By Cassio Dreyfuss, Vice President of Research at Gartner
Many of the products and services we use in our daily lives have not been available for a few years. And the suppliers of these new products and services are fighting hard for your customer loyalty with creative incentive programs. In the new digital economy, the market changes very quickly, leading to continuous actions to leverage a recently perceived opportunity, or to react to new threats detected.
The useful life of most new business models is much shorter than that of traditional ones, changing the economic viability equation. As an example, think of telephone operators. For decades and decades they have evolved slowly, offering essentially the same services. And now they are in total war. A new feature offered by one will be immediately copied by the others, and yesterday's competitive differentiation becomes part of tomorrow's basic features.
Agility and flexibility are now essential components of strategic action. Identifying or creating a business opportunity requires a focus on the constantly changing environment. The internal processes for creating a strategy and drawing up a strategic plan must be revised to suit shorter time cycles. For this reason, we are witnessing so many transformations in the IT area, with new planning processes and new development environments, capable of operating with levels of agility and flexibility not available in a traditional environment.
Competition in the new era is conditioned by the right type of leadership and the ability to develop the organization, processes and skills to support the new levels of agility and flexibility required. Traditional “heavy” organizations may find it difficult to adapt to these requirements. It is the people and their leadership characteristics and capacity for innovation that create the “light” organization that can operate at the right level of agility and flexibility.
The new competitiveness requirements emphasize the ability to react quickly in areas where business development cannot be planned far in advance. This leads companies to seek, internally or externally, whoever has the necessary knowledge or skill ready to be provided. In such circumstances, each company - and each internal IT organization - will be directed to focus on some essential areas of performance, in which they achieve high levels of excellence, using opportunistically their internal and external partners to form the right combination of resources. for each specific initiative.
The development of the digital business model is designed to leverage partners in collaborative Business Process Networks (RPNs), with the dynamic allocation of resources from internal and external partners. The Vitality solution (“the healthy life reward program”) from the insurance company Prudential shows a list of more than 20 partners that participate and benefit from that business model.
RPNs open new opportunities for each company to focus on what they do best, but they require the ability to mobilize and demobilize internal and external resources very quickly, to participate in the creation of a new business model and add competitiveness to the network. The use of internal and external suppliers, in addition to your own IT, is an important tactic to reduce “time to Market” and share market risks.
Digital business models still enjoy ample freedom of action, with no restrictions on specific laws and regulations - and may remain so, as they operate intangible components, difficult to be controlled by governments and regulatory bodies. For example, the collection of taxes on commercial transactions via the Internet is still a pending issue. In the area of new financial models, operators such as PayPal (payment transaction intermediary) and Kickstarter (global crowdfunding platform) are performing activities that, until recently, were reserved for banks under a strict set of regulations by the Central Bank. Pioneers largely establish or influence rules. In the absence of specific and effective regulation, any company now has the opportunity to create something unique and then influence the laws that will eventually regulate that specific competitive space. Go first and then work on influencing regulation.
Digital businesses are a recent revolution, yet with no clear winners, no consolidated leadership positions, and no strong defensive positions. This means that there are many open spaces to be identified and occupied; and there are many new spaces to be imagined and created. But it also means that any model created can be easily copied, as is typical of the digital business.
Think, for example, of a very simple business model like calling a taxi from a cell phone. In most metropolitan areas today, there are at least half a dozen of these business models, all essentially the same. In other words, no strong leader is inaccessible, no barrier of protection is insurmountable. This turns classic roles into innovation. The “first to play” may not remain in the glory of having been the first to occupy a new space on the market. It is necessary to keep in continuous movement, adding differentiations, which will act as a temporary barrier to followers. And the “opportunistic follower” must be prepared to make some money very quickly - before the not-so-fast followers run out of opportunity. Do we still need more taxi deals on our cell phones?
