THE PATH TO SELF-DISRUPTIONNine steps of a digital transformation journey

Sponsored by

START YOUR OWN DISRUPTION

C-suite executives in every industry must set the right pace for digital innovation. Move too fast, and you can undermine still-valuable business processes and threaten your customer franchise. Move too slow, and established enterprises risk being “Ubered” by aggressive newcomers that steal business and gain competitive advantage. A balanced approach is paced, modular and risk-adjusted—but executed with a sense of urgency. The following nine steps, broken down into three main stages, can guide change agents as they design their own transformative businesses and use the latest technology to create modern architectures—all while securing the enterprise.

DESIGN STEP 1: Develop the end-game

business model.

This means disruption. However, the future business model may be such a radical departure from the business that the planning process may not work, and traditional planners may feel threated by the results. Here are three starting points:

• Begin with your own digital assets. Every company has a series of digital initiatives already ongoing—these should be catalogued, reviewed, and used as the starting base.

• Begin a process of innovation to design the new model. The use of cloud capabilities can provide an environment in which experimentation can be rapid and failure can be low-cost.

• Finally, a useful model for future digital business may be the very insurgents that are driving transformation in the first place. You cannot copy them, but you can emulate their best practices in technology and business model.

Because legacy firms do not start from a blank slate, they must assess their current assets and liabilities against the future business model. Many of the discussions about transformation focus on the weaknesses of traditional firms—legacy technologies, inability to attract tech talent, etc. But traditional firms should not underestimate the strengths they bring to the table.

Some firms appear to have an inferiority complex when dealing with digital disruption. These incumbent companies bring enormous assets to the table, such as big customer bases, big brand names, or regulatory approvals. These are strengths that can be built into their new digital businesses.

DESIGN STEP 2: Perform a gap analysis and strength assessment.

DESIGN STEP 3: Weigh M&As for digital change.

Some traditional firms are turning to acquisitions and partnerships as vehicles for digital change. This approach addresses the struggle incumbents often face when building new cultures and businesses, particularly those that threaten the existing franchise. Insurgents—for all of their hubris—often need the assets and branding of their larger competitors to break out from their many competitors. Thus, by combining with the insurgent challenger, established enterprises can accelerate time-to-market for the new enterprise, which is critical in the digital space. In its research on the financial industry, the EIU found that 45% of traditional firms and 53% of digital challengers believed that the best strategy was for them to join forces as partners or acquisitions. Digital disruption is not always a zero-sum game—a combination of forces may be the best and fastest route forward.

ARCHITECTURE STEP 1: Define the optimal IT architecture.

The central choice in self-disruption is whether—or how many—applications should be shifted to the cloud. After all, many of the new disruptive firms capitalise on the low costs and technical agility that cloud can provide. Some providers depict this as a stark cloud versus on-premise decision. This is a false choice. Each firm will make its own decision on public, private, and on-premise solutions according to its business and security needs.

The bottom line: don’t look at hybrid cloud as a compromise—it can be a valuable way to combine cloud agility with traditional IT predictability.

Once the end-game is defined, the incumbent must examine its current networks, processes, and personnel not only as assets but also as liabilities. Early technology leaders, such as insurance companies and airlines, have found that their proprietary, server-based systems are holding them back. What were once constraints are now becoming serious liabilities as nimble, cloud-based insurgents challenge traditional firms for the market. Incumbents must identify their technology liabilities and make plans to replace them where necessary.

ARCHITECTURE STEP 2: Conduct a legacy technology audit.

As firms redesign their technology, an emerging model is that of “dual-speed IT.” Legacy firms often find they cannot abandon the legacy technologies that house their customer lists, product information, and back-office systems. At the same time, customers, whose digital expectations have been set by LinkedIn and Facebook, are expecting nothing less than an outstanding digital interface.

The most realistic option may be to embrace co-existing IT architectures. “Organizations need to overhaul their support model to adjust to this new paradigm. A critical element is recognizing that IT needs two speeds of service delivery,” says Antoine Gourevitch, managing partner at the Boston Consulting Group. While this model will present significant integration challenges, it is a practical solution to the back-office realities of many firms.

ARCHITECTURE STEP 3: Build out the IT architecture.

SECURITY STEP 1: Define a data security

strategy.

In an EIU survey of over 700 disrupting and disrupted firms, the majority of executives said data security was the number one challenge.

Clearly, a data security strategy must be designed not just for the present, but for the future business and the projected level of threats in the years ahead.

This requires a new degree of flexibility and scalability in security strategies. Data security used to consist of high firewalls and other tools for locking down the firm. With the increased sophistication and frequency of cyber-attacks, security managers now accept that the bad guys are going to get in, which puts new emphasis on containment and fast remediation. New security strategies must be flexible enough to be scaled up and modified for the cyber risks of tomorrow, which can only be expected to escalate and become more sophisticated.

The transformation journey is a period of elevated data security risk. By its nature, transformation brings new entities—some of which may not have equivalent standards—within the firewall. New devices, new networks, and new employees all present potential entry points for hackers. These require an aggressive data security program that keeps pace with and is an essential part of the journey.

SECURITY STEP 2: Maintain security during transformation.

Just as transformation presents risks, it also presents an opportunity to escalate the security standards of the enterprise. In most legacy firms, security consists of passwords, firewalls, and software, and remains the domain of the IT professionals. But with the new sophistication and frequency of attacks, security needs to be woven into the fabric of the entire enterprise. Disruption can be turned into an advantage for data security.

The digital transformation journey is a fluid time, when new systems can be adopted and new cultures created. This is an opportunity to weave security into the DNA of the enterprise.

SECURITY STEP 3: Turn transformation into an opportunity.

URGENCY Time to do it right, but no time to lose.

This is one of a series of Economist Intelligence Unit discussions, sponsored by Hewlett Packard Enterprise, on the digital transformation journey. For in-depth analyses of digital disruption, securing the internet of things and managing legacy technology, please click on these links.

No industry will escape disruption. And the timeline for disruption will not be set by you—it will be set by your new competitors. Rapid mobilisation will require a ramp-up of resources. Some of your best employees will welcome disruption and become its leaders. The complexity and urgency should make you carefully screen and select your partners. The stakes—which can include the survival of the firm—demand that you recruit the support of your C-suite and board. You have time to do it right, but no time to lose. Start disrupting yourself now, before others do it for you.