Digital. Cloud. AI-Driven: The Magic Triangle of a Modern Business Strategy
Being a business leader in the established economy is not necessarily a fun job these days. Keeping the competitors at a distance while finding ways to defend the current business model against the Internet giants like Amazon, Google, Facebook etc. is a tough job. However, running a business based on digital disciplines and being prepared with the right armor is simply about doing rather than thinking about the why. As a supporting element, a modern business strategy is built upon a magic triangle that consists of three vertices delivering the necessary essentials: Be digital. Use cloud. Leverage artificial intelligence (AI). In this article, we are going to unfold this triangle.
Digital: Just do it!
First, talking digitization means talking about a digital evolution and not a transformation. We are within a digitization process that has started over 40 years ago when Intel introduced its “Intel 4004” processor in series and SAP, Microsoft or Apple were founded. In the meantime, you can find PCs or Macs in each office and the use of mobile devices is continuously growing. However, even after these 40 years not every process has been digitized so far and doing things for the sake of doing things is simply wrong.
However, digitization is hassling leadership teams by letting them challenge the existing business model and reinvent oneself to confront the competition with a digitized organization. Apart from that the leadership’s task is to develop a unique digital agenda they can leverage to highly interconnect with customers, partners and suppliers and therefore redefine all necessary processes, understanding them as an essential part of a digital enterprise. In doing so, it is important to put the customer tenaciously into focus of interest. Based on smart products and AI technologies, organizations are able to get a better understanding of their target groups and to spot the current needs and thus act proactively. These include the development of “data driven apps” to raise as much qualitative data as possible and to use it at the scene of event (digital touchpoint) in order to increase the digital user experience for customers as well as partners and suppliers.
The fact of the matter is that the entire supply chain must become much more agile to be ahead of competition. This is about real-time! In the best case, organizations know already one hour (or even earlier) what a customer is going to need. In other words: predictive analytics are becoming continuously more important. It is necessary to decrease set-up times for machines, to interconnect the entire supply chain and to scale with the help of the cloud. Because one simple fact reflects the digitization: markets are not predictable and thus the set-up times have to become faster.
Amazon is the prime example in the digital age. Started as a simple web shop, right now Amazon would only need an own music label to control almost 100 percent of the world’s digital goods. Just take Amazon Video as an example.
- Amazon produces own movies and series (that already won Oscars)
- Amazon hosts their own infrastructure to run and deliver the videos (Amazon Web Services)
- Amazon has the own platform to stream the videos (Amazon Video)
- Amazon controls the distribution channels via apps (multi OS) and own devices (Kindle)
The prime example for the digital evolution is Vorwerk’s Thermomix. Originally introduced in 1971 the kitchen appliance was continuously advanced over the last over 40 years until 2014 when the latest version TM5 hit the market. One of the important things of this model is that it incorporates digital technologies, as it allows for “guided cooking” using proprietary memory chips to provide settings and cooking instructions, and has replaced all the buttons and knobs in previous models with a touch screen. Furthermore, a mobile application allows to plan for the week (month) and communicates with the Thermomix. A new Wi-Fi module replaces the memory chips and lets the Thermomix connect to the cooking experience website Cookidoo where the Thermomix gets access to the recipes. Bottom line, Vorwerk was able to advance and even digitize a product that is over 40 years old and thus understood to align its product as part of the digital evolution.
Another good example of the digital evolution is Tesla by producing the digitized car. In my opinion the cool thing about a Tesla is not the electrical part but it being fully software-defined – so, the software-defined car. That makes it much easier for Tesla to roll out new functionalities and the same software for any physical platform that is (will be) designed.
However, in the end most importantly business leaders must understand that their business has to be digital today or how Forrester Analyst Glenn O’ Donell tweeted:
There actually is no such thing as #DigitalBusiness. It’s just Business. If it isn’t “Digital,” you are likely out of business!
— Glenn O’Donnell (@glennodonnell) 22. Juni 2016
Cloud: The Essential Foundation
The cloud is one of the most important drivers of the digital evolution. Only with the use of dynamic and global scalable infrastructure, IT organizations can face the constantly changing market conditions and thus support their business strategy with a better agility. Cloud environments provide the best preconditions to facilitate the digital strategies of organizations of any size. Start-ups benefit by starting from scratch and do not have to consider a legacy IT. They can grow slowly without heavy static investments in IT resources. As part of their digital evolution established companies in particular need speed to keep up with the ever-changing market conditions. An idea is just the beginning. Most commonly the fast go-to-market fails due to technical execution because of slow deployments of IT resources or the lack of modern tools and services that support the development process.