Digital business models must make sense, not only to create entrepreneurs, but at the corporate level as well, as they germinate from a few ideas, but need constant care to grow. The "turning point" is often when, after being successful as prototypes, they need to be scaled up to reach new customers. These businesses now need to be integrated and coordinated with the set of the company's basic systems, with the same level of efficiency, security requirements and under the same standards and architecture.
Most companies will have two directions for business development at the same time. One is the agile, flexible approach, without hesitation, with a view to exploring transformative opportunities in the digital business space. The other is the traditional business, which will develop predictably, evolutionarily.
The existence of these two modes in an IT organization - bimodal IT - has already reached almost 30% of companies in Brazil. How to implement these two approaches? In Brazil, IT areas generally have scarce resources. Many CIOs would be tempted to share the same resources between the two modes of development - but that doesn't work. It is necessary to implement two clearly distinct ways of creating solutions. The first is the traditional way we have known for decades. The second should be implemented with separate resources, but it should not be a team of idle people playing solitaire on the computer, waiting for an opportunity to present itself. It must be a minimum group of people with talent for creating collaborative teams. At the appropriate time, they will look for resources in IT, in other areas within the company or outside, depending on the specific requirements of that opportunity.
Many companies are still hesitant to move into the digital business era. This is usually due to a combination of two reasons, one reinforcing the other. This change requires a radical leap, and they are not sure how to act. However, this can be carried out in the proportion and level of risk that the company considers appropriate, through business innovation cells independent (but not isolated) from the usual businesses.
Business leaders do not always have a clear perception of the possibilities of the digital business, but people and companies will be part of this new world, whether they want to or not. Dynamic markets, such as retail, finance and insurance, are already advancing in new ways. And we can expect an explosion in the education and health care markets soon. In a globalized world, Brazilian companies must react to the same factors as companies in developed countries. This means that, regardless of how favorable or unfavorable our current conditions are, companies must start moving towards the new digital economy.
Undoubtedly, we are in the times of defining a new economic era, the moment when "almost anything goes". The new era of digital business opens up unprecedented opportunities, as well as introducing new risks. The basic condition is to think about opportunities with a new head. There is a lot of open space ahead, waiting for talent and a strategic eye to take possession of it. And the time is now.
The useful life of most new business models is much shorter than that of traditional ones, changing the economic viability equation. As an example, think of telephone operators. For decades and decades they have evolved slowly, offering essentially the same services. And now they are in total war. A new feature offered by one will be immediately copied by the others, and yesterday's competitive differentiation becomes part of tomorrow's basic features.
Agility and flexibility are now essential components of strategic action. Identifying or creating a business opportunity requires a focus on the constantly changing environment. The internal processes for creating a strategy and drawing up a strategic plan must be revised to suit shorter time cycles. For this reason, we are witnessing so many transformations in the IT area, with new planning processes and new development environments, capable of operating with levels of agility and flexibility not available in a traditional environment.
Competition in the new era is conditioned by the right type of leadership and the ability to develop the organization, processes and skills to support the new levels of agility and flexibility required. Traditional “heavy” organizations may find it difficult to adapt to these requirements. It is the people and their leadership characteristics and capacity for innovation that create the “light” organization that can operate at the right level of agility and flexibility.
The new competitiveness requirements emphasize the ability to react quickly in areas where business development cannot be planned far in advance. This leads companies to seek, internally or externally, whoever has the necessary knowledge or skill ready to be provided. In such circumstances, each company - and each internal IT organization - will be directed to focus on some essential areas of performance, in which they achieve high levels of excellence, using opportunistically their internal and external partners to form the right combination of resources. for each specific initiative.
The development of the digital business model is designed to leverage partners in collaborative Business Process Networks (RPNs), with the dynamic allocation of resources from internal and external partners. The Vitality solution (“the healthy life reward program”) from the insurance company Prudential shows a list of more than 20 partners that participate and benefit from that business model.
