What Trends Will Shape Cybersecurity in the Coming Year?

Leading research and advisory company Gartner recently wrapped up its 2017 Security and Risk Management Summit. A premier gathering of leaders and executives in the fields of security, risk management, and business continuity management, the annual summit focuses on helping businesses reinvent and refine their thinking on how to handle security and risk in the digital age.

In this era of ransomware attacks and privacy breaches, the issue of cybersecurity was unsurprisingly one of the defining themes of this year’s summit. In a presentation given on the summit’s first day, Gartner analyst and research vice president Earl Perkins outlined five key trends that are expected to shape the cybersecurity landscape in 2017 and 2018.

1. Changing skills and organizational requirements

Cybersecurity already has a zero percent unemployment rate, and that talent shortage is only expected to grow as the field evolves and the need for new skill sets arises. Data management in particular will become a significant challenge. The next three to five years alone will see organizations generating more data than they ever have before, and that unprecedented volume of information will require highly specialized handling. The need for new skills in data science and analytics will continue to grow, and the industry’s major concerns will include areas like data classes, data governance, and artificial security intelligence. To keep pace with this next phase of cybersecurity, adaptability will be essential, both for organizations and for individuals.

2. Cloud security as a top priority

Now that cloud computing has become a mainstream activity and the cloud environment is reaching maturity, the cloud is becoming a valuable—and potentially vulnerable—security target. The entire industry will need to work together to prevent a tragedy of the commons in which the stability and security of a shared cloud service is threatened by too many demands from too many different companies, without the corresponding sharing of responsibility for its upkeep. In addition, to keep data safe in the cloud environment, companies will need to make difficult decisions about who they can and cannot trust. Therefore, they should develop rigorous security guidelines for both private and public cloud use, and put in place a model to drive informed decisions concerning cloud risk.

3. Shifting focus away from protection and prevention

One of the biggest cybersecurity trends discussed at the Gartner summit is one that may be the most difficult for security professionals to accept: the idea that it simply isn’t possible to stop every threat. Executives need to accept that fact and focus their resources on what they can actually accomplish. As Earl Perkins argued in his presentation, it is very difficult to stop a dedicated, well-financed actor who is after something specific in an organization from getting what they want, especially as they can always resort to a company’s weakest link: people. Instead, enterprises should adapt their security setup to focus not on protection, but on detection, response, and remediation, which Perkins described as the new frontier for today’s cybersecurity fight. Indeed, as technology evolves further, we can even expect to see the focus shift yet again from detection and response to prediction, i.e., heading off threats before they even happen.

4. The development operations center as the leader of application and data security

Despite the fact that there is a new window of opportunity in application security, the associated expense makes most enterprises reluctant to take advantage of it. However, there’s never been a better time to bring together development and operations, and to figure out the best way not only of evaluating the value of security, but of explaining that value to the business. The anticipated result is a necessary shift from DevOps to DevSecOps. Now that an almost endless connection between development and operations is possible due to the drastically shortened time to market, focusing on security within the DevOps context, rather than running each element as an isolated unit, is the essential next step. If enterprises are not working with an internal DevOps team, it’s critical to have a conversation with their service provider about the kind of security they offer.

5. Digital ecosystems and next-generation security

Safety, reliability, and privacy are the key tenets of cybersecurity, but the interesting thing happening now is that these issues are no longer confined solely to the digital realm. As a result of the rapid rise of the Internet of Things and its millions of connected devices, cybersecurity is now directly linked to the physical safety of people and environments. Bluntly put, when you’re talking about things like self-driving cars or sensors that monitor health conditions and give alerts when it’s time to take medication, enterprises that don’t have a sufficient handle on cybersecurity may be putting people’s lives at risk. Therefore, the next generation of cybersecurity won’t just be about the digital world, but the physical one as well.

A Look at Today’s Most Important Emerging Technologies

In today’s rapidly shifting digital landscape, it’s more important than ever for companies to stay on top of emerging technology trends. To help businesses keep pace with the latest technological changes, Forrester recently published a new report on “The Top Emerging Technologies for Digital Predators,” which includes a wealth of information relevant to companies regardless of where they sit on the digital transformation spectrum. Read on for a closer look at some key takeaways from the report.

What is a digital predator?

According to Forrester analyst and report co-author Nigel Fenwick, today’s companies tend to fall into one of three categories:

Digital dinosaurs—These incumbents struggle to shed their old business models and reinvent themselves for the digital economy. Their slow rate of change results from a number of different factors, including the power many feel from holding a near monopoly position, the need to defend large P&Ls (profit and loss), or simply a failure to see either the opportunity or the threat that digitization represents. Many retailers as well as manufacturing and construction firms belong to this group.

Digital transformers—These traditional businesses have successfully evolved to take advantage of emerging technologies; for the most part, they are creating new sources of value for their customers and are implementing competitive strategies that may take them beyond conventional industry boundaries. Companies like Burberry, L’Oréal, and Ford are good examples of digital transformers.

