To thrive in today's tech world, businesses must understand digital transformation and adopt a digital economy, according to a report from IDC.
The consequences for business which did not plan ahead toward The Los Angeles Times, flounder against limited-character social media and instantly uploadable video (The newspaper industry has lost billions of dollars in revenue annually, notably starting in 2013, which may or may not have anything to do with it being the year Jeff Bezos purchased The Washington Post.).have been dire. Gone by the wayside are major businesses and bookstore chains (Waldenbooks, B.Dalton, Borders, Crown), and, one-time beacons of news information like
In a few short years, it is predicted that half of all GDP worldwide will come from digitally enhanced products, services, and experience, according to a new report from International Data Corporation (IDC). Armed with five years of research, IDC documents the rise of the digital economy and the digital transformations organizations must undergo to compete and survive in this economy.
SEE: IT leader's guide to achieving digital transformation (TechRepublic Premium)
The decade (shockingly the second one in the 21st century) is coming to a close, and this represents a critical tipping point for the digital economy. And, as that digital economy becomes responsible for a growing share of enterprise revenue, it has also become an increasingly important item for CEOs agendas.
Four key areas
The IDC report recommends that CEOs must focus on four key areas when considering the digital economy.
- Customers: New customer requirements need to be met, as millennials enter peak earning years; create empathy with customers at scale; pivot operations from throughput and efficiency to market-driven objectives; and engender trust with customers.
- Capabilities: New capabilities are needed to succeed. Become an intelligent (AI-driven) organization, create software to deliver innovative services and personalized experience at scale, and implement new work-models within the organization.
- Critical Infrastructure: CEOs need to shift views of critical infrastructure. Physical plants and buildings are replaced by digital IT infrastructure and connectivity, necessary to ensure reliable digital services and experiences, and to create the pervasive experiences digital customers expect.
- Industry Ecosystems: The most challenging item on the CEO agenda will be what becomes of their industry, as new ecosystems develop and power shifts among industry players. To succeed, CEOs must define the new value in the digital economy, who their new partners will be, and what role they will play in these ecosystems.
"Organizations face a challenging timeline over the next three years," said Meredith Whalen, IDC chief research officer, in a release. "By the end of 2019, IDC believes 46% of organizations will be set up for a successful digital transformation--these are the 'digitally determined.'"
She continued, "In 2020, these organizations will spend $1.3 trillion on the technologies and services that enable the digital transformation of their business models, products and services, and organizations."
The rose does come off the bloom, though. She added, "But investor fatigue will start to set in by 2021, and the organizations that have been working toward transformation for four or five years will be expected to show results. Organizations that are lagging will be acquired, out of business, or subjected to new management. The organizations that are succeeding at digital transformation will deliver 'multiplied innovation' with new business models driving a significant increase in products, services, and experiences."
Nine research practices to come
Designed to help guide CEOs, decision makers, and technology suppliers to meet the demands of the digital economy, IDC plans to launch nine research practices in 2020 to bridge its traditional technology market view with a business outcomes view.
The objective of the practices will be to provide context to what is happening in the digital economy, explain desired business outcomes, engender trust or to become an intelligent organization, and how technology can be used to achieve these outcomes. The plan is for each practice to gather multiple IDC products under a common theme, which will relate back to the business outcomes organizations will pursue. The practices will be global, cross-functional, and organized as a virtual team.
The practices, IDC said, will align with the aforementioned CEO agenda. To address new customer requirements, three practices focus on how to: Develop relationships with customers at scale; pivot operations from efficiency and resiliency, meet market demand for customization; and develop digital trust programs.
To help the develop new capabilities, three more practices will examine how to: Add intelligence to business processes; become a software developer who creates and distributes digital services at scale; and create a work model that fosters human-machine collaboration while it enables new skills and worker experiences.
To overcome legacy thinking about what constitutes critical infrastructure, two practices will show that business metrics are tied to reliable digital services and experiences, which depend on digital infrastructure, and orchestrating connectivity across the workforce, customers, and operations. Partners are critical to creating pervasive experiences. The final practice will help CEOs to define new value in the digital economy.
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