Challenge: Where Is DX Headed?
Today, some companies are leading the Digital Transformation (DX) race; some are moving upstream; and others have no choice but to passively go with the flow. By analyzing the current status of global enterprises experiencing DX, IDC generated a five-level maturity model outlining the different stages of DX. These stages include digital resistors, digital explorers, digital transformers, and digital disruptors. DX is a business digitalization journey defined by the deep integration of technology and enterprise functions.
Based on four consecutive years of study, IDC found that more than 40 percent of organizations, globally, remain stuck in the first two stages of DX and urgently need to accelerate transformation. The major reasons for this immaturity are as follows:
• CIOs and business unit leaders fail to align their expectations with DX realities. First, DX is a long-term program. It will not generate remarkable or direct business value in a short period of time, which can erode confidence in unit leaders. Second, CIOs are confronted with tremendous technological complexities while business unit leaders blindly rely on the adoption of new technologies, resulting in a huge disparity of DX understanding between them.
• DX is an investment-intensive initiative. According to IDC estimations, the percentage of investment in Information and Communications Technology (ICT) by the entire organization is a key indicator of its investment in DX. ICT investments account for an average of 0.8 percent of a company’s revenue across all industries. Leading organizations generally invest 2.5 to 3 percent of their revenue in the ICT needed for DX.
• The technological complexity of DX rises exponentially while ICT fails to support effective integration. IDC estimates that fully integrating new technology into the business operations of any organizations will take three years. Meanwhile, the existing IT department will be unable to keep pace with the rapid emergence of new technologies. At least 10 new technologies have emerged in the past three years that fall under the third IDC Platform (including cloud computing, big data, social, and mobility), as well as six IT accelerators (next-generation security, Augmented Reality (AR)/Virtual Reality (VR), the Internet of Things (IoT), Artificial Intelligence (AI), robotics, and 3D-printing, etc.).
Deconstruction: Improving Digital Capabilities Is Imperative for DX
• Key Factors for DX Success
Companies in various phases of maturity should prioritize actions and follow different paths on their DX journey. By studying numerous DX cases, IDC identified four key factors of DX maturity:
• Vision and goals: Vision and goals serve as the fundamental prerequisites and top-level designs for enterprises pursuing DX. IDC views the vision and goals as a company’s overriding premise for achieving successful DX, which requires the participation of all staff, including the CEO, COO, CHRO, CTO, and CMO. Leadership, the operation model, work resources, information data, and comprehensive experience should all be designed in accordance with the vision and goals, and evaluated based on DX maturity.
• Organizational structure: Organizations at different stages of DX maturity vary in their structural needs, which IDC categorizes as one of four types: the special DX project team, the DX office, the embedded digital business team, and the digital business unit. Most enterprises are evolving toward an embedded digital business structure.
• KPI: In addition to reasonable vision, goals, and organizational structure, DX also requires appropriate KPIs. IDC discovered 21 KPIs by studying digital native companies, DX transformers, and those leading the DX movement.
• Digital capability: IDC considers digital capability development as the final DX factor. Successful DX relies on the implementation of the DX project and project groups, which directly rely on corresponding digital capabilities. The vision is implemented and the goals are achieved only when an organization is equipped with relevant digital capabilities optimized for its current development stage; only then can an organization generate value from restructuring and KPI configuration.
The IDC survey found that business units and IT directors consider digital capabilities to be key to the future of DX, including the following initiatives:
• Digital Capabilities Drive DX
An organization needs three sets of capabilities for DX (which can be further divided into 26 core abilities):
• Digital business innovation and efficient operation refers to an organization’s ability to integrate new technology into its pre-existing business and operations. From a business perspective it includes product and service digitalization, touchpoint customer management, precision marketing and customer profiling, precision services, digital branding, data monetization, and coordinated enterprise ecosystem management. From an organizational operation perspective, it includes a full online management process, a full online production process, full online asset organization, real-time policy support, as well as industry and market analysis.