Digital predators—The third category of businesses is startup territory. These digital predators successfully leverage emerging digital technologies to challenge traditional incumbent companies for market share, frequently displacing them in the process. The names of some of the biggest digital predators won’t surprise anyone: Amazon, Airbnb, and Netflix, for starters.

What emerging technologies are having a significant business impact?

Fenwick argues that, regardless of whether a company is a digital dinosaur, transformer, or predator, every company needs to understand how emerging technologies are impacting the business landscape and, consequently, what role they might have to play in the company’s own digital transformation. This understanding can help executives like CIOs, CTOs, and CDOs ensure that their technology portfolios blend mature technologies that support current operations with emerging technologies that will help to serve future customers.

According to the Forrester report, some of the most critical emerging technologies that companies need to know about—that is, those technologies that have the highest potential to bring a competitive advantage, influence markets, or shift the business landscape altogether—include:

Intelligent agents—These are artificial intelligence solutions that have the capacity to not only interact with their users, but to learn their behavior and understand their needs, and eventually even to make decisions on their behalf through predictive analytics. The idea behind intelligent agents is to improve productivity, optimize a variety of business activities, and reduce costs. Equally important is the goal to increase customer loyalty by offering a personalized, high-quality experience. Some of the best-known intelligent agents at present include prototypes like Apple’s Siri or Google Now, but more chatbots, virtual agents, and robotic process automation services are being added to the landscape every day.

Augmented and virtual reality—Augmented reality (AR) is a process by which digital information and experiences are layered on top of the physical world, while virtual reality (VR) goes one step further, creating a completely new, interactive digital environment. AR in particular has strong potential to dramatically alter the customer experience, especially in retail environments. For example, the home improvement retail chain Lowe’s recently released an AR “mapping” app that helps customers search for products, add them to a shopping list, and then easily navigate their way through the store to find and collect the items.

Internet of Things solutions—Smart devices and sensors connected to the Internet are providing companies with a new level of insight into how customers are using their products and how their systems are operating. The Forrester report makes the case that using a digital model to map the physical world will become a defining feature of business over the next decade, and that the Internet of Things (IoT) will simply become the business standard for companies dealing with physical assets.

Cognitive technology—Advanced machine learning has the power to mimic natural human cognitive functions, thus opening up the possibility for new data insights and suggested actions. Emerging technologies in this category include developments like natural language processing, which can personalize and differentiate the customer experience, as well as dramatically improve internal processes.

Hybrid wireless technologies—A new communications infrastructure could be on the rise given the advances in interfaces and software that allow devices to use and to translate between at least two different wireless providers, protocols, and frequency bands (such as radio, cellular, and Wi-Fi). These developments are likely to drive new applications that anticipate and meet customer demands in a whole new way.

How to Thrive in the Fourth Industrial Revolution – 9 Principles

One of the biggest effects of the Fourth Industrial Revolution has been the erosion of conventional boundaries between industries. As a host of emerging and mutually reinforcing technologies (like the Internet of Things, data analytics, and machine learning) have opened up a vast array of new opportunities for business, it’s becoming increasingly difficult to see the difference between, for example, a retail store and a retail bank, or an entertainment production company and a telecommunications provider. In addition, the relationships among consumers, suppliers, and producers are similarly blurring as a result of digital technology’s power to enable individuals to connect outside of the traditional value chain.

In such a confused environment, full of ever-shifting lines in the sand, how can a business differentiate itself from its competitors (who may not even be in the same industry), build digital prowess, and play a pivotal role in the Fourth Industrial Revolution? A recent article from Strategy & Business magazine offers the following nine principles as a guide:

1. Rethink the business model.

Today’s digital landscape is full of cautionary examples of incumbents who clung to outdated business models, only to lose ground to startups that leveraged flexibility and innovation to introduce new products and services at significantly lower prices. Businesses today need to realize that traditional industries have changed forever, and paths to profitability have changed accordingly. As a result, it’s time to take a fresh look at long-established assumptions about doing business, and develop a new business model that’s a more appropriate fit for this new era.

2. Build a platform-based strategy.

The value chain was the backbone of the old industrial system; in the new system, that backbone is the platform. A system that brings a range of vendors and customers together on a plug-and-play technological base, the platform has become widely recognized as one of the main driving forces of the Fourth Industrial Revolution. Companies must take steps to determine what role they will be able to play in a platform-based economy, such as a builder of platforms, an engager using platforms to provide products and services, or a developer of new technologies to serve existing platforms.

3. Design for customers.

The new infrastructure of the Fourth Industrial Revolution may be a web of digital connections, but it’s important to remember that there are still real-life people at the end of those connections. Today, digital technology has given businesses the opportunity to be closer than ever to their customers, and to discover (and fulfill) what those customers genuinely want and need. A customer-centric approach to design has therefore become vitally important.