Cloud infrastructure and platforms empower IT organizations to deliver agility and thus support the business to enhance innovation capabilities. This includes:
- Access to state-of-the-art technologies and higher-level services to develop new digital products and services
- Affordable test and development of PoCs
- Improvement of customer experience by developing new customer facing solutions to enhance the customer engagement
- Closer integration of the entire process and supply chains within the organization as well as with partners and suppliers
- Acceleration of release cycles (continuous development and deployment)
Another important fact: Organizations cannot just focus on their home market anymore. Driven by globalization that hits its climax with the digitization of our society, scalability also needs to be considered from a global angle. The cloud enables elastic infrastructure operations and supports global expansion in an easy way by:
- Flexible access to IT resources without limits
- On demand usage of the infrastructure
- Overcome technical challenges like avoiding high latency
- Fulfill legal requirements in the corresponding target market
- Worldwide customer reachability
As part of digital strategies, the cloud is becoming more and more important. It serves as the ideal foundation for a straightforward access to IT resources and empowers every organization to act in an agile way. As a technological foundation, it serves as a means to an end and enables the access to ongoing innovation such as AI-related services.
AI-Driven: The Future of any Digital Business
Imagine when anything that is a process can and will be run by an AI. Because, with AI anything that is a process in your company can be automated. This is an important fact on your journey to new business models since an AI-operated business empowers you to use your financial resources and talent much more effectively. AI is the next logical step after the cloud and benefits from its success. The cloud is the enabler from a technological perspective. AI is about the business value and thus leads to smarter and more intelligent applications. Based on a sophisticated data analysis, AI applications that run in the background help to refine the customer approach and tailor products even better to the current needs.
But AI also helps to run IT environments more efficiently. Such as an AI-defined Infrastructure that utilizes the company’s existing knowledge executing it automatically and independently and thus operates an infrastructure environment after a training sessions on its own. One use case is the autonomous operation of an AI-powered IT management system that helps to avoid service disruptions of public cloud providers. Bottom line, AI respective an AI-defined Infrastructure makes the operations of a cloud environment even more intelligent and hereby efficient.
As part of a digital strategy, AI empowers enterprises to improve its operations with:
- A better understanding of customers based on past interactions and behaviors
- A fancy experience of changing the customer interaction from keyboard entry to speech control
- Deeper engagement with smart virtual assistance enhancing the customer experience
- Customized products and service offerings aligned with customer needs
- Predictive by analyzing data, interactions and behavior from the past and in real-time
- Conversational with smart personal assistants and bots
- Augmentation of existing and new products, services, applications and processes
However, the potential of AI is not just simply to optimize existing processes. In the next 5 to 10 years AI will become the game changer! It will accelerate innovation and lead to new business models. Today, AI applications already have the necessary maturity to increase the efficiency of single processes. However, one should not only see AI from an operational (increase efficiency) perspective but also from a strategic angle in order to leverage the technological capabilities for new applications and use cases. And thus, create real values for customers, partners as well as for the own employees.
Digital technologies such as artificial intelligence, cloud computing or internet of things (IoT) are the foundation for innovation and new business models that will change common rules and thus lead to ongoing disruptions within and across industries. In doing so, enhancing the customer experience by addressing their needs is crucial and thus constantly raises the customer expectations. Amazon, Google, Netflix, Uber or Airbnb are just some examples.
And the next disruptors are right on your doorstep. The autonomous car will become a reality – the technological perspective is not the issue but we have to see how everything will be handled from an ethical side. This progress will have a direct impact on the retail, hotel and logistics industry. Just think about a network of self-driving cars that autonomously deliver goods to the customer. And then think about one of these self-driving cars being your private car that you can lend to this delivery network when you are at the office – and you getting a share of the revenue. Or think about an autonomous car/ bus that functions as a hotel room as well – like an “Airbnb Mobile”.
Bottom line, it doesn’t matter in which industry you are working right now. You should be at eye level with the common technologies and trends, even if you do not feel any impact at the moment. This includes to understand and check what a certain technology can do for your current business model or if it could become a threat that influences your company in a negative way.