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SUMMARY
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Why all the hype around digital transformation?
Four letters – SMAC, which stand for Social, Mobile, Analytics, and Cloud – are behind one of most significant trends
affecting businesses today: digital transformation. This digital revolution has profoundly affected both consumer behavior
and customer relationships, in almost every industry.
• The number of unique mobile subscribers reached 3.6 billion at the end of 2014 – nearly half of the global population.1
• By the end of 2015, a billion of those people will have used their mobile device for banking services – a figure that should
reach 2 billion by 2020.2
• By 2017, mobile commerce revenue in the U.S. [will be] 50% of U.S. digital commerce revenue3
…and connected:
• In August 2015, Facebook – the world’s biggest social network by number of users – had nearly 1.5 billion active user profiles.4
• Analysts estimate that by 2016, there will be 2.13 billion social network users worldwide.5
• 1 million new active mobile social users are added every day. That’s 12 each second.6
Meanwhile, businesses are using new technologies to collect big data to analyze consumer behaviors
and better meet customer needs … and every day, more businesses are jumping on the bandwagon:
• A Gartner study published in September 2015 showed that 75% of companies surveyed have invested or plan to invest in big
data in the next two years.
• Another study carried out globally revealed that over 40% of companies surveyed have already implemented a big data project,
and only 17% don’t plan to at all.7
Many businesses have mandated that operations be moved to the cloud. This number grows every day. The software-as-a-
service market reached $49 billion in 2015 (source: TBR), and the infrastructure-as-a-service market reached $27 billion.
The pace of innovation is clearly accelerating in this digital age, and new technology is continuously hitting the market. Some
of this new technology is already making waves, like the Internet of Things (IoT). An IDC study published in September 2015
found that 73% of respondents have already deployed such devices or plan to do so in the coming year. Other technology, such
as 3D printing and drones, are already helping companies to innovate.
1
“The Mobile Economy 2015,” GSMA
2
Juniper Research study
3
Gartner
4
Statista
5
Statista
6
Brandwatch 3
7
“ Big Data Use Cases 2015,” BARC study sponsored in part by cloudera
I - Challenges of digital transformation
“
Organizations actively using big
data, cloud, and mobility enjoy
up to 53% higher revenue growth
than those that have not invested
in these technologies.8
By prompting a rapid change in consumer behavior, digital It would be too easy to say that these companies are successful
technology is upending “conventional” business models simply because they have installed the latest technology.
across the board. Entire segments of the economy are being Their success also comes from applying that technology in
transformed as new markets emerge, reflected in the success a way that delivers solid benefits to their customers. They
of Amazon, Netflix, Uber, and Airbnb. Some industries have have put customers and, more broadly, consumers – who
been completely disrupted, such as music and media. have increasing influence on the technologies that businesses
adopt – at the heart of their business models.
Others, like hospitality, retail, and transportation, are facing
an entirely new form of competition. Traditional industries
High customer expectations
like manufacturing, healthcare, banking, and insurance are
aggressively leveraging SMAC to change business models,
In the digital age, understanding customers, their needs,
including supply chain and customer management. And no
and expectations – and using that knowledge to deliver an
industry will remain unscathed; they must all rethink their
impeccable customer experience – is more essential than
processes and revamp their services to keep up with the
ever.
digital age.