4. Boost technological acumen.

Today, regardless of industry, software is the key to competitiveness. Over the next few years, every company, even born-digital startups, will need to improve its technological acumen in order to keep up with the pace of change and remain a competitive market force. This not only means recruiting software experts, it also means making training in digital tools and insight a key development focus for every single worker.

5. Innovate quickly and openly.

Large-scale disruptive innovation has garnered the lion’s share of attention in the digital revolution, but many companies are finding that a steady stream of smaller, incremental innovations is just as effective, in terms of both profit and feasibility. Today’s digital tools allow smaller innovations like new products to be prototyped, manufactured in small batches, and tested in the market within a greatly reduced timeframe; this is a huge advantage in helping companies understand how real-world customers will respond.

6. Leverage data.

Most companies are well versed in gathering data. However, the next step is to ensure that they properly analyze the data for important patterns, which can lead to critical insights and actionable decisions. For maximum effectiveness, companies should ensure that their analytics teams are integrated, and that there are regular discussions across the company about what findings are coming to light and how this information could affect the business.

7. Embrace new financing models.

The old ways of raising money are having a harder time delivering when it comes to financing new large-scale technologies. Instead, financing is seeing the same kind of shift that cloud computing brought to software—that is, a pay-as-you-go model that emphasizes smaller but more frequent payments in exchange for more flexible installations.

8. Emphasize purpose over products.

Purpose is taking over from product as the main factor that differentiates one company from another. A clear value proposition, applied to everything a company does, is a must-have for anyone doing business in the digital age; consumers today want to know not only what a company provides, but why they provide it and towards what outcome.

9. Handle data responsibly.

Even small companies are now collecting vast amounts of data, and customers need to know that companies can be trusted with their sensitive personal information. This not only means that companies must maintain secure privacy safeguards to prevent unauthorized data access, but it also means that they must handle data ethically and transparently to avoid betraying consumer trust.

4 Important Takeaways from a New Study on the Internet of Things

Hosted by Cisco in late May 2017, the fourth installment of the Internet of Things World Forum (IoTWF) brought together some of the world’s most innovative IoT thought leaders from business, government, and academia for three days of discussion and debate in London, one of Europe’s fastest-growing technology capitals.

One of the highlights of this year’s IoTWF was the release of a new study conducted by Cisco on the current state of the IoT landscape. To compile the study, Cisco surveyed more than 1,800 business and IT leaders across a range of industries in the US, the UK, and India, focusing exclusively on respondents from organizations that had completed or were in the process of implementing at least one IoT initiative.

Despite widespread excitement about the enormous potential of the Internet of Things, the results of the study highlighted the fact that getting successful IoT initiatives off the ground is not always an easy task. According to survey respondents, the majority of IoT initiatives (60 percent) grind to a halt at the Proof of Concept stage. As for companies with completed IoT initiatives, only 26 percent consider their initiative to be a complete success, while on the other hand, a full one-third of completed projects were deemed unsuccessful.

Other important takeaways from the study include:

The human factor still matters.

Technology may be at the heart of the Internet of Things, but it’s vital not to overlook the critical role that human factors like culture, leadership, and organization play in the ultimate success of an IoT project. In fact, of the four factors that survey respondents identified as the most important for successful IoT initiatives, three are all about people and relationships. The top factor, cited by 54 percent of respondents, was strong collaboration between IT and business units; this was followed closely by an organizational culture that focuses on and values technology (cited by 49 percent of respondents), and IoT expertise and knowledge both internally and through external partnerships (48 percent). In addition, survey respondents whose organizations had completed successful IoT projects described the use of close partnerships at every project stage – from strategic planning through to post-rollout – as a fundamental part of their overall success.

And speaking of the human factor, it’s also interesting to note here that the success of an IoT project seems to be very much a matter of perception. IT executives, who prioritize things like technologies, expertise, and vendors, are more likely to consider projects successful than are business executives, who place greater importance on strategy, business cases, processes, and milestones. Thirty-five percent of IT executives who responded to the Cisco survey considered their IoT initiative to be completely successful, while only 15 percent of business executives said the same.

Support is critical.

With 60 percent of survey respondents emphasizing that IoT initiatives are much more difficult to implement in reality than anyone at their organization expected, it’s clear that a successful IoT project needs all the help it can get. Some of the main challenges that need to be overcome across all stages of implementation include time to completion, insufficient internal expertise, data quality, integration across teams, and cost overruns. Organizations that have been the most successful in implementing IoT initiatives have turned these challenges into opportunities by seeking out and engaging in strong partnerships throughout the process, as described above, in order to reduce the learning curve and bridge critical knowledge and skills gaps. Many survey respondents described the potential of these partnerships with other vendors as an important way to create connected solutions, share data, and consequently bring significant new value to industries.

Failure is a teaching tool.

