Cisco News

Managing your SAP Digital Transformation Journey

Digital Transformation. We’ve heard the words, but have you wondered what it is all about? Digital Transformation is a strategic directive to redefine your business practices and processes to gain competitive advantage. It is all about making the inevitable tide of change work for you,
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Going Digital: Your Boss Doesn’t Get It. Your Clients Don’t Get It Either. What Are You to Do?

Going Digital: Your Boss Doesn’t Get It

Digital advertising now exceeds all other forms of marketing communications. But, your boss thinks: old school print and magazines. Your website is so hard to use it’s an industry joke. But nobody seems to care. Everyone hates IT and their projects seem to fail more than succeed. What should you do?

Let’s face it – while many, maybe even most, executives give lip service to the impact of digital transformation they really don’t understand it or even believe in it. Instead they focus on what made them successful in their past. Don’t believe it? Then why is your website a bear to use? Why is it hard to find your company’s product or services in a Google search? Why does seemingly every IT project take way too long, costs too much and often fails? These are not the signs of a digitally savvy organization.

Sure, there are organizations that actually do get it and the consultants love to write up glowing case studies and articles about the resulting improved customer experience and increased margins. But, do you work for one of them? Here’s how to determine an answer. For our analysis let’s look at four kinds of business models:

  • Asset Builders – produce and sell physical things
  • Service Providers – offer professional services
  • Technology Creators – develop new technologies like biotech and high tech
  • Network Orchestrators – manage social, business, and transactional networks

The models result in very different outcomes, cultures and attract very different talent. Let’s explore some measures.

First there is the value they achieve:

  • Asset Builders are usually priced at .5 – 2x revenues
  • Service Providers are usually priced at 1 – 3x revenues
  • Technology Creators are usually priced at 3 – 7x revenues
  • Network Orchestrators are usually priced at 4 – 11x revenues

A pretty dramatic range don’t you agree? Here is why. Take a look at the different growth rates and profit margins that each produce:

The odds are you (and your management chain) are in the first two groups. Fewer than 5% of companies are in the fastest growing, most digital and profitable slot (Network Orchestrators) despite the positive impact of this business model on multiple performance measures:

Here’s a caveat: the breakdown is not perfect. Amazon is largely a network orchestrator but it makes most of its profit from Amazon Web Services as a service provider. IBM would claim it is a technology creator but it has been shrinking for years and years, and its stock price reflects it.  Nonetheless, the framework is a good guide for evaluating your company or your clients.

Which one do you live in or sell to, and what culture makes you most comfortable? There is a clear distinction among these four in the kind of people, process and organization they have developed. Starting with the least digital the Asset Builders tend to be conservative, relatively slow and careful and incremental in their view.

Service Providers are concerned with effectively executing consistent and repeatable delivery of their services. Technology Creators are by necessity more innovative and faster paced unless they have largely become just asset builders. Lastly, Network Orchestrators are pretty disruptive and in many ways characterize the epitome of digital transformation.

Most companies are not going to go digital successfully. In the US only 18% of firms have done it. Over time those who do will disrupt the rest. Where do you want to call home? Good news! If you want to move you probably can. Talent is definitely in short supply with record low unemployment and most companies lamenting a shortage of good people. The result is that turnover is at an all time high.

It’s often a tough decision to leave an organization, especially if you have spent years with them. On the other hand, do you want to go down with the ship?

By John Pientka

John Pientka

John is currently the principal of Pientka and Associates which specializes in IT and Cloud Computing.

Over the years John has been vice president at CGI Federal, where he lead their cloud computing division. He founded and served as CEO of GigEpath, which provided communication solutions to major corporations. He has also served as president of British Telecom’s outsourcing arm Syncordia, vice president and general manager of a division at Motorola.

John has earned his M.B.A. from Harvard University as well as a bachelor’s degree from the State University in Buffalo, New York.

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