is a widely used term, but it means totally different things to different people! You could have a pure-tech view of things where you address to improve aspects such as communications and technology; while a business view might focus purely on digitization of business transactions, improving process workflows and maximize customer acquisition channels.

A typical service oriented view focuses on improving customer care / customer service while reducing operational costs by clever use of new technology platforms, for instance for social listening, digital analytics and so on. Many also talk about digital transformation where organizations must use intranet platforms to improve employee productivity.

What types of Digital Enterprise exist out there?

There are different ways of slicing and dicing a digital enterprise (digital business/digital commerce/electronic business/electronic commerce/online business/Internet-based business or whatever that applies best for your business).

You can slice it by degree of digitization – measured by the product or service sold, the process [cpc, web2online conversion etc.], and the delivery method. Digital enterprises can be either pure online/digital or click-and-mortar businesses (having both digital/online and non-digital/offline operations/channels) or some other form of a unique mix that works best for your clients segmented the way you'd want to serve them better.

Another way is to focus on the type of transaction that is happening between a buyer and a seller. Transactions could be conducted among businesses (B2B), between a company and its retail customers (i.e., consumers) (B2C), within an organization (intra B2O), between consumers (C2C), between peers (P2P – this is one to watch carefully as markets will be jolted by this move where consumers will lock out sellers from the conversation), between members of networks and communities and finally, between government and its citizens (G2C).

But before we start to focus on the nice stuff digital has to offer to one and all, we must look at some challenges that are staring at us straight in our faces.

What challenges do they face in the coming years?

#1: Security – Cyberattacks will come often as we get more interconnected

Cybersecurity is increasingly becoming a huge concern for consumers, individuals, companies, government organizations and even a matter of national security. The interconnectedness that is a boon for digital is also a great platform for malicious groups and individuals to create large-scale disruptions with little input. Latest example of the attack on Sony Pictures for its latest release "The Interview" of South Korean leader is one such example that vulnerabilities exist even within large firms!

Look how polluted the system is:

• We transmit 2 trillion emails per dat out of which 75% is spam!
• Every minute 42 new strains of malware is produced
• About 8600 webpages with malicious code is produced every day
• 50% is search on internet leads to these malicious websites

This list is endless but just to put things in perspective: there is an estimated loss of $9 – 21Trillion economic value from these security challenges. As businesses continue to go digital, a recent study by Carnegie Mellon 2012 Cylab reveals this shocking detail:

57 % of them are not analyzing the adequacy of cyber insurance coverage or undertaking key activities related to cyber risk management to help them manage reputational and financial risks associated with the theft of confidential and proprietary data and security breaches

Senior leaders must be ahead of these cyberattack by enforcing effective cybersecurity governance and strategies. We cannot take security lightly and I am predicting that it will get worse in 2015 before it gets any better!

#2: Personal Data – What value does it hold?

Companies are going crazy about massive amount of data being produced within and outside their organization. Startups too are beginning to realize the value of personal data but since this is an evolving field, not much is being done there. How to handle and request for data? Who is in-charge and how does this ownership of data change as it crosses hands? A lot of questions remain unanswered.

Market-based mechanisms are still being figured out but I see this space to grow enormously. Here is one of such ideas proposed by WEF researchers.

While the economical value of personal data is measured differently when startups raise capital going to VCs or go selling their companies (Instagram sale of $2Bn to FB; Whatsapp $19Bn sale to Facebook), there is no standard of framework as such that helps individuals, employees, businesses, communities be aware of the value of their personal data.

A huge challenge businesses will face in the future as they march towards digital kingdom!

#3: Privacy – Right to be left alone?

Privacy is a huge issue and we will have to address this sooner rather than later. I remember reading an article in National Geographic on the history of privacy through centuries. Take a look:

One of the many definitions of privacy:

Privacy refers to the right to be left alone and the right to be free of unreasonable personal intrusions.

Privacy is all about your personal data, as I outlined in the previous section. Definitions of personal data vary but in simple terms it means:

any data that can be attributed to an identifiable person either directly or indirectly.

Personal data could be anything such as your email address/full address, your buy behavior, your travel patterns and so on. Quite often this collected data is sold or revealed without your consent to others. A few examples could be:

• Facebook’s 2012 experiment on its users without complying with consent standards
• the U.S government’s global surveillance activities disclosed by National Security Agency (NSA) whistle blower Edward Snowden, and the alleged involvement of many Internet companies and digital businesses including Google, Apple, Microsoft, Facebook, Twitter, Yahoo, AOL, Cisco, IBM, HP and others.
• Dat collection and "helping" consumers - While many of us are going full-ahead with the new IoT things, be warned, the privacy issue is not addressed adequately. Here's an example of smart meters in your homes.

Look in terms of what it could cost you as an internet service provider. The NSA example for instance could cost – according to Forrester, the internet service vendors an estimated $180 billion in net loss by 2016! That's almost a 25% decline in global revenues! That industry is not doing well anyway and messing around with their customer data would mean definitive death for them.

#4: Digital Divide – Digital Natives and the lost masses!

