Even the most successful organisations today need to address the question: can you compete against emerging businesses that were born in the internet age?
IT transformation is a critical challenge, and becoming a digital-first organisation means changing the way you think about technology.
“The big question for business leaders is: who are the next disrupters? Every organisation has been disrupted already by web-born companies – not by their well-known competitors,” says Intel’s Heiner Genzken.
Existing organisations that want to thrive in the digital economy are increasingly aware of this threat, and the only way to prepare for it is through IT transformation.
“A new competitor will come up with a service on the web that offers an alternative to an existing organisation’s service which is more attractive to millennials. This will provoke the question, how can I compete or avoid being disrupted by them?” says Genzken.
“This is the reason for IT modernisation and a consequence of the digital age. It is not a hobby or hype for the CIO who is doing it only because everyone else is. Modernisation must be done to survive,”
Intel’s Markus Leberecht agrees that disruption from unexpected quarters is a new challenge for many firms.
“For companies I’ve spoken to, including those within the German car industry, their need in the digital age is to look beyond being a product company and becoming a digital company looking at mobility services,” he says.
Advances in chip technology are enabling these huge transformations allowing data and analytics to play a key role in innovation.
Genzken points out the reality of Moore’s Law – that the number of transistors in a dense integrated circuit is growing exponentially. Intel has been at the forefront of this evolution and continues to drive IT transformation with its Xeon Scalable processors.
“We are past a threshold. Twenty years ago we did not have the compute, storage or networks at the cost we have today to make all the well-known social media and web-born disruptors possible. Now, Moore’s Law is enabling the digitalisation, and everything possible will be offered sooner or later,” he says.
“Our core technology – processor chips and platforms for server, storage and networking – is the key enabler for digitalisation. Without the Xeon processor, disruptors like Airbnb and Google wouldn’t exist. It is enabling the disrupters.”
Genzken highlights how former GE chief executive Jeff Immelt said in 2014, “If you went to bed last night as an industrial company, you’re going to wake up today as a software analytics company.”
Services not products
Car manufacturers are transforming to making profit from the mobility services they sell to their customers, not just from cars. This process is advancing with the rise of driverless cars from the likes of Google and others.
“Car manufacturers are looking at disruption from the outside and from within, but developments such as autonomous driving and electric cars are all heavily IT-driven,” says Leberecht.
Genzken adds: “Every producer of something – it can be a service or a product – will be at least challenged, if not disrupted, in their business model.”
Classic corporate values such as brand, lean operations and faster production are less compelling drivers of competitive edge than they were 20 years ago.
“They are at least being questioned because they are all put on the same level to some degree by artificial intelligence. The differences between car brands are decreasing. In the new world, the key driver is digitalisation and for millennials who want to move from A to B, the car brand is less important,” says Genzken.
Similarly, he points out that Airbnb has disrupted the hotel industry with a great idea and a piece of software. However, the classic hospitality value of low cost is not the reason for its success.
“Data shows that the average room price for an Airbnb room in New York is higher than that for a hotel, but people like Airbnb because it runs on their smartphones, is right in front of their nose and is more practical, easy and reliable,” he says.
Disrupting the disrupters
Genzken believes digital transformation is still very much in its early days.
“No-one should believe that we are near an endpoint for digitalisation. We have just started with this process and we will be asking who is disrupting the disrupter. A better service will come along, an improved search engine and new social media services,” he says.
Leberecht agrees that organisations should be prepared for continuous change. “Every maturity model in every industry is not an endpoint; it is a constant age of evolution,” he says.
By developing IT strategy in line with business innovation, organisations can best prepare for this transformation.
“It is a challenge for everyone who thinks you can afford to stand still. An organisation can create a new platform for everyone to work on and it becomes the new normal, but there will be new capabilities to add by combining with other new technologies,” says Leberecht.
“Don’t approach IT transformation as a one-off. It is a process, and organisations should take a step-by-step approach, and share best practice ideas, and build momentum.”
If you would like to compete in today’s digital economy, please visit https://www.intel.co.uk/content/www/uk/en/business/driving-value-with-it-transformation-paper.html
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Intel Xeon: https://www.intel.co.uk/content/www/uk/en/processors/xeon/scalable/xeon-scalable-platform.html