• Data intelligence and value regeneration refer to an enterprise’s ability to manage, govern, and mine value from the full volume of data generated throughout its complete lifecycle. It can be subdivided into the ability to integrate with external data; collect, store, analyze, model, and govern data; and data security.
• Digital technology management and integration refers to the efficient management of digital technology introduced into an organization. It includes a resilient infrastructure, service-based component decoupling, service operation and management, new technology introduction, API management, technology security, as well as development and operation.
IDC’s survey found the most desired digital capabilities among enterprises are the ability to adopt and integrate new technologies (13.1 percent); the ability to create innovative products and services with new technologies (12.9 percent); and ICT scheduling and management flexibility (12.2 percent).
Transition: DX Requires the Support of Next-Generation I3 System Features
• Platform Adoption Is Inevitable
The history of DX is one of interaction and integration between new technologies, business, and management processes. Over the last decade, new technology has become more closely integrated with business and processes as the development of applied technologies has accelerated. This has led to a deeper level of business and management process transformation.
IDC believes that enterprises must build a next-generation system featuring I3 to support the development of digital capabilities.
• Integration — new technology protects existing investments: There are three levels of integration. First is integration with an existing system. In the last two decades of DX, many enterprises made huge investments in, and procurements of, digital technology including devices, software, hardware, and services. During the system unification process in 2018, compatibility with existing systems was the premise of any investment in DX. Second, the platform should integrate with emerging technology. The last decade witnessed waves of new technology disrupting and restructuring digitalization, resulting in repeated investment and construction. Therefore, another important factor to consider is compatibility with cloud computing, big data, video technology, the IoT, and other new technologies. Third, the new platform should integrate with external digital services. As the interface of the digital platform communicates with other organizations, it must be able to quickly access external digital services.
• Intelligence — data-based intelligent core: The new platform must have three aspects of intelligence. First, the platform should structure capacity around the entire data lifecycle to support the collection, integration, processing, storage, use, and deletion of data. Second, the platform should build capabilities for processing, integrating, and sharing full column data comprehensively, including a company’s historical data (e.g., ERP); data collected using new technology (video, sensors, etc.); and online data (customer profiles, etc.). Based on the above two aspects of intelligence, the third is mining data for value. IDC believes data-based value generation is achieved in two ways. One is an on-demand real-time digital service provided by the smart platform that has gained intelligence through its operations. The other is the smart output of best practices and models that can be reused in the mining process. The three aspects of intelligence described above will play key roles in building the next-generation platform.
• Inheritability — the core of the system is strengthened with the passage of time: In an age of rapid changes, we should pursue a stable system core and strengthen its capability to manage the ever-changing environment. Over the next decade, the deep integration of emerging application technology and business will lead to the explosive growth of digital products, services, and models. IDC believes the next-generation system should have a decoupling feature and flexible properties. Enterprises must identify timeless core functions through decoupling, and build upon them to protect technology investments. This is a key consideration for the next-generation system.
• Digital Capabilities Require a Unified Platform
As IDC’s survey shows, it is necessary for enterprises to build a support platform for DX that can converge and integrate new technologies like the IoT, cloud, big data, AI, and security. The platform must provide extensive connections, facilitate business coordination and agile innovation, and empower business innovation through deep integration. The platform should be flexible enough to address changing business needs and support the enterprise DX.
The study also found that enterprises attach great importance to digital platforms, scoring 8.1 in the evaluation (scores are out of 10, with 1 representing least important and 10 most important). Given a company’s need for DX and the trend of ICT development, digital platforms have become an indispensable tool for an enterprise during DX.
Game Changer: Digital Platforms Provide Digital Capabilities and Address Uncertainties
• Defining a Digital Platform
A digital service center fuses technology together, aggregates data and enables enterprise applications by using intelligent digital technology as components, data as a productivity resource, and standard digital services as the output. The service center drives business innovation and efficient operation; empowers data management and value generation; and simplifies technology operation and management.
