Digital business is every business

November 27, 2016

PwC’s Technology Innovation Leader, Dr Crighton Nichols, describes the tools that allow forward-thinking organisations to learn faster than their competitors.

digital business

Change has always been essential to businesses wishing to maintain relevance and market share. However, the rate of change, driven by Moore’s law – that computing processing power doubles every two years – has been accelerating over the past few decades. So, it’s now difficult to stay abreast of the latest trends, and the threats and opportunities they present.

From new platforms that leverage the sharing economy, such as Airbnb and Uber, to recent advances in social, cognitive and spatial computing, business models are being disrupted in ways many people find difficult to comprehend, let alone respond to in a timely manner.

For example, in a study of corporate longevity by the strategy-consulting firm Innosight, the average tenure of companies in the S&P 500 – the US stock market index of 500 large companies’ market capitalisation – had dropped from 33 years in 1965 to 20 years in 1990, to a forecast of 14 years within the next decade.

In order to stay relevant, organisations need to embrace the reality that all businesses are digital businesses.

It is no longer sufficient to just acknowledge this reality; it must be deeply understood and adopted at all levels of the firm. A good place to start is the famous article by Marc Andreessen: “Why Software is Eating the World”.

Digital disruption is coded in software. Gains in efficiency and accuracy mean that business processes are increasingly being implemented with software – even in long-established firms in traditional industries.

Recent advances in robotic process automation and machine learning are ensuring that this trend will continue, consuming ever-larger sections of the business and displacing workers in lower-end cognitive roles, such as tasks performed in service delivery centres. Yet, developing software in a traditional enterprise is difficult to do well.

Fortunately, software development has itself undergone a number of transformations. The first is the transition from waterfall (a non-iterative approach to software development) to agile approaches to developing software.

This is grounded in the realisation that higher quality software products – those with fewer bugs that meet the business objectives – result when business and IT professionals work closely together to iteratively co-create the solutions.

As cloud computing becomes more ubiquitous, the provision of the hardware upon which the software executes has itself come to be defined in software and hosted by a (trusted) third party.

Cloud hosting has enabled a new range of service offerings, from Infrastructure as a Service (IaaS) to Platforms as a Service (PaaS) to Software as a Service (SaaS), depending how much of the software “stack” is hosted by a third party.

The primary benefits of cloud computing are speed and flexibility. It is possible to “spin-up” (i.e. create) instances of servers to perform tasks in minutes, instead of weeks, and discard them when they are no longer required.

This is particularly useful for workloads that are spiky in nature, such as data analytics, which consume large amounts of computational resources for relatively short periods.

Finally, there’s the rise of DevOps. This describes the merging of software development and operations roles into a single group or team to ensure that changes in software are delivered to the end-users as quickly as possible.

This in turn introduces the benefits of automation to the delivery of software solutions, resulting in the ability to continuously integrate and deliver new versions of software to customers.

Each of these revolutions in software development: agile, cloud and DevOps, allow organisations who implement them to run digital business experiments and innovate more quickly and rigorously than ever before.

If the lessons learned from running these experiments are properly captured and shared, then the result may what MIT systems scientists Peter Senge first forsaw in 1990 – a true “learning organisation”1.

After all, to quote the famous business strategist Arie de Geus: “The ability to learn faster than your competitors may be the only sustainable competitive advantage”.

Dr Crighton Nichols

Technology Innovation Leader, PwC Australia

Read next: Digital transformation executive, Vishy Narayanan, reveals the attributes of a digital disruptor and the keys to transforming your business.

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1 Senge, P. M. (1990) The Fifth Discipline. The art and practice of the learning organization, London: Random House.

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