Digital transformation, as defined by Constellation Research, is “the methodology in which organizations transform and create new business models and culture with digital technologies.”
And these new business models, says Constellation Founder and Principal Analyst Ray Wang, are creating a winner takes all market.
In a webinar available on-demand, Wang notes that more than half of the Fortune 500 companies since the year 2000 have been merged, acquired, gone bankrupt or have fallen off the list. And much of this change can be attributed to the creation – or not – of new digital business models.
“What we are seeing in every industry,” says Wang, “digital leaders are taking 40 to 70% of the overall market share and 23 to 57% of profits. In some places, if there are only one or two major players, they’re taking up to 77% of the profits.
“This is a massive change in the marketplace.” And to survive and thrive, Wang advises, organizations must transform their business models to recognize and address today’s post-sale, on-demand, attention economy: where what happens after the sale is just as important as making it; where subscription models are the new norm; where saving people time and capturing their attention creates new leaders.
This constant attention to convenience and engagement not only applies to customers and employees, but to partners and suppliers, as well. “When you put these things together, says Wang, “you have digital transformation. It’s much more than a project. It’s much more than a program. It’s something that’s happening in a constant state.”
Technology’s Role in Digital Transformation
If we look back at the definition for digital transformation again, the methodology in which organizations transform and create new business models and culture with digital technologies, there are five digital technologies that have been the underpinning of digital transformation since the 1990s, notes Wang. These are:
- Big Data
- and Unified Communications.
“The trend that’s had the biggest impact to date on digital transformation has been the move to the cloud because it’s democratized access to compute power,” says Wang. “Anyone or everyone can access not just information, not just storage, not just processing capability – we now have access to all of the technology around you. When you have democratization of access, it gives you so much opportunity to create new business models.”
Looking ahead however, it’s the following six technology trends that will affect the next shift in how we improve customer experiences, improve what we do in the workplace, transform products and leverage machines at scale to augment humanity:
- 3D Printing
- Augmented Reality/Virtual Reality
- Block Chain Technology
- Artificial Intelligence/Cognitive.
Which one will have the biggest impact on the greatest number of businesses? Wang believes it’s AI and cognitive. “If you talk to Cortana and use conversations as a service, you see recommendations pop up. People talk to their phones today. People talk to devices in their house.
“That piece is learning from you – and all the self-learning and machine learning parts of AI are going to have the greatest amount of business impact inside every organization.”
Which Comes First? The Business Model or the Technology?
“When we look at digital transformation, people tend to think about the technologies,” says Wang, “but it’s about how you change your business models and how you change the way you engage with stakeholders.
“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 get to digital transformation.”