Today’s consumers have little patience for even the slightest
Such a shift makes good business sense, too. A recent Dell
inconvenience: a service that’s complicated to use, a slow
study showed that “organizations actively using big data,
website, an outdated catalog, nonexistent customer support,
cloud, and mobility enjoy up to 53% higher revenue growth
or the inability to track a delivery are all things that could
than those that have not invested in these technologies.”8
cause someone to take their business elsewhere. And most
of those people don’t come back. An Oracle study found that
89% of consumers began doing business with a competitor
following a poor customer experience.9
8
Global Technology Adoption Index 2015, Dell
4 9
2011 Customer Experience Impact Report, Oracle
II - With digital transformation,
customer experience is king
All successful online retailers have one thing in common: their Take Burberry as an example. In 2006, the luxury retailer
core business is to provide an excellent customer experience. introduced a digital transformation initiative to improve and
These companies use knowledge about their customers to standardize the customer experience on its website and in its
continuously offer new services, make buying easier, and stores. The company aligned its online product line-up with
the inventory in its stores, and equipped its stores with RFID
offer personalized recommendations. A classic example is
technology. Inventory problems became a non-issue and the
online clothing retailer Zappos, which, if its warehouse is out
company’s revenue has since tripled.
of stock of a particular item, helps customers find that item at
another retailer. And as a result, 75% of Zappos’ orders come In a completely different industry, insurance company AXA
from repeat customers. formed partnerships with manufacturers of connected
devices so that it can offer customers intrusion detection and
Today’s consumers use applications and digital services fire protection services alongside its home insurance policies.
on a daily basis. Therefore, companies across all industries
must accommodate these new consumer expectations and And as another example, a few years ago, Domino’s Pizza
introduced an online ordering feature that allows consumers
behaviors in order to survive. In a study published in October
to track when their food is being prepared, when it’s en-route
2015, 56% of surveyed companies planned to assess the
– all in real-time. Now, 25% of all Domino’s orders across the
impact of digital as it relates to customer experience, and 63% US come from online, and within four years, they recognized
were improving their online customer experience.10 a 23% growth in profit.
“
Companies aware of this shift have already started reworking
their processes and procedures to provide their customers
with the best possible experience.
In a study published in October 2015,
56% of surveyed companies planned
to assess the impact of digital as it
relates to customer experience, and 63%
were improving their online customer
experience.10
10
Digital Transformation in the Age of the Customer”, Forrester/Accenture Interactive
5
Today, companies spend an
average of 28% of their IT
“
budgets on projects related
to improving the customer or
end-user experience.11
11
2015 Mobile Workforce“, Dimension Data
6
III - Establishing the right conditions
for a successful transformation
12
Keller, Scot and Price, Colin. Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage. McKinsey & Company. John Wiley & Sons, 2011
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Boost IT agility Position the IT department as a genuine business
partner
A company’s IT landscape usually evolves slower than In the digital economy, the role of IT departments has
its business needs and markets. But the IT landscape is expanded beyond simply keeping applications in good working
precisely what a company uses for business-critical steps like order. They must now also work closely with lines of business
order-taking, inventory management, contract management, to design and implement initiatives that require the support
and billing. of digitally-driven applications and technologies, which by
definition have a large IT component. IT departments must
Neglecting these essential technology bricks could have a leverage their cross-functional nature to become genuine
direct impact on front-office applications, since they often business partners, even going as far as spearheading change
pull data from the back-office. Inflexible IT systems create a to help drive innovation.
number of risks for a company, such as an inability to meet
delivery deadlines, mediocre performance that could directly To successfully support their company’s digital transformation,
impair the customer experience, inconsistent data from one IT departments must have a thorough understanding of their
application to the next, and interruptions in customer-facing entire IT portfolio – and the associated risks. Optimizing
processes due to “siloed” applications not sharing data with that portfolio helps IT departments gain credibility in driving
each other. the transformation, most notably by freeing up significant
resources: companies reinvest an average of 42% of the
To avoid this type of paralysis, companies need to ensure savings generated by IT portfolio rationalization into business
they have an agile IT landscape – systems in which data transformation, according to a 2014 study.13
can be easily circulated and to which new application bricks
can be easily added. For many companies, that would entail
modernizing their IT landscape by installing missing bricks or
updating old ones.