One of the biggest shifts in mindset that has happened as a result of the digital revolution is embracing failure—not avoiding it. To succeed in the fast-paced world of digital transformation, businesses must become less risk-averse and use stalled or failed initiatives as a learning experience to feed and improve future efforts. Happily, the majority of businesses working in the IoT realm seem to be on board with this idea: 64 percent of survey respondents agreed that unsuccessful IoT initiatives actually had the unexpected benefit of accelerating, rather than slowing down, their organization’s level of IoT investment.

The benefits are significant.

If IoT initiatives are so hard to implement successfully, are they really worth pursuing? The answer to that is a resounding yes, as indicated by the benefits that survey respondents described as resulting from successful IoT projects. Nearly three-quarters (73 percent) of all respondents said that they had been able to use data from completed IoT projects to improve their business in some way; globally, the top three benefits named by respondents were improved customer satisfaction (70 percent), better operational efficiencies (67 percent), and improved quality of products and services (66 percent). Perhaps not surprisingly, these benefits can also help businesses boost their revenues: 39 percent of survey respondents cited improved profitability as the top unexpected benefit that IoT projects brought to their organization.

How to Think Like a Disruptive Digital Leader

CEOs and other top executives today know that a major shift is needed to adapt to the dramatic changes that the digital revolution has brought to the business landscape. But all too often, they overlook one of the most important factors in achieving such a shift successfully: their own mindset.

As the business world becomes increasingly driven by digital developments, two distinct categories of CEO mindsets are emerging. One is the traditionalist: these executives are strongly on the side of the incumbent marketplace, of letting solid business cases determine investment strategies, and of prioritizing predictability over speed and innovation. The other is the digital market disruptor: the type of leader who believes that innovation can lead to big wins, that embracing failure is an inevitable part of risk management, and that innovation and speed should be prioritized over predictability.

These mindsets are important because, inevitably, a leader’s mindset is their frame of reference for interpreting and acting on information, and this process is in turn directly connected to how the company itself operates. Thus, a traditional CEO may struggle to lead a company’s digital transformation successfully, not necessarily due to lack of knowledge or willingness, but simply because they have difficulty altering long-established thought and decision-making patterns that are increasingly less relevant to the real world of business today. Transforming their mindset is therefore one of the first things that leaders who become successful digital drivers must do in order to transform their company.

To find out if you’re thinking like a disruptive digital leader, check yourself against these five key mindset traits of digital disruptors, as outlined in a recent article from Gartner.

Thrive on uncertainty.

Uncertainty can be paralyzing, particularly to incumbent business leaders who are accustomed to having plenty of time to make decisions and strong business cases arguing for or against those decisions. In the digital era, however, technology and innovations are evolving so rapidly and unpredictably that uncertainty is inevitable. Disruptive digital leaders not only understand, but embrace this idea. They don’t waste time or energy trying to make the uncertain more certain. Instead, they explore what is technologically possible, what impending changes might mean to the markets, and what are the risk-reward tradeoffs, doing the best they can to establish plans that allow for change and evolution.

Focus on “leapfrogging” ideas.

Traditional incremental thinking simply can’t keep up with the pace of change in the digital era. Disruptive digital leaders are therefore always on the lookout for breakthrough ideas—ideas that that have the potential to leapfrog ahead into a visionary new frontier and to bring dramatic, rather than step-by-step, changes to a company. Naturally, this requires a mindset that tolerates risk, given the volatility of future technologies. A true digital leader will be driven by this challenge and the possibility of creating net-new business value while still keeping a close eye on the end goal.

Master the digital-era levers.

The digital revolution has unfolded over a relatively short time frame, but it’s been long enough to demonstrate that not all new digital technologies are ready for the long haul. There are plenty of shiny innovations that look good if you’re interested in technology for technology’s sake, but won’t ever become true drivers of transformation. Digital leaders know to look beyond these distractions, seeking to master not isolated pieces of technology, but the real competitive levers of the digital era. Making long-term, strategic investments in areas like platform-based business models or customer data analytics can help companies become pioneering digital business leaders, rather than just another flash in the pan.

Start, experiment, learn, iterate.

If traditionally-minded leaders would rather wait until technology-enabled breakthroughs have been tried, tested, and proven, disruptive digital leaders know that waiting for certainty just means that another company will get in the door first. That’s why the mindset of digital leaders is focused on a start-experiment-learn-iterate approach: beginning from well-grounded strategic bets, these leaders explore and experiment with different pathways to breakthrough solutions, learning as they go rather than waiting for a sure thing before they start. The result is often a leaner approach that yields new value while still mitigating downside risk.

Innovate faster than the competition.

Speed is everything in the digital era. The current landscape is so rich in disruption and innovation that, often, the only way for companies to differentiate themselves is simply to launch their new product or service first. To achieve this goal of innovation at maximum speed, digital leaders work to establish a true culture of creativity. This means incentivizing speed, but not punishing failure—indeed, sometimes mistakes are even rewarded. This type of culture also involves breaking free of traditional industry rules, and championing and modeling risk-taking and discovery at every level of the company, from new recruits to established directors.