Today more than 70 % of the world’s citizens live in societies, which are in the early stage of digitization. Internet access play a critical role in this and according to WEF (World Economic Forum) the "Networked Readiness Index" reflects the degree to which economies leverage ICT for enhanced competitiveness and is measured by four dimensions of environment (political and regulatory environment, business and innovation environment), readiness (infrastructure and digital content, affordability, skills), usage (individual usage, business usage, and government usage), impact (economic impacts and social impacts).

Take a look:

You can see pretty clearly that most of the advanced economies (e.g., top 10 countries of Sweden, Singapore, Finland, Denmark, Switzerland, Netherlands, Norway, United States, Canada, and United Kingdom in 2012; top 10 countries of Finland, Singapore, Sweden, Netherlands, Norway, Switzerland, United States, Hong Kong, United Kingdom, and Korea Republic in 2014) have a high Networked Readiness Index, and many developing countries (especially in certain parts of Asia and Africa have very low ICT readiness with the main reason being the insufficient development of ICT infrastructure, which still remains very costly.

This WEF report measures the digitization scores based on six different perspectives, namely ubiquity (the level of access to digital services and applications), affordability (pricing), reliability (the quality of connection), speed (the rate of data throughput), usability (how easy is to get online and use online applications/services), and skills (the ability of users to incorporate digital applications and services into their lives and businesses.)

so much for the Baby Boomers, Generation Y, Generation X; Generation C or what we fondly call also the “Digital Natives”, have different attitudes and temparaments towards digital technologies and different habits of usage. For them the digital channel is definitely preferred way of doing everything, and having to go offline is viewed as an annoyance.

This divide with the digital natives and digital illeterates is bound to grow dramatically as new set of digital societal norms will alienate the latter group.

#5: Governing the Internet

There is a lot of talk about internet governance and some countries, such as Australia, Singapore, Malaysia etc, have already embarked on creating totally new national and even regional broadband networks by deploying fiber optics across the core network and these investments are running in tens of billions. For instance, that of Australia NBN network will cost them in excess of AU$40 billion!

There is currently little, missed of even a bit confused government regulation when it comes to internet. This will have to change as we move on but it is definitely not going to be an easy task when aspects of international or transnational internet governance are involved as various legal and political battles will need to be won.

Right now it is all hunky dory but this will change soon as commerce and political power shifts to the internet, and sure it will affect the future of internet and thereby affecting the way a typical digital enterprise operates.

#6: Digital lives or no life at all?

Nobody knows you are a dog on the web.

Our lives are becoming more digital than we can even imagine. Aren't we already living and behaving like the bits and bytes that float around the internet and all those webpages we visit? Is internet making us daft and retarded and is robbing our ability to think and create? There are articles that challenge our ability to think deep and do deep reading / deep writing, are we losing our way or finding our new path?

Similarly, the lines between our private, public and professional lives beginning to disappear; it is almost as if the interconnectedness has taken control of our lives and we cannot see the difference anymore. Our dependency on mobile and devices we carry is so problematic, according to a recent Nokia study, that we tend to, on an average, check our devices every 6.5 minutes!

#7: Long Tail – Are we being fooled into a death trap?

There is a lot of talk about the head and the middle and the long tail. Many digital enterprises are being fooled into the business benefits that the middle and even the long tail can bring. While budget is a boon to many who are extracting value out of the middle and the long tail to further segment, many believe that it is still the head.

Google's Eric Schmidt makes a remarkable observation in this old McKinsey interview from 2008:

What really happens is something called a power law, with the property that a small number of things are very highly concentrated and most other things have relatively little volume. Virtually all of the new network markets follow this law.

What he means is that eventually a major consolidation will ensue leaving a few large players who will relentlessly focus on the head (i.e., big bucks coming from the core customers), leaving others who are romancing with the wrong digitization in the ashes!

#8: Integration Dilemma - As devices grow, our heads will explode connecting those devices!

Internet of things (IoT) or Internet of Everything (IoE) is all going to rain heavily down on us as the lack of integration; absent standards and multiple proprietary platforms shipping different versions of software / firmware will become a headache we may not be able to cope with.

All the effort to connect and ensure effective communication between / across computing devices, home appliances, mobile and tablets, embedded devices, industrial sensors, movable vehicles (ships, planes, cars, bikes etc) will be needed or else these advanced technologies will met untimely death as poor adoption will eventually choke the lives out of these initiatives.

Conclusion

Aspiring to become a digital enterprise is one thing but given the challenges I mentioned above, the ones who are marching towards becoming a responsible as well as succesful digital enterprise do also realize that all that talk about big data, IoT, wearables, beacons is useless if there are not addressing the security & privacy issues; they do not adhere to local, national, regional and international policies; they are dismissive about the effect it has on the people and how their personal data is being manipulated and finally it is a totally meaningless exercise if the focus is on the data set which lies both on the wrong side of the long tail and is providing inaccurate results due to poor or no cross-functional integration.

Digital is cool and awesome but hopefully you have taken the above mentioned challenges in your digital battleplan.