Even as you begin to read this, you are probably already in the midst of a disruption in the industry and are wondering how to equip your company to meet the new challenge.
5 big reasons why enterprises face challenges
1. Customers are more demanding – The digital world is constantly redefining customer taste, trends, and needs. Sometimes, these changes present opportunities that your company shouldn’t let go, to stay relevant.
2. Rate of business change is ever-increasing – Constant speeding of business change caused by the internet and mobile technologies is hugely determining who survives and who thrives.
3. Size doesn’t matter – Size is no protection in this digital world against market traction. The digital age has enabled everyone to innovate and cause disruption. New startups and lean competitors have no baggage of running the business on older models (or backward compatibility, in simple terms).
4. Lineage doesn’t matter – Customers are lapping up innovation and fresh ideas brought by younger and smaller players. Those with no lineage in an industry are chipping away the market share of large established players. Experience is no safety and reputation is transient.
5. Competitive threats are hard to see or act – Companies need to experiment, and plan products and services that cannibalize their own successful (in the past) offerings. Innovate or perish paradigm is now a reality.
“40 percent of the top 500 companies (US) are no longer in the top 500, 10 years later” – Gordon Graylish, Intel global vice-president and general manager, Enterprise Solutions. Clearly, there is no reason for complacency.
Implications on IT
Whip the horse. Isn’t IT supposed to enable companies to steer through challenges? Do enterprise challenges translate into challenges for IT?
Application strategy is of high importance as every business strategy is powered by a software application behind – When Marc Andreessen said “Software is eating the world”, he meant it and it is not surprising that software is going to play a significant role in solving these enterprise challenges. Apps drive every strategy. Hence, app development (powering innovation in strategy) is of utmost importance to the enterprise.
Applications are needed faster than ever – Traditional development practices no longer meet the needs of new-age businesses. Enterprise IT taking business needs and translating them to software requirements for vendors (after an RFP process), is too slow to be acceptable. IT needs to find new ways of catering to this demand.
Do more with less, as budgets are limited and uncertain – Gartner estimates that 70 percent of IT funds go to things other than business innovation; most likely keeping the current systems running (keeping the lights on). Older software becomes a liability for numerous reasons and reduces the ability of an Enterprise to change. The problem of shrinking IT budgets is compounded by the gradual turning of software investments into legacy (a liability, not an asset). IT needs to generate more value out of prior investments and build on top.
Technology is changing too fast, limiting capacity build-up – Scorching pace of technology infusion is crunching the time enterprises have to build up their internal capability. New technology is rapidly multiplying possibilities for business leaders but is also questioning their status quo.
An incentive for saving time than money – Instead of striving to save its own expenditure, IT can serve better by equipping the company for its future battles in the shortest possible time. This forces IT to think of “Wrap and reuse” instead of “Rip and replace” strategies.
Innovation and reuse are at a premium.
This calls for a relook at what the enterprise IT spending and overall effort is focused on. Gartner has nicely captured how applications stack up (based on their pace of change), which also provides the proportion of focus and budget traditionally accorded by Enterprises.
However, considering the new set of challenges, a higher focus is needed on “Systems of Innovation” now than ever before. We should stop treating Technology or IT investment as Capex that needs predictable ROI. “Technology is a metaphor for Change. Technology is also a metaphor for Risk”, as Dr. Kenneth Green, Director of The Campus Computing Project, said at DiECon 2013.
In subsequent posts, I would attempt to further elaborate on this new kind of Enterprise Innovation Infrastructure and the options available for enterprises to implement in their organizations.
Check out other posts in the series. Twitter: #FutureAppStrategy