The role of technology and IT companies in enterprise digital transformation

The way you see the world depends on where you stand. But, what if it’s your stance that’s the problem?

There is an urgent need for businesses within the IT, Technology and Communications (ITC) sector to consider a fundamental change of position. Thinking horizontally, not vertically. Looking across, not down. Creating partnerships with others to build more complete solutions. Supporting their customers’ needs and exceeding the expectations of those customers by providing them with far better outcomes.

It’s the only way to thrive in a world where boundaries are becoming meaningless, and services are fluid. B2B, B2C, B2B2C, are formulas that have lost their luster. Now, it’s X2X via XaaS – Anything to Anyone, Everything as a Service. As Apple Computer put it way back in 1984 ‘Think Different.’ Forget the old grammar, learn a new one. In fact, remove the grammar of traditional business and be brave enough to reinvent yourself. Remove old definitions, silos, and chains of command.

Introduction: Think horizontally. The new role of IT, technology and communications

The digital age has driven a scale and pace of change that has transformed business and society and business, economic and society. Cash generated is ploughed back into the next wave of new technologies such as AI, MEC, IoT, 5G, Robotics, 3D printing, VR/AR and Quantum Computing. In turn, these deliver the next wave of innovative products: packaged up XaaS, available on-demand anywhere at any time, acquired frictionlessly and with limitless cloud scalability they will both disrupt and invent completely new markets in future. Digital technology and connectivity are what defines the modern world. Everything is connected, or if it isn’t, it soon will be.

Whilst IT, Technology and Communications (ITC) companies are in the vanguard driving these new digital technologies, they’re not immune themselves from falling victim to these disruptive forces reshaping their markets and value networks, because they are both creators and consumers. Large R&D driven ITC companies with the scale to fund multi-year investment programs conversely find that the structures and processes created to operate at global scale and secure funding also makes it much more difficult for them to alter course.

You only have to look at the rapid demise of ITC market leaders over the last 30 years. Whether it be DEC, Data General and WANG in mini computers, Kodak in cameras or the rapid consolidation of industries from the many to just a handful. This has impacted almost every ITC market from consumer electronics to enterprise search. Indeed, the digital age with compelling new business models, partner ecosystems and digital platforms generating powerful direct and indirect ‘network effects’ is one of winner takes all.

You can sympathize therefore with the many challenges the ITC sector faces: Hi-tech product developers need to continuously innovate. Playing safe is investing in sustaining innovation (‘red oceans’) to fight competitors by continuously adding new features to existing products; and incorporating new technology and personalization. In parallel, it’s about managing the manufacturing process to continually drive out costs to offer more functional products for the same or less money. It relies on the immutability of existing sources of competitive advantage, barriers to entry and Porter five forces.

In contrast, riskier disruptive innovation is embracing new digital technologies and importantly also, new business models, to create new markets and value networks (‘blue ocean’) and displace established market-leaders by offering something radically better.

Inventing new products is more difficult especially as customers aren’t demanding them and innovations often threaten to cannibalize existing sales presenting tough choices. Whereas sustaining innovation seems safer, it doesn’t always mean customers value new features (‘overshoot’) allowing disruptors to position a more focused or radically better product or price point.

This is the story of Apple displacing Nokia in mobile handsets, a company which heavily invested in innovation, with strong product launch and market segmentation capabilities and which met customer demand by channeling sustaining innovation into incrementing battery life to win in the ‘red oceans’ and not smart phone technology, an undefined new need in the ‘blue oceans’. The rest is history. Aligned with the iPhone was a new business model (Apple App Store), with an open ecosystem driving a new source of competitive advantage for the digital age and new levers (like ‘network effect’) to continuously raise barriers to entry.

Whilst physical and digital lines are blurring with new products and business models sold XaaS, so are vertical industry boundaries: Amazon sells everything, but it also develops technologies through Amazon Web Services which is now a market leader in compute, storage, databases, analytics, networking, IoT, security and enterprise applications. Is it an ITC company or a retailer?

It’s both and much more. Apple makes movies; Facebook is deciding what’s real news and its Open Compute Project shares the most efficient data center hardware designs for scalable computing; Google is trying to beat Uber to transforming mobility with autonomous drive; the list is endless. What happens if all traditional companies respond to the digital age by becoming part-ITC themselves?

Is this blurring of ITC boundaries a real threat? Potentially yes, but only for ITC businesses that are set in their ways and not willing to adapt. A middle-aged, vertically led industry feels comfortable with boundaries and limits. It is 100% focused on traditional competitors not seeing the real threat comes from without. It tries to dictate to customers what they need, want and when they can have it. It focuses on incremental growth more than disruptive innovation and new business models (even though it says the opposite). And it feels threatened by open ecosystems. In contrast, no other company has been as successful as Amazon at building its brand around the customer – so even if ecosystems are too fluid, too messy and the outcomes too unpredictable – if this delivers the best customer outcome then this is what has driven Amazon’s strategy.

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