February 26, 2016

Digitalization means change in business models

Ari Hirvonen

Head of Enterprise Architecture Consulting, Tieto

A technical digitalization platform is prerequisite for all digitalization but foremost we are talking about radical business model change.

Some players have moved from traditional pipeline business model to digital platform business. Source-assemble-deliver value chain is replaced with pull-facilitate-match. Instead of building all assets in slow processes, platform business build interest around one meaningful interaction in an agile way. They facilitate interaction with different players in the ecosystem and match those who deliver and those who are in need.

Data is the new oil in this business. It is a valuable asset because data with smart algorithms replaces a lot of traditional processes and decision making. Many slow to build and expensive parts of the business are no more relevant. For example ecosystem is the new warehouse and supply chain.

Next gold rush

Platform business models cause true threat to many companies. For example San Francisco’s biggest yellow taxi company went to bankruptcy due to Uber. Risk is true and many are afraid of it and that is now visible in all businesses. Business and IT alignment, IT time to market and business agility were three top trends in the previous global IT trend survey with over 3300 IT decision maker respondents globally indicating that digitalization is now in focus and there is no time to wait. IT cost saving was in the fourth place indicating shift from cost cutting agenda to new business enablement by digitalization.

In this year’s survey the same trends accelerate. The importance of business and IT alignment nearly doubled to 42% saying that it is the most important concern. IT enabled business change is here. Business agility was the second most important, business process management third and innovation forth. All very relevant in business digitalization and needed if one wants to change the game.

IT related cost cutting can be now found for the first time outside the top ten. Interestingly and despite of the clear focus shift from cost cutting to digitalization, cost control remains the 3rd most important KPI for IT departments. It seems that the management and leadership change is slower than actual change in operations and critical priorities.

Platform business models are not the whole truth

Despite of seeking disruptive blue oceans traditional business still prospers. Evolutionary digitalization such as business process automatization or customer experience management in these businesses enables new competitiveness. Typical reality is to run and improve the current business while seeking blue oceans for example building new digitalized start-ups, which benefit already existing mother company assets.

This duality is the core of Tieto’s Digitalization Framework. The framework is not just about IT but we understand that digitalization requires changes in people, processes and technology. We can build new platform business with you while enabling also success in your traditional business. By using only old models and KPIs one will have challenges. Processes, assets and governance must fit for these two different kind of needs -  traditional and digital.

Explore more: Digitalizing your business.

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