The 4th Industrial Revolution is creating Digital Predators & Digital Preys; where is your business headed?

←Part-2.

A Digital Eco-system

Deciding to expand my investigation and further explore the problem faced by many businesses today, I start to indulge myself more in in-depth discussions with my industry colleagues to better understand where Australian companies are in reference to the digital revolution taking place.

Digging a bit beyond what I found in the past couple of weeks, that several companies are trying to madly upgrade their technology stack to brace themselves from the next disruptive waves of the industrial revolution — 4th industrial revolution (4IR) to be precise → a real digital disruption.

4IR is a super-Nutshell

The 4th industrial revolution is a very different one from the previous 3, as it is more than just technology.

It is a generational shift, represents a fundamental change in the way we live, works and relate to one another. It is an environment in which disruptive digital technologies and trends such as the Internet of Things (#IoT), Robotics, Virtual Reality (#VR) and Artificial Intelligence (#AI) are changing the way we live, work, commute, connect and communicate.

It encompasses all the opportunities that the business needs for automation and computerisation, and can now deploy to improve their production cycles and “connect” all the different works aspects into a unified digital eco-system. It is an environment, which runs of data as a fuel as well as it has an exhaust that emits smart data too. The amount of data created daily is genuinely astonishing.

And this is where the Cloud-Technology (primer-technology) comes into play, providing ample capacity to deal with this ample data, serving up massive On Demand computing power to store, index, and process data.

Transitioning to the Cloud also provides business with:

1. Flexibility & Scalability
2. Easy to Innovate — Cost & Speed (Any business can be as agile as a start-up)
3. Automation — e.g. Automatic SW updates
4. Reduce Cost and Lower ToC — e.g. Free up CAPEX
5. Shared Responsibility — while you pay less (isn’t that fantastic business proposition, you get more for less)
6. Increased collaboration
7. Secure & Robust Disaster Recovery — No need for a backup plan
8. Improved Document control
9. Improved Security — (only if you know what you are doing — as cloud Security a bit different)
10. Competitiveness
11. Improved Easy Procurement — Flexible pay options
12. Increases mobility

Digital Disruption and the Changing Market Dynamic

The resulting market shifts and digital disruptions mean that we live in a time of great promise and great peril. With 4IR is motion; the world now has the potential to:

Ø connect billions of more people to digital networks,

Ø improve workforce utilisation,

Ø dramatically enhance the efficiency of organisations,

Ø improve customer experience,

Ø significantly improve profitability, and

Ø even manage assets in ways that can help regenerate the natural environment, potentially undoing the damage of previous industrial revolutions.

But no doubt there are consequences we cannot foresee. Living in the age of the 4IR is an exciting time for some (The Elite & High Performers) and not so much for others (Medial & the Low Performers).

All these new digital forces within the 4IR eco-system are creating a new competitive landscape and a new operating environment for the business, resulting in a rapid fall in average company lifespan.

Some study results are showing that in the age of the 4IR, the firm has less than 50% chances of surviving, creating a more significant divide.

There is a good and positive side to this digital force too. The comparison in Figure 2 shows us that:

• in the Cloud led digital age, the proportion of our elite performers has almost tripled from 2018 to 2019, showing that excellence is possible — it just requires the right execution.

Business leaders know their industries are ripe for 4IR led digital-transformation and are eager to bring the benefits of next-gen technology to their business. In fact, in a new study by Harvard Business Review ‘Competing in 2020: Winners and Losers in the Digital Economy 2, 80% of the 783 respondents believe digital trends will disrupt their industry. Most of those (84%) said their industry has either passed the inflexion point of disruption or will pass it by 2020.

For the past many years, businesses were spending 3 to 4 times more on IT than on innovation. Cloud-Technology providing the factory floor on which business ideas & innovation quickly come to life, transiting to Cloud computing help enterprises to reverse that trend, while concurrently reducing costs, increasing application deployment times and making IT more agile.

Some organisations have taken the next step as part of their Cloud Transformative Journey and have moved some of their existing applications from on-premises hosting to the Cloud as a ‘lift-and-shift’ strategy to improve their Cloud footprint and their understanding of the digital revolution in play.

