How Digital Transformation is Impacting Finance and IT
The exponential pace of disruptive innovation is fundamentally changing the way we do business. For brands and organizations, digital transformation – defined by Constellation Research as the methodology in which organizations transform and create new business models and culture with digital technologies – is vital to long-term success.
In a recent interview, Ray Wang (Principal Analyst, Founder, and Chairman of Constellation Research and author of the best-selling book Disrupting Digital Business) gave his insights on the impact of digital transformation on key business processes. In a previous post, we explored digital transformation’s impact on sales, service and marketing.
In this next post of the series, we take a look at how digital transformation impacts finance (which must be on the lookout for new business models), as well as IT (which must be able to deliver technology as a service to match and facilitate).
Notes Wang, “once you get the business model down right, then you can figure out what technologies you need to support. And when you bring those two together, that’s when you actually get to digital transformation.”
How Digital Transformation is Impacting Finance
“We now have the ability to model and create forecasts and planning in ways that we haven’t before. You have the power of machine learning that’s there, mining for patterns, understanding different types of insights that you might not have seen before.”
“One of the elements that finance needs to consider in digital transformation is unit cost pricing – what’s the smallest increment that you can sell to a customer of your product, service or insider experience,” notes Wang.
“In business school, people talk about how you don’t sell the razor, you sell the blade. Dollar Shave Club is a great example because they’re selling shaves as a service. So if you can imagine the smallest increment of something you sell, you can do some crazy things. You can reimagine how you can craft new experiences and outcomes by doing that. CFOs now have the ability to reimagine new types of business models by understanding the smallest unit they can sell.
“Related to that, because we’re in digital and have all that data and information, we now have the ability to model and create forecasts and planning in ways that we haven’t before. You have the power of machine learning that’s there, mining for patterns, understanding different types of insights that you might not have seen before to empower digital transformation.”
How Digital Transformation is Impacting IT
“The CIO is gaining more and more influence again because we have a new generation of CIOs who understand they have to innovate. It’s really about adapting to change and being able to deliver technology as a service to match new business models.”
“To succeed in digital transformation, the CIO has to be able to look at IT not in bimodal (where there’s one team focused on stability and keeping the lights on, while a separate team focuses on agility and innovation).
“Basically, you’ve got a team that has to run ops so efficiently that you have your core team also spending as much time on innovation as they are on efficiency. What happens over time is you take a new idea or a new concept that’s coming because the business model is changing.
“You have to first figure out how to make that work on its own, and then you have to figure out how to make that work inside your existing organization. And then, over time, you have to figure out how to do that better and faster than everyone else. That is not bimodal IT,” says Wang.
“We actually have continuous sets of innovations within IT, and you have to think about how technology plays a role in supporting new business models. The average age of a mobile app on the consumer side is something like 42 days. So you no longer have these 10-year platforms. You basically have to think in terms of 18-36 months, and what changes have to happen.
“And so on the IT side, you want to invest a lot more in architects. And you want to invest a lot more in folks who understand how to translate between business and technology so that you’re successful.
“And over time, what’s going to happen is that the technology teams start to realize that you want to get certain things off of your team—in terms of your mission, and in terms of automation, regulatory, compliance, operations—so that as you move to the cloud, everything becomes standard. And the advantage is really what you do in terms of application development.
“The companies that are going to be more innovative are going to have people that develop on platforms, people that develop and build software and technologies that don’t even exist yet to support those business models. So getting to the cloud is basically table stakes. You have to be there. But that means everyone is at the same level.
“Innovation is going to require you to take advantage of cloud platforms that allow you to really build that scale. This is ultimately a battle for how efficient you are at using compute power to transform your business.”
Notes Wang, “Here’s the thing people don’t realize—the CIO is the grownup in the room, and in fact, the CIO is gaining more and more influence again because we have a new generation of CIOs who understand they have to innovate. It’s not about standardizing everything on one platform and making everybody force-fit to use it.
It’s really about adapting to change and being able to deliver technology as a service to match new business models.”
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Learn More About Digital Transformation
In a new interview, Constellation Research analyst and best-selling author Ray Wang covers top trends that are impacting digital transformation, the technologies needed to be successful, who should lead digital transformation initiatives, the impact on sales, customer service, IT, finance, marketing and much more.
Need to get start or want to move farther along?
Click here to access the entire interview.
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R "Ray" Wang is the Principal Analyst, Founder, and Chairman of Silicon Valley based Constellation Research, Inc. He's also the author of the new best-selling book Disrupting Digital Business, published by Harvard Business Review Press, as well as the business strategy and technology blog "A Software Insider’s Point of View" which provides insight into how disruptive technologies and new business models such as digital transformation impact brands, enterprises, and organizations. His Silicon Valley research firm, Constellation Research, Inc., advises Global 2000 companies on the future, business strategy, and disruptive technology adoption.