PLAN IT TRANSFORMATION
3 Identify and assess IT transformation
initiatives based on business outcomes
SS E
13
Cap Gemini Application Landscape Report 2014
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IV - Laying the groundwork
for a smooth transformation
“
According to Forrester, “Companies are
constantly looking to reinvent themselves
in this new ‘customer’ age. But the agility
needed to leverage a new technology
or meet a new customer need requires
companies to be more transparent in their
strategy planning process and to gather
more data to improve decision-making
and drive performance.”
Most digital transformation programs don’t start from scratch; they build on a company’s existing business practices,
processes, and IT systems. And these existing elements usually need to be rationalized, upgraded, or modernized to launch
transformation initiatives under the right conditions. Four key steps can help business and IT leaders prepare their existing
architecture and effectively plan out the transformation process.
Modeling this information from a single source of truth is They also need to assess each touchpoint based on customer
a vital step in developing a transformation strategy, because satisfaction, to help them build or redesign their internal
it gives managers a clear idea of where the company business processes, and maximize customer satisfaction.
is heading, and helps them define transformation stages By linking internal processes to touchpoints, company leaders
to reach its objectives. can easily identify related internal business processes and
streamline their processes for an improved digital experience.
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3. Plan the IT transformation 4. Mitigate transformation risks
This step is about defining the required IT transformation Every transformation scenario has its own set of risks.
initiatives to execute the business transformation. It starts The risks could be related to the applications themselves
by mapping out all the applications currently used in the (for example, because they are too old, inflexible, or expensive),
company’s IT landscape and using those maps to understand to new processes that could conflict with other business
how these applications support the business capabilities needs or compliance/security requirements, or to the skills
defined in the first step. and resources that the company has (or doesn’t have).
Reconciling business needs with IT assets in this way gives To integrate risk into change decisions, managers should
IT managers a better understanding of how their application first identify risks, assess them based on their likelihood
portfolio fits in with their company’s strategy, and lets them and impact, and then implement possible action plans to
plan and implement the changes needed to better align the reduce risk. Risks should also be communicated throughout
portfolio with business needs. the organization, so company leaders are all on the same
page and can improve decision-making while reducing
Once managers have a clear understanding of their uncertainty. Finally, a proper governance of risks should be
applications, systems, and processes, they can start analyzing implemented to ensure that risks are constantly monitored,
those elements and outlining action plans. That entails and controls are well in place and effective over the long term.
gathering information on the value, condition, and usage
of their applications, and identifying any business needs By performing reviews and assessments on a regular
that are not met by those applications. With that information, basis, new risks are identified and risk level is kept under
IT managers can evaluate different change options and an acceptable limit. The bottom line here is that companies
prioritize IT transformation scenarios based on business need to manage risks without jeopardizing the customer
outcomes. Also, IT managers and their departments must experience.
remain agile, capable of rapidly deploying the necessary
resources and perhaps even switching to a different scenario These planning and transformation steps should be followed
if needed. to ensure companies will remain agile for the long term.
DRIVE THE DIGITAL CAPTURE STRATEGY TRANSFORM TRANSFORM IT RATIONALIZE IT MANAGE RISKS
TRANSFORMATION BUSINESS PORTFOLIO
Get actionable Decide future direction Design new processes Identify and assess Streamline your Identify, assess
deliverables through by assessing drivers by incorporating IT Transformation application portfolio and mitigate risks
dashboards and of change and end-to-end customer initiatives based on and increase the tied to processes
reports planning business experience business outcomes agility of your IT and IT assets
capabilities systems
COMMON REPOSITORY
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V - Solutions to guide your transformation
MEGA International has developed an integrated set of software solutions, HOPEX, that can support managers in every key step
of the transformation by giving them an interactive view of all the business and IT components – including their dependencies
– and helping them drive business and IT transformation.HOPEX provides the visibility and tools to improve decision-making
and navigate change in a disruptive environment – with a sharp focus on business needs. HOPEX solutions cover the five main
fields outlined below.