RPNs open new opportunities for each company to focus on what they do best, but they require the ability to mobilize and demobilize internal and external resources very quickly, to participate in the creation of a new business model and add competitiveness to the network. The use of internal and external suppliers, in addition to your own IT, is an important tactic to reduce “time to Market” and share market risks.
Digital business models still enjoy ample freedom of action, with no restrictions on specific laws and regulations - and may remain so, as they operate intangible components, difficult to be controlled by governments and regulatory bodies. For example, the collection of taxes on commercial transactions via the Internet is still a pending issue. In the area of new financial models, operators such as PayPal (payment transaction intermediary) and Kickstarter (global crowdfunding platform) are performing activities that, until recently, were reserved for banks under a strict set of regulations by the Central Bank. Pioneers largely establish or influence rules. In the absence of specific and effective regulation, any company now has the opportunity to create something unique and then influence the laws that will eventually regulate that specific competitive space. Go first and then work on influencing regulation.
Digital businesses are a recent revolution, yet with no clear winners, no consolidated leadership positions, and no strong defensive positions. This means that there are many open spaces to be identified and occupied; and there are many new spaces to be imagined and created. But it also means that any model created can be easily copied, as is typical of the digital business.
Think, for example, of a very simple business model like calling a taxi from a cell phone. In most metropolitan areas today, there are at least half a dozen of these business models, all essentially the same. In other words, no strong leader is inaccessible, no barrier of protection is insurmountable. This turns classic roles into innovation. The “first to play” may not remain in the glory of having been the first to occupy a new space on the market. It is necessary to keep in continuous movement, adding differentiations, which will act as a temporary barrier to followers. And the “opportunistic follower” must be prepared to make some money very quickly - before the not-so-fast followers run out of opportunity. Do we still need more taxi deals on our cell phones?
Digital business models must make sense, not only to create entrepreneurs, but at the corporate level as well, as they germinate from a few ideas, but need constant care to grow. The "turning point" is often when, after being successful as prototypes, they need to be scaled up to reach new customers. These businesses now need to be integrated and coordinated with the set of the company's basic systems, with the same level of efficiency, security requirements and under the same standards and architecture.
Most companies will have two directions for business development at the same time. One is the agile, flexible approach, without hesitation, with a view to exploring transformative opportunities in the digital business space. The other is the traditional business, which will develop predictably, evolutionarily.
The existence of these two modes in an IT organization - bimodal IT - has already reached almost 30% of companies in Brazil. How to implement these two approaches? In Brazil, IT areas generally have scarce resources. Many CIOs would be tempted to share the same resources between the two modes of development - but that doesn't work. It is necessary to implement two clearly distinct ways of creating solutions. The first is the traditional way we have known for decades. The second should be implemented with separate resources, but it should not be a team of idle people playing solitaire on the computer, waiting for an opportunity to present itself. It must be a minimum group of people with talent for creating collaborative teams. At the appropriate time, they will look for resources in IT, in other areas within the company or outside, depending on the specific requirements of that opportunity.
Many companies are still hesitant to move into the digital business era. This is usually due to a combination of two reasons, one reinforcing the other. This change requires a radical leap, and they are not sure how to act. However, this can be carried out in the proportion and level of risk that the company considers appropriate, through business innovation cells independent (but not isolated) from the usual businesses.
Business leaders do not always have a clear perception of the possibilities of the digital business, but people and companies will be part of this new world, whether they want to or not. Dynamic markets, such as retail, finance and insurance, are already advancing in new ways. And we can expect an explosion in the education and health care markets soon. In a globalized world, Brazilian companies must react to the same factors as companies in developed countries. This means that, regardless of how favorable or unfavorable our current conditions are, companies must start moving towards the new digital economy.
Undoubtedly, we are in the times of defining a new economic era, the moment when "almost anything goes". The new era of digital business opens up unprecedented opportunities, as well as introducing new risks. The basic condition is to think about opportunities with a new head. There is a lot of open space ahead, waiting for talent and a strategic eye to take possession of it. And the time is now.
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