• Intelligent digital technology as components: With cloud computing, big data, video technology, the IoT, AI, next-generation security, and other emerging technologies serving as its core components, the digital platform fuses existing technology together while introducing new technologies to the company. Through comprehensive integration of new and existing technology, the platform embeds the organization’s technological capabilities within the platform and empowers business development and operation.
• Data as the production resource: On one hand, the interdependence of data and the digital platform means different scales and types of data require the support of different digital platforms. On the other, digital platforms in different stages of maturity can handle different scales and types of data. While processing the data, the platform accumulates industry-specific experience, which gradually helps build a smarter platform and develop smarter export capabilities.
• Standard digital services as the output: A digital platform provides API-based standard digital services that access the Internet, devices, applications, and other platforms in a standard way. Digital platforms not only facilitate business development and operations within the organization, but also develop into a new form of digital service that differentiates itself from competitors.
• Structure of a Digital Platform
The core architecture of the digital platform is cloud-based, focuses on data analysis and management, and uses a digital service as the interface that supports industrial applications by connecting with devices through the network.
• Value of a Digital Platform
• Supporting applications and empowering business for the future: The construction of digital platforms will provide flexibility for application development, which will allow application management to catch up with business changes and cope with multiple business demands.
• Providing standard digital services and empowering ecosystems for the industry chain: By integrating new technologies, the platform provides digital capabilities for the upstream and downstream enterprises in the industry chain. Partners and suppliers can produce and provide services through a unified platform.
• Forging digital intelligence through data assets: The platform helps mine the value of full-volume and full-lifecycle data, and continually accumulates data models through best practices and industry benchmarks. It helps build data resource pools and unlocks untapped data value.
• Integrating new technology through technological operation and management: The platform provides companies with efficient infrastructural operation and management, and further realizes the vertical synergy between platforms, networks, and devices.
Through the establishment of digital platforms, enterprises will benefit from data integration, data intelligence, digital operation, application empowerment, and integrated ICT infrastructure.
The platform accumulates full-volume business data, which helps to support decision-making and business model innovation (15 percent), cope with the changing needs of consumers in a fast and flexible way (12.7 percent), build more integrated and smarter ICT infrastructure (11.9 percent), release organizational resources through capacity transfer, and further focus on business innovation (11.9 percent).
• Typical Digital Platform Analysis
Currently, there are three main types of digital platforms on the market: giant Internet vendor-based Type-C platforms; customer scenario-based Type-π platforms; and specific industry scenario-based Type-F platforms.
• Type-C platform (giant Internet vendor-based): This type of platform provides digital capabilities based on its Internet business. Oriented to customer scenarios or application demands, the main functions of the platform are integration and orchestration of application data and functions. The platform is mainly used for application service development and diversified integration, mostly supported by cloud platforms on the backend. Most of these platforms are provided by Internet vendors, which are relatively weak in ICT infrastructure construction, Internet connectivity, and coordination.
• Type-π platform (customer scenario-based best practices): This type of platform focuses on building flexible ICT infrastructure and developing management capabilities through cloud-network-application-edge-terminal device synergy. Traditional ICT infrastructures are upgraded and integrated with new ICT resources. This platform can provide a range of capabilities, including data aggregation, integration, sharing, and value exploration. The platform’s new technology introduction and integration capabilities are highly valued for supporting application development in accordance with customer needs. A relatively weak understanding of industry is the main challenge of a Type-π platform. However, through the accumulation of best practices and cooperation with industry partners, the functions and contents will gradually diversify.
• Type-F platform (specific industry scenario-based): This type of platform targets a specific industry and provides support for industrial applications. It requires an in-depth understanding of industrial applications and a rich accumulation of industrial experiences to realize specific industry values. However, the limits of such a platform have become obvious with the emergence of cross-industry consolidation.
With the constant development and evolution of business and management demands, various types of platforms will gradually integrate and form a more flexible architecture that offers a wide array of capabilities.
Security, innovation, intelligence, openness, standardization, efficiency, and collaboration are the best features of the digital platform.
