As Cisco’s Chief Digital Officer, my entire focus is on enabling Cisco and our customers to accelerate the digitization of our businesses, countries, and cities.
Digitization provides an enormous opportunity to enable, differentiate, and define new business models; yet at its core, the success of the transition is predicated on the capacity to reimagine and reinvent the actual work. This includes building on the Internet foundation to extend the mobility of work, the distribution of work, the immediacy of work, and how and where work will take place.
Being digital isn’t just about technology. It requires companies to reexamine their entire way of doing business — and how they offer it — to deliver new value to customers and partners through fast innovation and operational efficiency.
Winners will be those who equate digitization not with basic automation, but instead with the notion of reinventing systems and tools to create a continuous cycle of innovation in a company’s product portfolio and operating model.
As we begin 2016, companies are under more pressure to accelerate digitization than ever before.
In fact, according to a 2015 study by the Global Center for Digital Business Transformation (DBT Center), “digital disruption” will displace nearly 4 of the top 10 incumbents by industry over the next five years. The average time to disruption is a mere three years!
In order to build a digitization roadmap, it’s important to have a clear sense of the potential value of specific digital investments. To this end, Cisco recently conducted the market’s most comprehensive economic analysis to calculate the Digital Value at Stake for private sector organizations across 16 industries. The analysis is rooted in customer engagements and evaluation of 350 private sector digital use cases.
Digital Value at Stake is based on two components: 1) entirely new sources of value emanating from digital investments and innovations, and 2) value shifting among companies and industries based on their ability (or inability) to harness digital capabilities (in essence, value moving from “losers” to “winners”).
Cisco’s analysis shows that six industries — manufacturing, financial services, retail, service provider, healthcare, and oil and gas — will account for 71 percent of the total private sector Digital Value at Stake for the next decade (2015-2024).
Yet, none of these six realized more than 29 percent of its potential Digital Value at Stake in 2015. One of them — retail — managed to capture just 15 percent of its digital value potential last year.
To help retailers close this gap, Cisco has released a report titled A Roadmap to Digital Value in the Retail Industry. It identifies the top 10 sources of digital value for the retail industry, along with a roadmap for getting started and building long-term success.
Retailers need to pay attention: Cisco’s analysis shows that a $20 billion retailer that fully embraces digitization has the potential to save $33 million in annual IT costs, and to generate $823 million in annual earnings before interest and taxes (EBIT).
When it comes to digitization, it’s important to follow a self-funding strategy that generates both new sources of revenue and operational/IT savings. These gains and savings can then be reinvested in new digital solutions to drive continuous innovation.
Starbucks provides a textbook example of this approach.
An early pioneer in developing its own mobile payment app, Starbucks went one step further by linking the payment app to its customer loyalty program.
The company then decided to address a new customer concern: “line anxiety.” Starbucks built on the prior success of its mobile payment app by creating Mobile Order & Pay (MOP). The app allows customers to preorder and pay for their beverages, skipping the line to pick up their orders in the store of their choice. Starbucks says that the mobile app now accounts for over 21 percent of total purchases, with nearly two-thirds of those payments coming through MOP.
The app’s success opened up new opportunities for connected (digital) advertising. Because MOP is tied to the inventory management systems in individual stores, it offers a channel for promoting upsell opportunities and impulse purchases (would you like a muffin with your latte?).
The nice thing about digitization is that investments made to achieve one business outcome can be repurposed to drive other digital initiatives. The key is start building your digital strategy now — one success at a time.
Throughout 2016, I plan to share parallel journeys being taken by Cisco customers to help frame how digital operating models are being developed to reengineer and reimagine different industries across the globe. I’m excited to share the efforts and successes of our innovative customers. I look forward to hearing your thoughts on these initiatives, as well as what you see happening in your particular market.
Great read – thank you Kevin
Is Cisco looking to go deeper into industrial operations of these 6 verticals and what is Cisco’s expected role in unlocking the value stated in the above study?
The Starbuck’s example is a great illustration of “digitization” efforts of an organization to satisfy both a customer desire (speed, ease) and an organizational efficiency (visibility to orders which drives efficiency in labor costs and efficiency in concluding a sale). What is the roadmap of such digitization within Cisco? Are there particular areas we are focusing on first?
Great article with excellent insights!
To meet these goals we at Cisco need to promote innovative solutions on various Cisco platforms. Current perception in the startup space is that Cisco is a giant that caters to large enterprise customers only. We need to turn this around and set up a plug and play center where entrepreneurs with viable ideas can come in and get access to Cisco technology and expertise to unlock the value proposition for our customers.
Cisco demonstrated this week that we will focus heavily on being the platform of choice to enable IoT across every industry from wireless to mobile networks…essential as work becomes more fluid incorporating communications across more and more devices
Really enjoyed reading this article Kevin, thanks for sharing. I have been looking for a good description of digital transformation and you have provided it “Being digital isn’t just about technology. It requires companies to reexamine their entire way of doing business — and how they offer it — to deliver new value to customers and partners through fast innovation and operational efficiency.”
So a comprehensive digital strategy sounds key to a successful implementation.
About 4 years ago I was in conversation with Starbucks in Seattle from an analytics perspective on upsell and cross sell and then aligning it to the supply chain strategy. That then led to new features which are key in MOP. At cisco it is key to look at the opportunity immediately around us, as well as away from us. 80% of the gains of digitization will be from the most mundane work people do.
Read on #Cisco #techradar how real-time data and analytics are transforming businesses:
Is there a place to get the “elevator” pitch/definition of DIGITIZATION with a real-life example? One that can be given to someone NOT technical. I’d love to be able to explain this to my family — all of who are in non-technical fields (real estate, health care, mom). Thank you!
Thought provoking article.It is interesting to consider why organizations fail to adopt technology which is claimed to be beneficial to them?
We are all busy, maybe there is ignorance around certain advances or claims. Certainly a “word of mouth” recommendation would be sufficient for a consumer but an organization would need a more rigorous evaluation.
Or second situation maybe ineptitude, maybe the organizations knows its a valuable tool, but they have failed to assess it correctly?
Or maybe there is a third situation where the offering is so Nebulous its impossible for an organization to ever truly make an assessment. Welcome to the world of systems, until the CIO (if you are lucky enough to have one) and academia start working a lot closer together we will not see high percentages of adoption of digital technology in organizations.
I was less familiar. but thanks for sharing
A very compelling narrative for digitization. However as more teams and people join the fray, there will be an increased need for better tools to tackle complexity in a digitized world. One of big problems arising out complexity as you pointed out will be to make sense of data and its value.
What we have today for understanding data is mostly tied to charting typograhies in excel or other reporting tools. This forces us to view data from a limited perspective versus looking at it from a complete geometric point of view. We need to transition to tools that will allow us to look at the shape of data, versus using standardized tools to report on metrics so we accelerate our perception of business in a fast changing world. The goal therefore should be to move from ‘chart on data’ to ‘data on chart’.
As you already know, in the world of big data, meaning hinges on how fast you can accelerate the understanding of the paradigm you are in, and the only way to make a difference is to be on top of it.
Digitization is not solely a technological transition. It is a shift in mindset to constantly examine what, and how, we do things today to identify opportunities for improvement and then leverage technology that is available to accelerate transition and potentially expose even more opportunities.
Helping customers to set their digital strategy is the key. Helping customers to also understand that their network infrastructure that was once an IT expenditure can be transition to a profit centre in a connected digital environment by using big data and analytics.
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