Profits that Kill in the Age of Digital Transformation

Digital transformation initiatives both increase revenue and decrease expenses according to our upcoming study titled Work AHEAD 2016 by Cognizant’s Center for the Future of Work.  For this study we surveyed over 2,000 executives across 18 countries.  The expected net business impact over the next 3 years of rapid digital transformation, i.e. hyper-transformation, is an increase in revenue of 11.4% (Revenue = 10.3%, Costs = -1.3%) amongst the companies in our study.  These numbers represent the difference between success and failure in many industries. 

To get the predicted revenue impact, companies expect to increase their spending on digital technologies from 11.3% of their revenue today, to 16.6% of revenue by 2020, while decreasing their non-digital investments.

In addition, our study reveals 64% of the futurists in our study, experts paid to study digital technology trends and to develop future strategies, believe digital transformation will boost revenues by 2020, 76% believe it will strengthen their competitive positioning, and 88% believe it will accelerate their speed to market.  If you accept these predictions, then your organization should quickly transform itself and jettison the heavy baggage that accumulates as a result of decades of institutionalized methodologies developed and codified in an analog era - an era operating at a far slower operational tempo.  The good news is that ROIs (return on investments) from digital transformation initiatives are compelling.  Nearly 30% of the surveyed firms are receiving an ROI greater than 100%.

These revenue numbers have investors interested and asking about the digital transformation plans of companies they invest in, or are considering investing in today.  We have all read about the list of companies that have failed this year due in part to their slow and/or inadequate response to digital technologies and changing competitive marketplaces.  As a result investors today want to understand the speed and scale of their portfolio’s digital transformation initiatives, as these initiatives can be predictors of future value.

For executives, transforming an enterprise is difficult at any time, but when an enterprise is highly profitable - digital transformation is even harder.  Why?  The temptation to follow the maxim, “Don’t fix what isn’t broken,” is just too compelling. The challenge enterprises are faced with today, however, is that digital technologies are changing the competitive landscape faster and in different ways than executives have ever seen before.

Recently, we presented a workshop on digital transformation strategies for a highly profitable automotive parts and systems manufacturer.  The company is filled with very smart people, and with very efficient long standing manufacturing systems and processes.  The company is very innovative in R&D and forward thinking in the adoption of digital technologies and strategies for their products and services, but their internal operations remain deeply entrenched in the past. 

The challenge we all faced in the room is how do we justify digital transformation when today, the old systems pay out in record profits.  How do we tell the story that in the age of digital transformation, data takes on a whole new level of importance?  In fact, executives believe big data and business analytics will have the biggest business impact of all technologies on businesses from years 2020-2025. 

Today an enterprise’s system for collecting, analyzing, reporting and sharing data is mission critical, especially given the increasing importance of artificial intelligence, robotic process automation and machine learning to companies’ future success. The end-to-end system for managing this data we call the “optimized information logistics systems” or by its acronym, OILS.  Having effective OILS is mandatory in order to become a digitally transformed enterprise (DTE).  DTEs place a premium on data collecting, analysis, situational awareness and real-time action and reaction.  Executives see the value in OILS, as 63% believe analytics will have a very strong impact on work by 2020, and 62% predict OILS will significantly enhance decision-making over the next 5 years.

DTEs see where their resources are located, where they are needed and how best to manage them at all times to successfully and efficiently accomplish their mission.  They see how customers are using their products and how they are holding up. Real-time connectivity combined with OILS enables organizations to think, act and compete in real-time, a capability never before possible.   It enables products in the field to be intimately tied to R&D and the manufacturing floor.  It is a whole new world, which in spite of profits today, must be anticipated and invested in for tomorrow, or the profits of today might lead to the death of them tomorrow.

