Going beyond the knowledge of new technologies – It’s time to act!

Digital technologies are sweeping the business landscapes, with many labels – digital analytics, automation, Machine Learning, Internet of Things, Artificial Intelligence, Industry 4.0, just to name a few. Yet, these technological transformations are not a future vision; they surround and impact us today. Knowing and understanding this development is one thing. Getting your arms around the emerging technologies and thus, creating value is a whole new step, which has become the defining business challenge and competitive advantage of our time. Companies in the McKinsey Global Survey on digital strategy expect a significant risk to their revenues from digitization in the years ahead if they take no action to respond. What’s more, they become vulnerable to those competitors, who adapt successfully. Advanced technologies are essential to modern enterprises, and it’s fair to say that every large company is working with them to some extent.

Embracing digital transformation and making investments and strategic decisions based on new technologies seems to be the new factor of success, because you cannot solve tomorrow’s challenges with yesterday’s solutions. Nevertheless, there are numerous companies that lag behind the current development. This poses the question, what the pain points are that prevent companies from realizing the potentials digital transformation holds and how they can be enabled to do so.

Three barriers to the engagement in new digital technologies

1. Knowledge and understanding

The first barrier is the necessity to gain a profound knowledge and an understanding of the disruptive character, which are inherent to these new technologies. Often, people in an organization, are not fully fluent in what digital transformation is and are not up to speed with the fundamental changes this can imply for their own business or their competitors. This causes a serious problem: People who are not fully aware of the topic “digitization” are more likely to fall prey to the “shiny object” syndrome: In order to stay ahead, they would invest in cool and trendy new digital technologies without having a clear understanding of the use and impact for their own business and not having a plan of how to generate value for their business. Also, they are more likely to follow the wrong initiatives or skip fundamental steps that would enable a greater future-orientation. All in all, a lack of fundamental knowledge is keeping the company from moving forward and engaging in new digital technologies. Leaders in particular need to understand the impact of these disruptive technologies and the speed in which they impact their own business and therefore, the necessity to act – fast!

2. Support from executive level

Without doubt, knowledge is key. But any strategy or mission that does not receive attention from the top level of an organization is doomed to fail. A fundamental change, such as the digitization of businesses we are facing now, affects the whole organization. The CEO and top leaders are called to commit to an adapted digital strategy and need to provide a sense of orientation and guidance. But outwardly commitment alone is not sufficient. To successfully embrace new technologies, company-wide coordinated, smart strategies and investments are needed. Thus, the executive level needs to act and engage all people in the organization in order to drive the digital change. But when it comes to defining and executing a digital strategy, it seems something is holding executives back, and thus, entire organizations. There is a tendency to a more passive mindset with the expectation that someone else is supposed to start with the digital transformation before doing it oneself, Furthermore, with this mindset at hand, people are looking for ready to use cases, that are just waiting to be implemented.

3. Talents to execute the change

Knowledge and an effective support by the executive level are not sufficient to drive the digital changes needed and successfully embrace digital technologies. But in today’s rapidly and constantly changing world, organizations that understand what kind of talents they need, and how to achieve this have a competitive advantage. Few would debate the importance of digital talents for the future-orientation of companies. However, their impact is still often underappreciated.

To make use of the benefits digital talents hold for organizations, it is crucial to start with an understanding of the capabilities your digital business needs. These specific capabilities may vary widely between industries and locations, but some common traits can be identified: Digital talents need to be customer-focused, operate and adapt quickly to a changing environment, and need to be responsive and agile. For example, top engineering talents can be anywhere from three to ten times more efficient than an average engineer. Thus, acquiring top talents can lead to high investment savings by accelerating the digital transformation process.

Such top talent is of course difficult to find. According to McKinsey, the demand for top talents, delivering on new capabilities is expected to increase the supply largely, especially for big-data talent, who could be 50% to 60% greater than the supply.

Strategies to overcome these barriers

How can businesses achieve a fundamental understanding about digitization and its great impact – which is the first barrier to the engagement in new technologies? For this, companies need to understand how fast business models are changing. You only need to look at Uber, Airbnb or Tesla, who have been established in only a few years and who have transformed entire industries and our understanding of transportation or traveling. But also keep in mind the negative examples, like Nokia, Kodak or Blackberry who could not keep up with the rapid change due to digitization. So, it’s better to “Uber yourselves before someone else does”.

After attracting attention for the urgency of engaging in the developments of digital transformation, the next step is to develop a digital transformation strategy and to execute it, concentrating on two core elements:

1.     Focus on value generation and the impact to the overall business model by attaching importance to supplier innovations, such as making your products more compelling, in a better and more competitive way. Stay customer oriented and keep an eye on risk management to ensure that you secure all goods and services needed for your production or service delivery. Finally, focus on a sustainable supply chain.

2.     Free up financial resources to fund the investments needed in the future business model by leveraging the purchasing power to the highest possible extent. But also, bring down the transactional, operational costs by automation. For example, the McKinsey Market research showed that the share of budgets and people that organizations invest in digital transformation is proportional to revenues earned from this. Often, companies invest only in the most proven new technologies (like big data and mobile and traditional web technologies). But embracing digitization calls for more decisive and effective investments to drive your business forward. Thus, companies that follow more hesitant investment strategies with regard to the digital transformation need to rethink their investment decision-making process and their overall cultures. Companies will need to embrace a test-and-learn mindset to drive creativity and innovations and to take risks appropriately. Thus, companies can help foster a more agile organization culture, enabling learning from experiments at a pace fast enough to respond to their rapidly changing markets.

To the point: This is how the adoption to new technologies can take place

To successfully adopt to new technologies, you need to define a clear vision and clear objectives to specify and implement transformation strategies. This needs to begin with the executive level that agrees on a bold, comprehensive and compelling digital strategy and an overarching vision for how new technologies can drive their business ahead as well as clear but ambitious objectives, whether for building a new digital business that taps large, nontraditional revenue pools or for steadily improving the productivity, quality, or customer satisfaction of the core business.

We are amidst digital transformation. Bold and courage decisions win, when risks and gains are weighted up thoroughly. As soon as an understanding of the urgency and impact of digitization throughout the business is achieved, a compelling vision and clear objectives are the framework for a successful digital transformation strategy that drives your business ahead in the rapidly changing market.

Authors

Marcell Vollmer is chief digital officer of SAP Ariba and the former chief procurement officer of SAP.

Melissa Dams is a business psychology master student and currently supporting the CDO of SAP Ariba.

SAP is the market leader in business applications; and SAP Ariba is the world’s largest business network, linking together buyers and suppliers from more than 3 million companies in 190 countries.

Tags

#DigitalTransformation #future #technologies #Procurement #ArtificialIntelligence #AI #MachineLearning #ML #Blockchain #digital #Industry40