Practice: Leading the Development of Digital Platforms
• Huawei Digital Platform
Huawei is committed to building safe, innovative, smart, and open digital platforms for enterprise DX. The platforms offer capabilities that include monitoring, operation, maintenance, and security management. They help enterprises connect and manage applications and data through the unified coordination of cloud, network, application, edge, and terminal devices.
By leveraging AI and other new technologies, Huawei’s digital platforms help enterprises build new ICT capabilities. The end-to-end solutions that the platforms provide enable enterprises to establish data connection, full-volume data sharing, and data mining for value. This eliminates data silos and provides intelligent support for business decision-making. The platforms introduce new technology while maintaining compatibility with existing IT systems; facilitate smooth upgrades and transformations; drive the openness of the IT architecture; and diversify the capabilities of IT systems. Huawei digital platforms support the development of digital capabilities for enterprises in three aspects: improvement of data-related capabilities, development of new ICT capabilities, and industrial empowerment.
• Eliminate data silos between all departments and develop industrial scenario-based data modeling, data analysis, and value exploration capabilities. The platforms aggregate, integrate, and analyze heterogeneous data from multiple sources to establish unified full-volume data as a foundation for value exploration and sharing.
• Develop new ICT capabilities by integrating new technologies. The platforms introduce new ICT capabilities while inheriting existing ones. By connecting a company’s internal and external systems, Huawei’s platforms achieve service-based capability integration, coordination, and sharing.
• Manage infrastructure efficiently and achieve vertical coordination of platforms, networks, and devices. Huawei’s platforms enable industry application development, iterative empowerment, and the promotion of digital business innovation.
• Additionally, Huawei digital platforms provide full-stack AI solutions and end-to-end security mechanisms that enable security control and AI for application development in operational and industrial scenarios. The digital platforms will act as key DX drivers.
• Case Study: Digital Platforms for Digital Transformation
Huawei digital platform best practices act as a reference for the industry, help enterprises realize their digital transformation goals, and promote enterprise development.
• Shenzhen Airport: AI-Optimized Business Processes Improve Efficiency
Based on the construction of future airport digital platforms, Shenzhen Airport has analyzed its problems and challenges. By establishing business scenarios and setting development goals, the airport has built a digital platform framework of unified infrastructure, unified data architecture, and unified data. The integration of the IoT, big data + AI, video cloud, GIS, and Integrated Communications Platforms (ICPs), in combination with business scenarios, has enhanced the airport’s digital capabilities. Shenzhen Airport promotes its digital transformation and facilitation as ‘great operation control, great security, and great service.’
• China Merchants Bank: Implementing Data Intelligence, Innovating Business, and Enhancing Experience
China Merchants Bank (CMB) is the first commercial bank in China that is completely owned by corporate legal persons. In 2018, China Merchants Bank ranked 213th in the Fortune Global 500. CMB started pursuing digital transformation in response to its business innovation needs and pain points. CMB’s digital transformation efforts include establishing a philosophy of digital transformation and formulating specific measures; providing enterprises with the ability to collect, share, and discover the value of data through digital platforms; promoting the integration of data intelligence with business scenarios to empower business innovation; integrating new technologies like AI to enhance the bank’s sharing/management capabilities; and optimizing business processes to improve operational management efficiency.
• Yanbu, Saudi Arabia: Digital Transformation Helps to Realize Sustainable Development
Saudi Arabia released its Vision 2030 strategy in 2016, aiming to transform the nation through sustainable development. The Royal Commission for Yanbu, a future city under the Vision 2030, launched the Smart Yanbu Industrial City initiative during the same period, hoping to combat challenges with digital transformation. With the goal of enhancing municipal administration and leveraging digital capabilities empowered by Huawei, Yanbu has successfully built a solid digital infrastructure network, and achieved digital transformation and sustainable development with the help of smart city applications. These applications have improved municipal administrative efficiency, enhanced public safety, and created a better living environment.
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