Authors: Tim Hillison, Senior Director, Cognizant Digital Works, and Kevin Benedict, Senior Analyst, Cognizant's Center for the Future of Work

*Source The Work Ahead, 2016, Cognizant Center for the Future of Work


Competing in Future Time and Digital Transformation

Digital Transformation is the process of transforming a business from one state to another - from a state where businesses operate in Human time, to a state that operates in Digital time and finally to Future time.  Businesses today must digitally transform in order to compete in all three of these time continuums simultaneously. 

Let’s first identify these different time continuums:

  1. Human time – time governed by our physical, biological and mental limitations as humans
  2. Digital time – time governed by computing, networking and data transmission speeds
  3. Future time – time governed by predictive analytics, algorithms and artificial intelligence

Human time cannot compete with Digital time in a mobile and always connected world. Human time cannot deliver the real-time mobile and online commerce speeds that digital consumers require. For example, you can’t have a human responding to mobile search queries, or mobile payments, rather you need optimized information logistics systems (OILS) that are integrated with artificial intelligence (AI) enabled bots responding automatically in digital time.

Digital time refers to the speeds at which computer systems and networks operate.  The goal being to reach speeds as close to real-time as possible by optimizing each connected system, component and process that touch data.

Future time is faster than real-time.  It is the ability to anticipate needs, take actions and deliver content even before it is requested.  It is the ability to automatically prepare for the future in a manner that adds value.

An OILS running in Future time, utilizes predictive analytics, algorithms and AI to provide an experience that anticipates the needs of the user in a manner that makes it nearly invisible to the user.  For example turn-by-turn navigation supported by real-time traffic updates that route you around obstacles and problem areas.  An OILS, running in Future time, can prepare personalized and contextually relevant experiences in advance.

I had the opportunity to work with a large global automotive system manufacturer this year.  We explored extending traditional automotive systems to operate in Future time.  They would integrate multiple external databases including traffic accident and insurance information, plus real-time weather and traffic information to automatically prepare the vehicle and driver for the road ahead.  We were reaching into the future to provide additional value and a competitive advantage.

Future time delivers value from the future.  It works in a time beyond “real-time.”  This is the evolutionary nirvana for human to digital interactions.  Businesses that have not digitally transformed in a manner that can harvest value from the future have no possibility of competing there.

  1. Digital Hope and Redemption in the Digital Age
  2. Digital Transformation and the Role of Faster
  3. Digital Transformation and the Law of Thermodynamics
  4. Jettison the Heavy Baggage and Digitally Tranform
  5. Digital Transformation - The Dark Side
  6. Business is Not as Usual in Digital Transformation
  7. 15 Rules for Winning in Digital Transformation
  8. The End Goal of Digital Transformation
  9. Digital Transformation and the Ignorance Penalty
  10. Surviving the Three Ages of Digital Transformation
  11. From Digital to Hyper-Transformation
  12. Believers, Non-Believers and Digital Transformation
  13. Forces Driving the Digital Transformation Era
  14. Digital Transformation Requires Agility and Energy Measurement
  15. A Doctrine for Digital Transformation is Required
  16. The Advantages of Advantage in Digital Transformation
  17. Digital Transformation and Its Role in Mobility and Competition
  18. Digital Transformation - A Revolution in Precision Through IoT, Analytics and Mobility
  19. Competing in Digital Transformation and Mobility
  20. Ambiguity and Digital Transformation
  21. Digital Transformation and Mobility - Macro-Forces and Timing
  22. Mobile and IoT Technologies are Inside the Curve of Human Time

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Digital Hope and Redemption in the Digital Age

“You have a memory like an elephant,” is truly a compliment.  Researchers document all kinds of remarkable examples of the recall power of elephants, and this is credited with their ability to survive harsh environments as noted in this Scientific American article http://www.scientificamerican.com/article/elephants-never-forget/.

Our human memory also helps us learn from past experiences and mistakes, avoid recognizable hazards and keep track of our very busy lives.  Our memories for the most part have served us well, but the same might not always be said about digital memory in an always connected, real-time world. 

