Factors Driving Digital Transformation in 2018

Digital transformation will touch every business in every sector that wishes to remain competitive. The adoption of exponential technologies such as artificial intelligence, IoT, and blockchain will force executives to rethink and reimagine their business models, says Simon Carpenter, chief technical advisor at SAP Africa.

Without a powerful digital platform that enables companies to innovate at speed and scale and provides accurate insights in real time, business leaders will struggle to keep pace with the rate of change in 2018.

According to the IDC 2018 Digital Transformation Predictions report, digital transformation spending will increase by 42% between 2017 and 2019 to reach $1.7-trillion globally.

AI, which in 2017 already attracted investment of $12-billion in 2017, will likely be firmly in the spotlight as big data, machine learning and predictive analytics drive improvements in the agricultural, manufacturing, healthcare, retail and financial services sectors, said Carpenter.

“Blockchain will move out of the test phase into full-scale implementations in government and private sector initiatives regarding transactions, payments, and identity management. Companies that are quick to move in linking these exponential technologies to a powerful digital core that enables lines of business to optimise and innovate will find great opportunity in their digital transformation initiatives,” he said.

The motivations for undergoing digital transformation vary, but there are two major factors pulling organisations this brave new world, namely customer expectations and exponential organisations.

Customer expectations

“On one hand, it’s the heightened expectations of the Uber-using, Facebook-connected, Amazon-enabled consumer, shopper and “prosumer” and the Millennial or Gen Z employee demanding compelling, exciting experiences with instantaneous gratification. It is this factor that is driving the primacy of Customer Experience (CX) as a white-hot topic in most organisations. It is this aspect that makes Design a crucial competence,” said Carpenter.

Exponential organisations

“On the other hand, there is a new breed of Exponential Organisation that synthesises technical capabilities into new business models that can be launched and scaled with very little overhead (because they can leverage cloud platforms) and that come after existing value propositions or established industry structure in ways that incumbents can’t anticipate or don’t expect.

“And of course, these two factors are mutually reinforcing; every time a savvy new start-up offers customers a great experience or something novel that then becomes part of their expectations.”

For organisations, Carpenter advised: “You must keep doing what you’ve always done to create value – even if it may not survive for ever – because right now it’s your cash cow, it provides the return on capital invested and it is meeting some, albeit changing, customer expectations.”

He said there are many business processes and constructs that are not going to disappear; procurement, inventory management, the Balance Sheet and P&L, the need to govern and manage risk.

“So, in these areas – what Gartner refers to as “Mode1” – your digital transformation efforts should be about optimisation; focused on reducing costs and latency, accelerating processes, managing risks, driving efficiencies at scale by standardising and harmonising systems in the cloud, offering better user experiences and so forth.”

He said that businesses should also turn their attention to accelerating innovation because this drives your ability to grow and remain relevant.

“In this space (which Gartner calls Mode 2) the emphasis on innovation through rapid cycles of experimentation enabled by empathy and design capabilities and leveraging new technology capabilities like IoT, Blockchain and AI.

“This is about delivering new Customer Experiences, new Business Models and new sources of revenue,” he said.

With 13% of CIOs in Africa already moving beyond delivery into scaling on their digital initiatives – and a further 45% currently designing or delivering their digital initiatives – SAP said its new Leonardo Digital Innovation System will play a powerful role in enabling exponential innovation in 2018 and into the future.