The Sources of Digital Value Creation
There are two sources of digital value creation. The news is that these sources of value are not new, they have not come into being in the digital age but rather they have existed since commerce began. The two sources of digital value are what they have always been, revenue growth and cost reduction. Where digital leading businesses have excelled is how they have utilised digital technology to target these two areas of value creation. These digital leaders have driven revenue growth through generating new customers, developing new products and services and utilising new channels whilst optimising existing ones. They generate cost reduction through process efficiencies through digitisation, optimisation of their asset base whether that be physical premises, inventory, supplies or technology estate and have energized creativity in their workforce through engagement and collaboration.
Technology is what digital leaders have utilised to realise value creation. This enabling technology has become known as ‘The Digital Core’.
The Digital Core is an architecture comprising technologies that enable the enterprise. The digital core enables the business strategy by enabling value capture across one or both sources of value. From an examination of digital leaders the digital core comprises a number of common features.
The infrastructure pumps the oxygen through the enterprise. Agile Infrastructure will be foundational for the digital core. Digital leaders exploit the following:
- Hybrid Cloud – Deploying a mixture of public and private cloud that will be utilised to plan and execute the implementation of cloud services across public, private and third party platforms dependent upon risk and the achievement of business outcomes.
- Digital Infrastructure Transformation – Utilising capabilities that help to assess and modernize their existing application and infrastructure platforms to achieve desired business outcomes.
Platforms ‘as a Service’
Some digital leaders have been ‘first to the punch’ in many initiatives. In order to enable this they have a mindset of ‘off the self’ technology. For the digital core the technology platform has a common set of features that are exploited.
- Software-as-a-Service (SaaS) solutions – These are new applications that have been built from years of industry learning and have now developed into fully functional applications. Digital leaders forgo customisation of their software applications in order to obtain advantages in terms of speed and reduced maintenance complexity.
- DevOps – This is a practice that seeks to join the disciplines of software development and service operations. It focuses upon shorter development cycles, borrowing heavily from agile, more dependable code and faster software deployment. Digital leaders, whether they started as a tech startup, or being long established enterprises have grasped DevOps due to the opportunities it yields.
There are key moments of truth in every customer journey whether that be buying a product on-line, applying for a mortgage or surfing Facebook. When at that key moment the journey is personalised and enhanced through insight, the whole customer experience is transformed and that most difficult to attain, customer engagement won. Digital leaders increasingly achieve this personalisation through analytical insight by utilising:
- Big Data Tech – Transformation of their existing fragmented data enables digital leaders to deal with the explosion of data that is coming from increasing connectivity. This will require data technology that can capture, store and analyse both structured and unstructured data from a myriad of devices, sensors and people.
- Real-Time Predictive Analytics – This has the power to transform value capture, redefine business models and boost cross sell, up sell and new product sales. Think Amazon, Facebook and online gaming, who are the cutting edge here.
Front to Back Process Integration
Processes that have been conceived and designed from customer interaction through to final product fulfillment provide a richer customer experience and have built-in business efficiencies. The digital core enables such front to back process integration through:
- BPM Platforms – Business Process Management capability that combines rules, dynamic event-management technology integrated with applications and data.
- API Development – Deployment of APIs that connect processes across business silos within the enterprise but also outside of the enterprise to partners delivering enhanced efficiency and new sources of business value through enhanced business propositions.
Workplace Engagement and Collaboration
In many digital leading enterprises new customer propositions, products and services develop from a highly engaged workforce that uses digital technology for open communication and collaboration. The digital core enables this through:
- New envisioning of employee engagement and collaboration and communication – Enterprises have a clearly defined vision for this and have a roadmap of technologies and cultural change, training and recruitment to deliver this.
- Enterprise social networks and other collaboration tools – foster open communication, free flow of information exchange and engagement.
- Redesigned employee applications – provide rich, clean interfaces and functionality having similarity to social and mobile apps enabling a more engaged workforce.
Our increasingly interconnected world provides security risk for enterprises. The much-publicised data hacks have shown how just one breach can destroy a brand’s credibility with its customer base. The digital core must protect an enterprise against such security breaches through:
- Utilising latest tools, techniques and know-how – test cybersecurity through penetration testing, social engineering, and other ethical attacks and make this a routine.
- Understand security weaknesses – some IOT devices and applications will have inherent security weaknesses that must be understood and security controls must be enabled that remediate weaknesses.
Is your enterprise taking advantage of new opportunities for value creation that the digital economy enables? Whatever your starting position, grasping new business opportunities will require some aspects of digital transformation. At a minimum, you will need to understand the forces of digital disruption and how they are affecting your industry. You will need to have identified new opportunities for value creation. These can be innovation across the business model where new products and services are provided or new channels are utilised for service delivery. These value opportunities could equally be about dramatically improving digital customer experience, a loan in one hour, a mortgage completed in a week.
All of the value opportunities will have implications for your technology and how it is developed and governed, what we call the Digital Core. The Digital Core will drive the interconnection and automation of digitised business processes, enable new and dramatically improved customer experiences through exploiting new emerging technology and enabling business model innovation.
Author: Mark Cox
Mark Cox is a Digital Consultant and Advisor. He works as part of DXC Technology Advisory and Consulting Team. Mark has extensive experience in working with clients, designing and implementing digital transformation projects.