5 Lessons from Yesterday for the Technology of Tomorrow

In this era of the Fourth Industrial Revolution, new technologies are evolving faster than ever. But some experts are concerned that the pace of progress is so rapid that there isn’t enough time for us to absorb and reflect on (and consequently avoid) some of the mistakes that have caused technological development to stumble in the past.

Hilary Sutcliffe, a responsible innovation expert and the director of SocietyInside, addresses this concern in a recent World Economic Forum article in which she looks back to the early days of nanotechnology in. In examining some of the issues that accompanied the introduction of nanotechnology, Sutcliffe identifies five important lessons that one can (and should) apply to all future forms of technological development, from artificial intelligence to gene editing.

1. Distinguish the brand from the science.

Sutcliffe’s article refers to the “tyranny of the ‘ology’”—the danger of becoming overly fixated on the brand of a particular new technology rather than on the science behind it. Brands like nanotechnology or synthetic biology, in particular, have become popular buzzwords that organizations use to attract funding and academic investment, as well as to demonstrate their commitment to innovation. However, development can be compromised when the glamor surrounding a new technology, rather than how well it works or what risks are associated with it, drives discussions.

For example, the early excitement around nanotechnologies focused on the definition of nanomaterials as having features smaller than 100 nanometers. But while this size specification was an important element of “brand nano,” it proved to be a poor predictor of how these new materials actually behaved or the hazards they presented.

2. Hype has consequences.

In the new technology sector, competition for funding, media attention, and public interest is fierce. As a result, what Sutcliffe calls an “economy of promises” has developed, in which scientists and businesses hugely exaggerate the potential benefit of their particular “ology” to boost their chances of accessing vital financial support and other resources.

But these overstated claims have repercussions that we should not overlook. One of these is the inevitable tarnishing of a technology’s reputation when it proves unable in the short term to live up to its hype. For example, the 2004 goal of the US National Cancer Institute—to use nanotechnology to eliminate death and suffering from cancer by 2015—can’t help but make us feel disappointed now, even though the technology itself may eventually lead to that desired outcome.

Another repercussion concerns the delicate world of new technology regulation and legislation. Regulators have no option but to start their process based on what scientists and businesses claim their technology will deliver, but too much hype here can distract from a thorough and accurate exploration of a technology’s very real risks and hazards.

3. Language matters.

Closely associated with the issue of over-promising is the actual language involved in discussing and promoting new technologies. Naturally, we must devise new terms and metaphors when describing technologies and possibilities we haven’t seen before, as well as what problems they might solve, but we need to be careful to consider the impact of our chosen words. For example, many new technologies rely on military-inspired metaphors to evoke a feeling of control, dominance over nature, or extreme scientific accuracy. Not only do such terms lead to unsettling comparisons, they are also not usually reflected in reality, which compounds the problem of over-promising.

4. Don’t start by obsessing about the backlash.

Yes, new technologies can sometimes prove controversial, but when scientists launch their ideas from a place of defensiveness and confrontation, they often spark the very problems they are trying to avoid. Society does not necessarily have a widespread fear of technology itself. Instead, it has a widespread desire for engaged and collaborative discussion about what the technology is being developed for and what problems it will help solve. While it’s certainly important to think about how to address a potential backlash, imagining that such a backlash is already occurring when it isn’t can obstruct both developmental productivity and useful, forward-thinking societal dialogue.

5. Weigh the risks and benefits thoughtfully.

One of the biggest challenges associated with the hype, as well as the sheer volume of information around new technologies, is that it can be difficult for us to accurately weigh the real evidence for either potential benefit or possible harm. So much conflicting information and opinions surface when new technologies are introduced that parties from both sides of the debate often fall back on pre-conceived ideas, cherry-picking data to prove the point they’ve already decided on. However, as a society, it’s important that we discuss and weigh the question of acceptable benefits and risks in a thoughtful and clear-headed way, especially because reports have repeatedly shown that early warning signs of disaster are often clear (as in the case of asbestos, for example), but we are held back from acting by systemic biases and behavioral reasons.

Is Your Company Vulnerable to Digital Disruption?

For established businesses facing digital disruption, it’s natural to focus first and foremost on the particular startups or new companies that might be posing an immediate threat. After all, keeping a close eye on your competitors is perhaps one of the longest-established business principles around. But, as a recent article from McKinsey & Company argues, it’s actually far more important to consider why disruption is likely to occur; that is, what incumbents really need to understand is the nature of the disruption they face, not just which specific parties might prove to be catalysts for it.

To help incumbents clarify the sources of potential digital disruption, as well as the conditions under which it flourishes, McKinsey analysts have returned to the fundamental economic mechanisms of supply, demand, and market dynamics. In other words, the vital thing to understand about digitization is that it is disruptive to industries and incumbents when it results in a critical change to supply or demand (or both together).