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HOPEX IT Portfolio Management
Functional coverage
Allows IT managers to reduce complexity and improve the visibility of their IT assets, cut costs, and transform the IT portfolio,
while anticipating business and technology risks.
The solution allows portfolio managers to collect detailed information about their applications and technologies, including
costs, lifecycle, and risks, as well as business capabilities and business processes associated with each application.
The solution gives IT managers the tools they need to assess their application portfolios, making it easier to spot redundant,
expensive, and obsolete applications, as well as the most strategic ones. And with the solution’s various dashboards, and
simulation and comparison features, IT managers can make faster and better-informed decisions to transform their IT Portfolio.
Example
Suppose your company wants to merge a new online business application with a legacy application which is at the end of its
lifecycle, but has important data for the roll-out of the new service. You can use the HOPEX IT Portfolio Management solution
to compare different transformation options, such as replacing the application in the next two months or migrating the data
to the new application. You can use this information to assess impact on business operations.
For each application, you can also track various parameters, such as application lifecycles and supported business
capabilities, to facilitate the transformation of your portfolio and remove obsolete applications.
HOPEX IT Architecture
Functional coverage
Gives system architects the ability to model their system architecture, including all the different components (data,
applications, infrastructure, and technology) and their dependencies. It helps managers understand the impact of planned
changes to IT systems, whether in terms of projects to implement, the required resources, or the associated risks.
The solution can also be used to model a target system architecture and help determine the best way to reach that target
through planning and gap analysis features.
Example
To effectively plan a transformation initiative, you need to have a thorough understanding of your existing IT architecture.
For instance, if you want to introduce an order tracking system for mobile devices, you need to know which components
of the supply chain and CRM systems would be affected – and which technologies may be lacking, such as the ability
to send text alerts. That information will let you design and map the best way to implement the initiative
Functional coverage
Gives managers essential risk mapping and assessment tools that can be used to evaluate individual processes or IT assets.
The solution can also help managers plan risk mitigation initiatives and track implementation. It helps them assess risk impact
and likelihood, and integrate risk into change decisions, as well as define preventive controls to mitigate identified risks.
Example
All the risks associated with a given project should be carefully assessed well before the implementation phase. Taking
the previous example, suppose you spot a risk related to a subcontractor that handles an important step in your supply chain.
You could mitigate that risk by setting up an alert system with the subcontractor to make sure the right tracking data arrives
at the right time.
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CONCLUSION
Digital business is not a temporary phenomenon. On the contrary, it has a profound impact
on every company’s strategy and operations, and will continue to do so for a very long time.
The digital revolution revolves around the following: cloud, mobile devices, big data, and
social media. Combined, these four technological advancements have deeply changed our
behaviors as consumers: think of what you can do on a mobile device - it’s as if you were
holding a full encyclopedia in your hands, you can get access to an infinite variety of products
and services very easily and quickly, and reciprocally businesses know exactly what you like
(or dislike), and where you are.
This transformation is not limited to the consumer world, think of Industry 4.0, where systems
work and communicate together thanks to the Internet-of-Things. The organizational impact
on many industries is absolutely enormous.
The market has already been disrupted in many sectors, with new entrants improving
traditional businesses. Incumbent companies are no longer blocked by barriers to entry.
That’s why companies need to take action and become part of the digital revolution. A
great way to start is by appointing someone to be in charge of your organization’s digital
transformation. This person’s mission is to instill a new corporate culture centered on the
customer experience and the company’s agility in order to convert business into digital. Four
recommended steps are:
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MEGA INTERNATIONAL
MEGA International is a global software firm helping companies manage enterprise
complexity by giving them an interactive view of their operations. Executives gain the
visibility and information they need to make the right choices for effective governance
and for striking the right balance between capacity for innovation, cost optimization, and
risk management. Backed by HOPEX software and MEGA consulting services, companies
can boost business and IT agility in today’s disruptive business environment.
www.mega.com
mega.com September 2016