A digital platform allows a community of partners, providers and customers to share and enhance digital processes and capabilities, and extend them for mutual benefit.
Does your IT strategy for 2017 include building a digital ecosystem? It should, according to the 2017 Gartner CIO Agenda report, which looks at how a digital ecosystem can grow a business’s reach and enable it to achieve scalability. The report says enterprises need to shift from a linear, value chain business trading with well-known partners and adding value in steps, to being part of a faster and more dynamic networked digital ecosystem.
The 2017 Gartner CIO Agenda report is based on survey responses from 2 598 CIOs in 93 countries across all major industries. Collectively, survey respondents represent approximately USD9.4 trillion in revenue and public sector spending and USD292 billion in IT spending. There’s a significant shift underway in terms of where CIOs are opting to invest, according to the report.
“As digitalisation matures, enterprises are increasingly finding themselves part of a digital ecosystem — a grouping of enterprises, competitors, customers, regulators and other stakeholders that exchange information and interact electronically. Despite an increase of only 2.2% in the enterprise IT budget, spend on digitalisation is on the rise. Data from the 2017 survey shows that CIOs are shifting their investment pattern in response to digital business, spending 18% of their budget in support of digitalisation, a figure set to increase to 28% by 2018. Top performing businesses are already spending 34% of their IT budget on digital, and this is predicted to increase to 44% by 2018.” – Gartner
What is the digital ecosystem all about?
According to the report: “Gartner defines a digital ecosystem as an interdependent group of actors (enterprises, people, things) sharing standardised digital platforms to achieve a mutually beneficial purpose.”
But what does that mean for the bottom line?
“A digital ecosystem amplifies the reach of a company,” says Andy Rowsell-Jones, research vice president at Gartner. “It enables scalable connections between known partners and customers, but also provides a platform for unknown parties to connect with each other. [Digital] ecosystems blur industry boundaries and give rise to entirely new kinds of companies, products and services.”
To prepare your organisation to function in a digital ecosystem, Gartner’s report advises making interoperability the aim of your technology planning. “A combination of core and evolving digital technologies enhances interoperability among digital ecosystem partners and supports the transition to ecosystem participation, especially in analytics, cloud services, digital market management and security,” the report says.
DID YOU KNOW?
Denmark-based Danske Bank decided to use an ecosystem of partners and businesses to create a home-buying system that was easy to use, intuitive and full-service. The online portal, called Simple, combines customer data (such as finances) with house market listings. The result is an estimate of taxes, as well as heating and electricity costs associated with buying the home. Eventually the bank began offering a financing arm and ‘journey aggregator’ that ties users into an ecosystem of realtors and information, and service providers.
To fully participate in a digital ecosystem, Gartner says you will need to focus on three core domains: technology, organisational capabilities and leadership:
1. Extend the technology core to be digital-ecosystem-ready
A combination of core and evolving digital technologies underpin the transition to digital ecosystem participation. Planned top technology investments by survey respondents include analytics, cloud services, digital marketing management and security.
Business Intelligence (BI) and analytics continue to top investment priorities across all organisation types with an average of 38% of respondents citing this in their top three priorities.
For all but the top performers, enterprise resource planning (ERP) remains a significant investment with 22% of typical performers and 30% of trailing performers placing it in their top three technology priorities.
Just 8% of top performers ranked ERP in their top three, having likely invested enough to modernise ERP and shifted that investment to higher return activities. In contrast, trailing performers are investing heavily in non-differentiating activities. This seems to indicate that they will need to work hard to modernise their technology core before they can even consider a digital business-style investment.
2. Create a digital-ecosystem-ready organisation
CIOs across the board identify the IT skills gap as the primary barrier to achieving the objectives in their role. An average of 34% of survey respondents reported that information-related skills represent the biggest gap, especially those skills which are needed for the newest, most advanced analytics environments.
The skills that have previously been applied to pre-digital diagnostic analytics are not sufficient for the new real-time data scenarios presented by the Internet-of-Things (IoT), personal analytics, operational technology and information ecosystems. As a result, newer skills are in short supply and expensive.
Adoption of bimodal IT (the practice of managing two separate, coherent modes of IT delivery, one focused on stability and the other on agility) is key to the creation of a digital ecosystem-ready organisation and this is an area in which enterprises are making progress. Survey findings indicate that, on average, 43% of respondents say that they are bimodal. However, top performers far outpace typical and trailing performers in their use of bimodal with 68% of all leading performers having adopted bimodal compared with only 17% of the trailing performers.
3. Master digital-ecosystem-ready leadership
Understanding business priorities and applying disciplines to inform management and execution is foundational to the transition to a digital ecosystem. The survey showed that, together with their CEOs, high-performing CIO leaders share a focus on growth and digitisation.
Growth is a recurring theme in 2017’s strategic business priorities, with 28% of the top performers, 21% of the typical performers, and 24% of trailing performers identifying it as a top three priority. Digital business/digitalisation is a high strategic business priority among the top and typical performers (28% and 20%, respectively), but was only cited by 6% of trailing performers.
“To create digital-ecosystem-ready leadership, business leaders must re-evaluate leadership priorities, engage stakeholders and involve them across digital initiatives,” adds Rowsell-Jones.
“Leaders that are digital-ecosystem-ready are panoramic thinkers. They look for opportunity in every direction, cultivate diverse partnerships, and question the value propositions and business models of the past.”
1. When it comes to digital leadership, look beyond simple cost optimisation in IT to prioritising business value. High performers free up resources to reinvest in higher-return areas versus simply reducing cost.
2. You are more likely to meet your cost reduction targets by managing cost reductions in commodity IT to liberate resources for higher-return areas.
3. Create a digital-ecosystem-ready leadership action plan. Form a clear view of your current leadership situation, devise a realistic plan for addressing it, choose a few areas of focus and move forward on them.