For example, digital disruption can have the effect of exposing new supply and uncovering latent demand, and making a new market between them; one of the best illustrations of this is Airbnb, which exposed (rather than created) a previously unused supply of accommodation while at the same time revealing underlying consumer demand for more variety in accommodation choices. On the more extreme end of the scale, digital disruption can lead to the creation of new value propositions, hyperscale platforms, and reimagined business systems, all of which can change the nature of supply and demand to a significant degree.

For incumbents navigating the mechanisms of digital disruption and attempting to better understand the urgency of opportunities and threats they may be facing, McKinsey has produced a helpful “supply and demand” guide to digital disruption. Companies can use this guide as a basic organizational assessment tool to identify how vulnerable they may be to digital disruption in the following six supply and demand categories

Undistorted demand

Companies may be especially vulnerable to changes resulting from undistorted demand if the customer experience is below the current standard of “user friendliness,” both within and beyond the company’s particular industry. In other words, there is a strong risk of disruption if customers can’t get what they want at their preferred time and place, if they have no alternative but to buy the whole product or service to get the smaller part they want, if they are currently cross-subsidizing one another, or if the company’s customer identification and targeting techniques (like special pricing or advertising) are ineffective.

Unconstrained supply

Indicators of vulnerability in this category include a supply that is used unpredictably and high fixed or step costs. If customers don’t fully use a company’s product or service, or could easily become suppliers of the product or service themselves (as in the Airbnb example), then the risk of disruption is likewise high.

New market-making

The risk of disruption leading to new market-making is all about finding cheaper and more convenient ways of connecting supply with demand. Companies are vulnerable to disruption in this category if there is a lack of transparent information exchange between customers and suppliers, if research is costly and time-consuming with many intermediate steps and fees, and if transactions generally take a long time to complete.

New value proposition

Disruptions in this category aim to enrich a product or service and do more work for the customers on their behalf. If the experience of using a company’s product or service could be significantly enhanced through additional information or social media applications, or if a company offers a physical product that is not connected to the Internet (like appliances or thermostats), disruption that targets an enriched experience could be the result. If there is a substantial delay between when a customer purchases a product or service and when they receive it, or if they must be present in person in order to obtain the product, then disruption targeting a more convenient experience (doing more of the customer’s work for them) is likely.

Reimagined business systems

From an economic standpoint, disrupting business systems involves changing supply-side cost structure. Companies are vulnerable to such disruptions if there are multiple redundancies in the value chain, if physical distribution or retail networks are strongly entrenched, or if the industry in question has high margins compared to other industries or high variability in both cost and perceived value.

Hyperscaling platforms

Platforms are one of the major drivers of the digital economy and have been a strong disruptive force across industries. Essentially, companies are most at risk for disruption from the effect of hyperscaling platforms if their business model is based on charging customers to access information. Another clear risk indicator is the lack of any kind of dominant platform that governs interactions between industry suppliers and users. Finally, if there is strong potential for network effects related to a company’s product or service—that is, the phenomenon of a product or service gaining in value the more people use it—the risk of disruption is high.

A Look at the Top 5 Traits of Digital Transformation Leaders

For the most part, companies are no longer wrestling, as they once did, with the question of whether or not they need a senior executive in a digital transformation leadership role. Countless corporate case studies over the past few years have demonstrated the clear need for strong leadership when it comes to designing and implementing digital strategy and transformation efforts. But now, companies are facing an even more challenging question: what exactly sets successful digital transformation leaders apart from other senior executives? In other words, what traits do these leaders have that others don’t?

To help companies answer this question, Russell Reynolds Associates (RRA), the global executive-level recruitment consulting and advisory firm, conducted an intensive assessment of 28 of the world’s most successful digital transformation leaders and compared their findings with data on other senior executives in more traditional roles. RRA’s analysis revealed a remarkable 21 different attributes unique to digital transformation leaders; indeed, RRA analysts were struck by the significant differences between this cohort of top executives and other groups. When compared with other executives, digital leaders are far more likely to have the following traits:

1. Innovative

Innovation is perhaps the defining characteristic of top digital transformation leaders. Thinking outside the box, challenging traditional approaches, experimenting with new ideas, asking inquisitive questions—these are the hallmarks of leaders who are looking towards the future.

Digital transformation leaders are not just there to provide answers, they’re there to ask the questions that will help the company move forward and to develop solutions that are ambitious but still within the bounds of what is possible. Sometimes, conceptual or abstract thinking is what helps bring ideas into reality, and digital leaders excel at this kind of metaphorical work.

But don’t mistake these leaders for impractical dreamers; they are relentless in linking innovation to clear business outcomes, recognizing that the primary purpose of new and untested ideas is to drive revenue growth or cost-reduction goals.

2. Disruptive

Steady-state management is not how digital transformation leaders like to operate. While many traditional executives prefer the known to the unknown, digital transformation leaders thrive on ambiguity and uncertainty, with little regard—or even tolerance—for the way things have always been done.

