CIOs Prepare for Digital Transformation

The rapid adoption of digital technology is changing the world as we know it. Companies that were born with a digital DNA are now taking over the market. Ten years ago, the list of most valuable corporations was dominated by Big Oil and multinational conglomerates. Today, companies such as Google, Facebook, and Amazon dominate the headlines.

Technology has affected companies’ roles and the way they do business. Even if you don’t fully understand the term ‘digital transformation,’ odds are you’ve got at least a couple of initiatives in the works that would fall under its umbrella. The time is now for companies to refocus on a full-fledged digital transformation strategy. That means CIOs must be able to help their companies understand how the disruptions that digital transformation will bring to business can create opportunities for growth. To do this, CIOs first have to reinvent themselves.

The New Digital Reality

Reinventing Information Technology (IT) to support digital transformation requires far-reaching changes, from talent to infrastructure, and will take several years to complete. Fortunately, CIOs can educate companies to adopt an approach that delivers results quickly, while still reshaping IT for the long term.

This approach requires new, fast, agile IT to work alongside legacy IT, and a focus on one or two valuable business areas such as the web and customer engagement. This will enable a company to address its most critical IT areas within a few months before it needs to scale up to cover the remaining areas. Successful transformations will avoid fractures between high-speed and legacy IT functions and will be driven by the CEO and business leaders who will treat it as one of their top priorities, not just ‘another IT project.’

Change Ahead

Digital transformation will change the demands on IT in three principal ways:

• Increasingly sophisticated technology will be needed to improve companies’ operations and interactions with customers and clients. Examples include Netflix’s recommendation system and Booking.com’s proprietary search and caching system. Even coffee store chains are introducing sophisticated mobile-payment and loyalty Apps.
• Previously, efficiency was the most important IT performance measure. Now, everything matters: time-to-market, reliability, security, and, especially, scalability. The inability to scale up quickly makes it difficult to meet new business demands.
• Senior management will insist on much greater business engagement and oversight of IT departments. After all, the value at stake in IT digitalization will be much greater than before: up to 40 percent of revenue, 20 percent of costs, and, sometimes, the very survival of the business.

Preparing for Change

During prior technology shifts, such as from mainframes to minicomputers and then to client/servers, specialized IT organizations were required to sit between technology and the business in order to provision and support solutions. Today, ‘millennials’ (people born after 1982) are much more techsavvy, having grown up around computers. The combination of tech-savvy users and Everything-as-a-Service (XaaS) offerings now permits businesses to procure and provision technology-enabled solutions without involving IT technical staff. Business managers also have higher expectations as a result of their own experiences with personal technologies.

These managers search for the same kind of experience at work. They expect to be able to get immediate help by conducting a real-time chat with a customer-support specialist, and they share their experiences — good and bad — on social media. Therefore, digital enterprises are positioned to put the customer first anytime, anywhere, and at any place, based on customer expectations.

CIOs at a Crossroads

Digital transformation has put CIOs at a crossroads in their industries. Down one road, CIOs assume a leadership role that harnesses digital transformation disruptions and turns IT departments into sources of innovation. They work with business leaders to develop new products, services, and business models. Along this road, CIOs are expected to be business enablers, and CEOs expect them to build new vertical markets that promote more business opportunities with maximum cost efficiency. Down the other road, CIOs will preside over increasingly marginalized IT departments as other company clients go elsewhere for innovation.

What’s Wrong with Traditional IT?

• Legacy IT operations generally lack the agility, flexibility, and speed necessary to deliver high-quality solutions to support digital transformation. Traditional IT operations simply took too long, cost too much, and consistently failed to meet expectations. However, poor project execution was just one problem. A recent KPMG (the global audit, tax and advisory services firm) survey of more than 600 IT leaders found that systemic issues are the main reason for a lack of IT innovation, with 66 percent of respondents citing environment or structure, processes, and standards as primary causes.
• IT has a shortage of qualified digital professionals. Digital transformation requires new skills, but user experience design, security, mobility, the cloud, and other such skills are in very short supply. Also, certain new roles such as solutions brokers, product managers, and service managers require skills that may not exist in current IT organizations.
• Many CIOs are ill-prepared for the reality of digital transformation. Despite this, CEOs have high expectations on how much revenue this transformation can bring to their companies. CIOs will be challenged to strike a balance between risk and reward.
• For example, if CIOs integrate new business solutions with existing applications, how do they ensure that disaster recovery and business continuity plans will work? Will they comply with internal and external policies and regulations? Additionally, cyber threats present a continuing state of risk.
• Current IT infrastructures cannot be provisioned quickly or cheaply. Digital transformation requires new IT capabilities such as a scalable, cloud-based infrastructure. Traditional IT is used primarily to maintain systems of record: stable, reliable, transaction-oriented applications that operate at the core of the business. New releases were measured in years. In the new digital world, the focus is on customer- and employee-facing systems in which the user experience is of major importance and new releases tend to be measured in weeks, even days. These systems result from close collaboration between IT and users, and are the product of iterative, rapid development cycles.

Creating New IT Environments

CIOs need to create or upgrade R&D functions or innovation labs to provide an environment where IT, business users, and external customers can explore and refine new digital solutions. According to the KPMG survey, 34 percent of organizations have an R&D function within IT or IT and business. Because of the scarcity of digital skills, using a Digital Center of Excellence (DCoE) and/or Digital Acceleration Teams (DATs) can leverage this talent across the company in a much easier and faster way.

A challenge facing CIOs is that projects to solve legacy back-office issues take priority over advances in digital strategy. This makes it difficult to ‘evangelize’ the business value of IT. As a result, some CIOs appoint a second-in-command to manage operational issues.

A Digital Transformation Future

The positive effect of digital transformation for carrier operators should be the ability to produce more revenue streams. Enterprises can expect to see more profitable and sustained growth in key vertical markets such as Smart Cities, energy, finance, transportation, and manufacturing. The success of consumer-oriented companies will require continuous investment in Artificial Intelligence (AI), human-machine interfaces, Big Data, and other cutting-edge technologies in order to keep up with customer demand for smarter devices.

Huawei’s vision is to create a joint development model in which our company, our customers, and our partners grow together throughout the digital transformation journey.

Link: The ‘Internet of Intelligence’

In the not-so-distant future, the ‘Internet of Intelligence’ will emerge from technologies based on the Internet of Things (IoT) and Artificial Intelligence (AI). With it, humans and machines will be able to make decisions together.

While the IoT has given us simple AI assistants like Siri, Cortana, and Google Now, those assistants are only a subset of AI known as contextual awareness. AI is the intelligence exhibited by machines or software. Major AI researchers and textbooks define this field as ‘the study and design of intelligent agents’ in which an intelligent agent is a system that perceives its environment and takes actions that maximize its chances of success. Only further investment in AI can lead us to a truly intelligent age.

For years, video gaming has been playing with AI and procedural generation — a method of creating data algorithmically. Advantages include smaller file sizes, larger amounts of content, and random, less predictable game play.

In the future, true AI will come from a consumer technology company, not academia. The Application Programming Interface (API) as we know it will be replaced by the AI Programmable Interface (AIPI). Keeping up with demand for smart devices in a futuristic, intelligent world will require continuous investment in AI and other cutting-edge technologies by organizations and vendors across the industrial and consumer landscapes.