On the other hand, Figure 2 also reflecting that many businesses are still struggling to move the majority of their existing monolithic business systems to the Cloud, and if already moved are struggling to extract the full value form the move.

Cloud Adoption and its Success Rate — Let’s verify by examining some industry figures

To get some further sense of the cloud adoption by businesses, I decided to look into two key sub-topics;

1. What are some of the statistics & projections for Cloud adaptation around the world, and

2. What are some of the statistics around the business transformation success-rate from the Cloud adoption by the organisations?

Worldwide Public Cloud Service Revenue Forecast (Billions of U.S. Dollars) — Source: Gartner (April 2019)

Cloud Transformation Success rate

According to Forbes — 84% Of Companies failed At Digital / Cloud Transformation. McKinsey’s research data shows that less than 30% of transformation projects succeed. As Cloud led digital transformations are even more complicated; only 16% of respondents say their organisations’ Cloud transformations have successfully improved performance and also equipped them to sustain changes in the long term. An additional 7% reflected that performance improved but that those improvements were short-lived.

Even technology-savvy industries, such as high tech, media, and telecom, are struggling. Among these industries, the success rate does not exceed 26%. But in more traditional sectors, such as oil and gas, automotive, infrastructure, and pharmaceuticals, Cloud transformations are even more challenging: success rates fall between 4 and 11%.

Why businesses struggle to extract the full value from the Cloud?

With so many clear benefits, why are so many businesses struggling to extract full value from moving to the Cloud? Knowing what we know about cloud technology, it should be the most straightforward business case to write, approve and execute.

But this is not the reality on the ground to my discovery. So, I decided to keep progressing with my research over the coming days to deepen my understanding further hoping to figure out what the heck is going on.

Being a DJ (Digital-Jedi), what my investigative composing reviled was quite interesting. The building, writing, convincing and seeking the management approval for the Cloud Transformation was relatively straightforward for many businesses in recent times. But the execution of it, and then to extract the full value, is where all started to get painful and go horribly wrong for many businesses and in some cases, the companies went backwards — for example:

a.) there cost gone up significantly,

b.) or now they have two systems or process to manage with both performing sub-optimal etc., making them ask the question about Cloud.

As a self-appointed Jedi, I said to myself, let’s keep going and peel some more layers, and as such more information came to light revelling some key underlying symptoms to this problem on hand.

1.) Why building and getting a business case was an easy task — — tick!

1.1) Attaining the answer for this was comparatively simple. Everywhere business leaders look, there is a conference, an article, blog post or tweet about one of the megatrends in technology — cloud, big data and digital transformation.

1.2) Business leaders are under immense pressure to transform their businesses to survive the carnage inflicted by the cloud-native companies (Amazon, Airbnb, Netflix, and others) who are eating their market share every second, provides an instant ‘ Cloud is the secret sauce’ justification for approval.

1.3) Is the cloud transformation business case complete? Not always or no in most cases. — I will be sharing another article in reference to getting the cloud business case right!

2.) And Why its execution was hard, let me share my findings.

Many Cloud execution mainly failed because the current business eco-system was infested with some significant issues that needed to be well understood, before moving to Cloud execution. Some of these challenges, such as:

1.) The existing business applications were created using the traditional IT paradigm. As a result, these applications are typically monolithic and configured for fixed/static capacity in a few data centres. Simply moving them to the Cloud will not magically endow them with all the dynamic features of the Cloud.

2.) Without a doubt in any organisation, there are myriad numbers of business and technology processes that are a part of the day-to-day functioning. And as the range of these processes could be extremely varied, for example from a complex payroll function to audit & compliance, to financial reporting, to addressing a serve-1 from a SAN upgrade failure, adding a dimension of complexity to the app modernisation & transformation initiative.

3.) Complexity is not just dealing with the above verity, but with the veracity as well. Most of these processes have been introduced at various points since the inception of the business and shaped by multiple factors working along with the actual problem designed to solve. Many a time, it happens that a process that probably seemed very efficient and effective at the time it was introduced seems highly obsolete. And in many organisations, due to day-to-day business pressures, most of the updates are not adequately documented, resulting in an added challenge.