One of the main ways in which this trait manifests itself in digital leaders is in their inclination to cut through bureaucracy to speed up the pace of decision-making and action. While a certain amount of bureaucracy may be necessary, particularly at large companies, in order to properly manage risk and take advantage of economies of scale, digital leaders are adept at bureaucratic decluttering, cutting through unnecessary, long-established processes to identify what the current situation calls for.

3. Bold

This comfort with ambiguity is perhaps what gives digital transformation leaders their reputation for boldness. Recognizing that to be a game-changer, one must be able to set direction without fear, digital leaders are more than ready to take initiative and to test and push the limits of their companies in order to unearth hidden capabilities and bold, new ideas. In addition, digital leaders are more likely than other senior executives to lead from the front, embracing the high level of public visibility that comes with being a change agent. For digital leaders and the companies they serve, it’s not only important to succeed, it’s important to be seen succeeding.

4. Socially adept

The ability to come up with innovative and disruptive ideas is all well and good, but it’s of little use without the social skills needed to be able to communicate these ideas effectively. That’s why today’s top digital transformation leaders are highly socially adept.

They know that the key to garnering support from their diverse constituencies and stakeholders is to be able to clearly and confidently share their vision, outlining how change will affect different groups and earning buy-in through careful listening and addressing questions and concerns. Digital leaders know it will be fruitless to attempt to implement change in spite of or against the will of the organization, so they have learned how to leverage their social capabilities, including the ability to adapt their communication style to different audiences, for maximum effect.

5. Determined

The pace and demands of digital change are ruthless. In response to this, digital transformation leaders have turned determination into a fine art. The role of a digital leader is not simply to develop a vision for the future, it’s also to guide a company and its people into that future, and this requires a strong sense of commitment and a deep resolve to see things through.

Through this determination, the best digital leaders are also instrumental in helping others become transformational as well; the right combination of bravery and optimism can be infectious, creating a change-ready atmosphere and attitude within an organization that is a key ingredient for digital success.

 

By: Keith Krach

5 of the Best Practices for Digitizing Business Processes

In today’s digital world, customers want it all. Conditioned by the innovations delivered by digitally disruptive startups, today’s consumers have come to expect every company they interact with to be able to offer them a quick, seamless and, above all, immediate digital experience, whether that’s seeing a real-time online report of their electricity consumption from their utilities provider or getting pre-approved for a bank loan in just a few clicks.

For most traditional organizations, revamping operations to meet these customer expectations doesn’t simply involve automating businesses processes, it involves reinventing them. Forward-thinking organizations are not just leveraging new technologies to perform existing business processes more efficiently, they are also challenging all assumptions about those existing processes and rebuilding them from the ground up with cutting-edge digital tools.

It’s not an easy task, but companies struggling with digital transformation can learn some valuable lessons from the way other organizations have successfully approached business process digitization. As outlined by McKinsey & Company, some of these best practices include the following:

1. Working backwards

It might seem counterintuitive, but the end state is often the best place to start when it comes to reconfiguring and digitizing business processes. This is especially true for incumbents with long-established and firmly entrenched business processes; in such cases, it can be extremely difficult to imagine alternatives without becoming overwhelmed by the constraints that stand in the way of radical change.

However, by describing the desired future state first (without regard for current constraints, as if it were already accomplished), then working backwards, it becomes easier to visualize how one might complete each step. This method also helps encourage organizations to challenge existing constraints; some are certainly real and important, but others turn out to be less of an obstacle and more of a corporate myth that can be overcome fairly easily through discussions with regulators or customers.

2. Tackling the customer experience end-to-end

Some organizations approach business process digitization gradually—testing the waters, as it were, by working on one particular stage of the customer experience at a time. However, while this can certainly boost efficiency in key areas and address some of the most urgent customer issues, this kind of segmented digitization will never be able to deliver the truly seamless experience that today’s customers demand.

Instead, it’s best for companies to approach these processes holistically, making a concerted effort to tackle them and see them through from end-to-end. Many organizations that have done this successfully have leveraged the support of startup-style, cross-functional units that bring diverse colleagues from different departments together to shake up the status quo and re-envision a process from all angles.

3. Growing capabilities

Few traditional organizations are sufficiently equipped to handle the demands of large-scale digitization. With critical digital skills in short supply in today’s competitive marketplace, successful companies are pursuing two talent-development avenues simultaneously.

One is launching programs that emphasize building in-house capabilities, seeking out and providing additional training to existing employees, in any department, demonstrating a flair for working with digital processes. Another is adding to the current in-house skill set by recruiting new talent externally, particularly for key roles like data scientists or user-experience designers.

Even when process digitization is urgently needed, companies must not overlook the critical step of taking the time to assemble the right people to both oversee and execute the digitization of business processes. Companies that embark on digitization efforts without the right team in place will simply be wasting resources and likely causing damage to their processes (and consequently their reputations) from which it may be difficult to recover.

