“Growing up, I used to worry about making and selling more cars; but now I worry, what if we only made cars? Just making cars is not our future” – Bill Ford, Executive Chairman, Ford Motor Co.
Consider the following business landscape:
- Ford sells computers-on-wheels
- DreamWorks is a technology company in the business of animation
- Fedex is a logistics company which offers a complete range of software solutions for ecommerce players
- Xerox is a photocopying company that sells document management and workflow solutions
What is common across these businesses?
- Technology, specifically computing and software are at the heart of these businesses
- Even though they are not traditional IT companies, they build, own, and support software products (IP) developed internally
- They have transformed their traditional businesses into cutting edge technology hubs embracing agility and innovation
While none of the above cited businesses (except for Xerox's PARC) are recognized for expertise in developing software, they have evolved into technology powerhouses with very mature capabilities in building world class software products and services, to complement their traditional business.
Evolving new business models and monetizing digital assets
“The information about the package is just as important as the package itself,” - Fred Smith, FedEx CEO
Some of these successful businesses have utilized new technologies along with their software and innovation capabilities to create completely new streams of businesses, which didn’t exist before. Consider the following examples:
- Fedex introduced a revolutionary SenseAware technology which combines an in-package sensing device with a comprehensive web-based information platform. Multiple sensors record a shipment's vital signs — temperature, location, when it's opened and whether the contents have been exposed to light etc. Now, Fedex offers this service to healthcare and life sciences companies to track surgical kits, medical equipment and live organs.
- With its workflow solutions targeted towards BPO domain, Xerox has created a completely new service and revenue stream, which is growing faster than its traditional business.
- GE is outfitting its core industrial products – from jet engines and gas turbines to CT/PET scanners with sensors that monitor various parts of the machinery. Using advanced analytics, GE is providing real-time information to its customers for improving efficiency, productivity, and also schedule effective preventive maintenance. With this new data GE has created a new economic and business model which can increase profitability for their customers, and also succeeded in capturing some of the new value that it generates.
Data owned and generated by corporations is quickly transforming into building decision support systems, so unique for themselves that they want to build and own their IP.
Why should I embrace change?
In this era of startups and new technologies bringing disruptive change, traditional businesses must adapt and transform their business models to survive. They must welcome and embrace change, innovation, and new /emerging technologies which can transform their business models and make them more relevant to their customers and markets. Failure to do so will make them obsolete, and will make them irrelevant in no time.
Best example is how Kodak failed to recognize the potential of digital technologies in transforming the camera industry. The failure to adapt and change with times can have catastrophic consequences to even a market leader.
Is there a digital revolution?
Yes, there is a digital revolution sweeping across multiple industries and domains. Social, Mobility, Analytics, and Cloud (SMAC), Big Data, IOT (Internet of Things), AI (Artificial Intelligence), and robotics, are fundamentally changing every aspect of the business landscape.
SMAC is changing every aspect of the customer interface, forcing companies to acquire the capabilities to even manage their solutions in the customer environment.
As sensors spread across every device in the personal and business space across every domain imaginable, IOT will not only revolutionize the manufacturing sector, but will also generate unquantifiable amounts of data driving the future of Big data analytics.
AI and robotics are revolutionizing and transforming diverse domains ranging from finance to healthcare to manufacturing.
How do I meet this challenge?
At the heart of all these businesses that have handled the challenges associated with the digital revolution and successfully transformed their business processes, is an ability to deal with technology and software in a sophisticated manner. These enterprises are agile, and innovative with mature capabilities to build, own, and operate cutting edge software products and solutions with transformational potential.
To successfully navigate the challenges of the digital revolution, every company has to transform itself into a software company.
In a series of future blogs, I will attempt to outline the nature of challenges that traditional businesses are confronted with in transforming themselves into agile, innovative companies that can build cutting edge software IP.
Steven ten Napel
To learn more about this topic, please participate in the MBA in één dag event on 18th of march and an extra day on 8th of April.