4.) Then, the Dev, Test, Sec, and Ops silos still well alive in most organisations, playing the same drama again and again with the same plot, which many of us may be very familiar and easy to recall–

4.1) An Urgent data-driven project, where the shipment date cannot be delayed because of external commitments made to market or customers. Then you add a bunch of developers who use up all the time in the schedule, leaving no time for testing or operations deployment.

4.2) Last dining minutes Security team finds out that there is a business App about to go live soon, they forcefully introduce some security bolt-ons.

4.3) And because no one is willing to slip the deployment data, every one after deployment takes an outrageous and unacceptable shortcut to hit the date.

4.4) As you can imagine now, the results are never pretty, but such is the norms in most organisations, where left hand rarely knows what the right hand is doing — creating a culture where no one is happy but lives with it.

5.) To add to all this, let us also understand the workforce maturity challenge in reference to digital skills, such as agile and DevOps.

5.1) The typical technology workforce of an enterprise is well versed in developing business applications in the traditional IT framework (ITIL-3). Workforce and teams within becoming used to a particular way of doing things and settle into their rheum. Most of them need to be reskilled or up-skilled for the cloud environment, and

5.2) Most of the enterprise have to fix delivery resources — 80% of the resources & cost are used just to keep the lights on, however, the new digital forces are creating an increasing demand on the same constrained resources causing the IT to fall behind further. And hence under pressure, IT takes short cuts, resulting in increased technical debt, while complexity is growing further compounding the problem and creating a more significant IT delivery gap.

As the above gaps are not clearly identified and their impact articulated, the approved business case with associated cost in most cases is incomplete!

So, lets Summaries our Findings

A. Lots and Lots of Organisations want Cloud, and are moving to Cloud and are successfully failing in doing so.

B. What I also found, that there was an almost 3x increase that are classified as ‘Elite Performers’ and these Elite Performers are predominately Cloud-Native. The ‘State of DevOps Report-2019’ study also shows that remanning majority moving south!

C. Businesses globally are facing an emerging threat to their business models driven predominately by the increasingly lower cost of cloud-based platforms (IaaS, PaaS and SaaS), fuelled by the commoditisation of data science capability to augmenting intelligence with analytics for faster, smarter action, regulatory shifts to encourage competition and changing customer preferences aligned to end-to-end app-driven digital experiences.

D. Transitioning to Cloud is a multifaceted problem, where business, people, process, technology, and culture all affected and impacted all at once. It is uncharted territory to somewhat scary with a lot of complexity and unknowns. And, businesses must tackle all the transformation/transition issue and not just technology, if they are to unlock powerful insights for informed and smart decision-making.

While Cloud enables an organisation to decrease the use of hard assets, it requires more sophistication in certain areas, including integration and security. And as Cloud is accessible to everyone and so it creates a level playing field. That being the case, how do you then create a competitive advantage through improved execution, and its absorption within your business value chain and extract the true value from such a transformation? Such a struggle is predominately due to lack of know-how in how to deal with the next stage of Cloud-Transformation complexities that involves people, process, culture and technology.

The above challenge requires a new way of working to close the IT delivery gap and reduce the ever-mounting technical debt. To achieve a successful transition to the cloud, strategy alone cannot succeed without deliberation and planning, guided by experience. The new-way-of-working need to incorporate:

1. a new technology delivery model (CI/CD),

2. a new operating rhythm (DevSecOps), and

3. a new service management model (based on end-to-end value chain e.g. ITIL-4)

Businesses that form their strategy now and shift resources to new digital initiatives and redesign their organisation and culture will have a distinct advantage. As companies seize these opportunities to redefine their business in reference to the new-way-of-working, they can accelerate time to value and minimise risk by integrating world-class planning and processes, rapid deployment methodologies and proven migration experience to every engagement. In the age of 4IR, a micro-digital revolution will occur typically every 12 months, so companies need to be in a continual state of transformation to sustain any competitive advantage.

As my research so far was able to unearth some common challenges faced by many organisations in their pursuit to digital/cloud transition/transformation, I decided to keep going with my journey and use my next set of articles in sharing how to extract success.

→ Part-4… (coming soon)