4. Moving quickly

The days of traditional IT-intensive programs, where returns were delivered only at the very end of the project, sometimes years after it launches, are over. Rapid delivery is the new name of the game when it comes to digitization efforts. Fortunately, when organizations tackle end-to-end processes cohesively in an appropriate sequence, improved performance can result within just a few months.

One of the keys here is for organizations to recognize what obstacles are holding up process digitization; often, delays result not from IT-related issues, but from the typically slow pace of business decision-making. Part of moving quickly, therefore, involves garnering strong board- and executive-level buy-in to be able to delegate key decisions directly to the project team.

5. Rolling in (not rolling out)

Traditional deployment involves progressively rolling out new solutions to existing sites and user teams. But when business processes, as well as the supporting organization, have been radically changed by digitization, a new approach is often needed.

Rather than spending time and energy on changing old habits and behaviors, many companies with newly digitized business processes simply roll in a new organizational unit altogether to handle the requirements of the new digital process. Existing employees can then be gradually transitioned into this unit as the volumes it handles likewise increase. Thus, by the time the new unit is handling all process volume, all legacy unit employees will have been absorbed.

What Are the Qualities That Make a Digital Forerunner?

In today’s digital economy, even the most traditional businesses are finding ways to leverage the power of new technologies to gain a competitive edge, whether that’s by overhauling legacy back-office processes, boosting supply chains, or reimagining service offerings. But only some companies can truly be thought of as digital forerunners—that is, companies that set the pace of digital transformation by combining the scale advantages of incumbents with the flexibility and speed of born-digital startups. And while each of these companies has taken its own unique approach to digital transformation (we’ve seen, after all, that digitization is far from a one-size-fits-all scenario) a recent article from global management consultant Bain & Company highlights five of the most important characteristics that digital forerunners tend to share.

A disruptive vision

One of the biggest divides in the digital economy is the one between the disruptors and the disrupted. Many companies are able, at least in some measure, to keep pace with the wave of digital disruption once it has swept over their industry, but only some have the vision needed to lead, rather than follow, that disruption. These forerunners make the digital imperative a top C-suite priority rather than relegating it to IT or another siloed department, and they work to define both a clear target for their digital strategy and a direct and actionable process for reaching that target. In other words, they view digitization as a holistic undertaking. As digital solutions are choreographed and coordinated across the value chain, the entire organization is empowered to experiment and innovate, and products and services are improved in a continuous cycle of iterations and feedback. Key to all these efforts is an appetite for risk; digital forerunners aren’t afraid of failure, because failure is what tells them where they need to do better.

A commitment to understanding customers

In order to deliver an exceptional customer experience, companies first must understand what their customers really want, why they want it, and how their wants change over time. Digital forerunners know that the key to these questions lies not in customer data alone (after all, most businesses today have more data than they know what to do with) but in how that data is analyzed to provide dynamic customer insights. Big data and advanced analytics are what make these insights possible, and digital forerunners are harnessing these tools not to only deepen their understanding of their customers’ needs, but to anticipate what they will want next and to offer a real-time, personalized experience. In addition, digital forerunners make strategic use of insights that come directly from customers themselves; by creating opportunities for one-to-one dialogue between brand and customer, companies recognize the importance of each individual customer in the value creation process, and leverage direct and contextual feedback to deliver a more satisfying product or service.

An integrated customer experience

A seamless, omni-channel experience is something that every customer wants and that digital forerunners deliver. Digital forerunners know that customers today expect to be able to easily navigate a fluid ecosystem that minimizes friction at every touchpoint. Customers certainly care about the product or service itself, but they also put value on other, less tangible things, such as whether they can get the product right now, how it will integrate with products they already own, and whether they can be sure that the product featured on the website is the same one they’ll find in the store. Digital forerunners understand these values, and they work to create an integrated strategy that blends physical and digital assets and touchpoints to deliver the most convenient, differentiated, and personalized customer experience possible.

Speed and innovation

No matter how well established an incumbent it might be, a digital forerunner thinks like a startup when it comes to innovation. Digital forerunners foster a collaborative culture of experimentation that operates along a swift cycle of test-learn-test. Rapid prototyping and small-scale trials help these companies learn quickly and iterate progressively toward the best solution. Failure is embraced, and calculated risk-taking is rewarded.

Cross-boundary capabilities

The traditional organizational silos that were once a hallmark of well-run companies have no place in the world of a digital forerunner. Using digital technology to boost customer responsiveness and increase the pace of innovation requires collaboration across all areas of a business. Consequently, a common practice among digital forerunners is to break down silos, restructure roles, and reimagine communication and interaction between different teams. Most digital forerunners facilitate this process by empowering a senior leader to “direct traffic,” or ensure that organizational realignment proceeds smoothly, and to minimize confusion about authority or accountability. Having an overseer in this role also allows digital forerunners to quickly identify and fill any clear capability gaps that might arise as long-standing roles are shuffled.