One of the most valuable concepts known to man is hope.  Hope is the belief that things can change and get better.  It is the belief that one can turn the page and start a new life.  It is the motivation that draws many to get out of bed each morning, recover from past mistakes, and go to work. 

Bankruptcy laws were designed, in part, to give hope. The Supreme Court in 1934 describes it this way, “It gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”  It gives debtors hope for a better future.  Source: http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/process-bankruptcy-basics 

Today our second brains, the digital memory banks in the cloud controlled by programmed algorithms, don’t forget.  Algorithms are programmed not to forget our histories, our bankruptcies, our youthful indiscretions, our convictions, DUIs, our vices, our former lives.  They make it difficult to forget and to transform into a better version of ourselves. 

The more our lives, through digital interactions, are driven by and influenced by digital algorithms and second brains, the more important it becomes to consider the issue of digital forgiveness, digital redemption and digital hope.  Hope that in the physical and digital world, you have the opportunity to start fresh, and change your life for the better, unencumbered by your plethora of mistakes, digitally remembered, biasing the future.  Few of us, with the exception of Uncle Rico in Napoleon Dynamite, are the same person we were in our youth. 

I can think of many scenarios where a person may want to change his/her life and leave the past behind, but algorithms and second brains won’t let them - unless somebody programs them to forget.  If they are not programmed to forget, our digital interactions with websites, businesses, governments, police, search engines and match-making sites will hang-on to our past and use it to judge our present and future.  Where is digital forgiveness in the digital era?  Where is the ability to hope for a different and better life free from our past if algorithms are programmed to always reference, remember and judge based on our past?

Just because something is technically possible, does not automatically make it good or worthy.  We as humans must define how we want digital technologies to support the world and society we desire.  The Supreme Court in 1934 thought it wise to forgive and forget, to give people the “right to be forgotten,” in order to let a person start fresh.  I believe it is time to let people be digitally redeemed in a similar manner.  

The “right to be forgotten” concept has now been made into law in the EU, and variations of it have been implemented in other regions around the world. It was motivated by the desire for people to "determine the development of their own life in an autonomous way, without being perpetually or periodically stigmatized as a consequence of a specific action performed in the past.”  Read more here https://en.wikipedia.org/wiki/Right_to_be_forgotten.  

In Germany they have implemented a law titled the Federal Data Protection Act, or Bundesdatenschutzgesetz (BDSG).  The law is designed to protect individuals' personal rights from being injured through the handling or mishandling of their personal information.  

I believe the “right to be forgotten” is an important consideration and discussion today. In a digital world fueled by data, capitalism is not a sufficient safeguard for our personal privacy and future.  We must imagine the world as we want it, and make it so as a society.

Hope is a critically important concept to humanity, and it must not be allowed to be stamped out by unbridled digital algorithms and second brains.  We must all recognize, in a digital age – hope matters.

  1. Digital Transformation and the Role of Faster
  2. Digital Transformation and the Law of Thermodynamics
  3. Jettison the Heavy Baggage and Digitally Tranform
  4. Digital Transformation - The Dark Side
  5. Business is Not as Usual in Digital Transformation
  6. 15 Rules for Winning in Digital Transformation
  7. The End Goal of Digital Transformation
  8. Digital Transformation and the Ignorance Penalty
  9. Surviving the Three Ages of Digital Transformation
  10. From Digital to Hyper-Transformation
  11. Believers, Non-Believers and Digital Transformation
  12. Forces Driving the Digital Transformation Era
  13. Digital Transformation Requires Agility and Energy Measurement
  14. A Doctrine for Digital Transformation is Required
  15. The Advantages of Advantage in Digital Transformation
  16. Digital Transformation and Its Role in Mobility and Competition
  17. Digital Transformation - A Revolution in Precision Through IoT, Analytics and Mobility
  18. Competing in Digital Transformation and Mobility
  19. Ambiguity and Digital Transformation
  20. Digital Transformation and Mobility - Macro-Forces and Timing
  21. Mobile and IoT Technologies are Inside the Curve of Human Time