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Digital Transformation in the

Intelligence Economy

An IDC WhitepaperM A R C H 2 0 1 9

CONTENTS

C H A P T E R 1

Digital Transformation (DX) Is the “New Normal” 3

1.1 Welcome to the Intelligence Economy 3

1.2 Thriving in the Digital World 4

C H A P T E R 2

A Framework for Digitalization: Where Are You 5 on the Path to Transformation?

2.1 Scaling to New Heights with DX 5

2.2 Leadership Drives Change 11

C H A P T E R 3

Overcoming Digital Deadbolts with DX Pathways 12

3.1 Tactical (Digital) Plans 12

3.2 Outdated KPIs 13

3.3 Siloed Organizational Structures 14

3.4 Silos of Innovation 15

3.5 Limited Expertise 16

C H A P T E R 4

The DX Playbook and the Path Forward 17

4.1 A Critical Self-Assessment: Points to Consider 19 When Creating Your DX Roadmap

Survey Methodology 21

An IDC Whitepaper

Digital Transformation in the

Intelligence Economy

2

EVERY organization worldwide, both public and private, is confronting the onslaught of opportunities and problems in the digital economy. The stakes are high but to thrive, it is more critical than ever to muster the resources and create an integrated, enterprise-wide digital strategy.

According to the IDC Intelligence Economy by Digitalization Survey, commissioned by Singtel, 45% of CEOs report being ‘digitally determined’ — that is, having an enterprise-wide strategy for continuous innovation, market transformation, and creating new business models and products and services. The remaining 55%, however, are struggling with their digital initiatives which are either disconnected from the enterprise strategy, somewhat connected, or focused only on the short term. It’s no surprise these enterprises fail to reap revenue expectations from digital initiatives.

So why is there a gap between expectation/implementation and results?

Singtel believes clarity around digital transformation strategies and a critical shift in mindsets is needed.

Transforming the business mindDigitalization, or the processes, platform and resources to transform enterprises digitally, demands a radical change in conventional business thinking; from cost reduction to cost optimization, and from revenue generation to revenue acceleration. This shift offers an amazing opportunity for companies to increase revenue, grab market share, and exponentially grow company value.

Cost optimization compels the enterprise to re-examine its business model with a focus on repurposing the organization’s resources. It encourages the reskilling of employees to embrace digital disruption, drives retooling of existing technologies and processes to

embed changes, releases staff and other assets for higher value services, and shifts the organization’s operational capabilities up the value chain. In short, cost optimization encourages a more agile enterprise culture that will open up new growth areas for the business.

Revenue acceleration leverages digital initiatives to create new, sustainable revenue streams by expanding enterprise market share, revenue and profits. This revenue is highly scalable (easily applied across geographies) and requires less investment in resources (physical assets and capital funds).

It promotes sustainable, expected revenue streams (for example, digital subscription models) with much higher velocity (turnover) to help enterprises attain many of the financial advantages that, until recently, have been enjoyed exclusively by startups and digital giants. Revenue acceleration requires re-examining and even deconstructing existing business models to build new ones that will help the enterprise pull ahead of the competition.

Enabling digitalization with the right partnerThe time to engage this mindset shift is now. As an enterprise that has undergone and is still undergoing its own digitalization journey, Singtel offers organizations the deep capabilities required to drive digital transformation. From a well-resourced ecosystem of technology suppliers to offer a variety of platforms, to sharing its own expertise in building up a technology stack for successful transformation, Singtel is well-positioned to enable enterprises achieve their digital ambitions.

The Road to Digitalization and Business Success

M E S S A G E F R O M R E S E A R C H S P O N S O R

3

Digital Transformation is the ‘New Normal’

AROUND the world and across industries, a fundamental shift is occurring in business markets. After the IT revolution, and particularly starting in the 1970s, digital technology was hailed as a driver of productivity efficiencies, but largely at the margin. Over time, however, IT has become a primary element embedded across the enterprise, and in today’s economy, digital technology is acknowledged as a core pillar of business innovation and economic disruption.

Digital transformation (DX), or simply put, converting business data and information into a digital format for economic use, has created massive change in how organizations collect, process, and leverage information for business models. It has also sparked a shift in how enterprises internally organize their human resource talent, integrate their lines of business across the organization, fuel a drive to become more customer-centric through shifting business models to better capture and react to customer needs, and handle the massive internal enterprise cultural change triggered by this disruption.

Of course, this shift offers an amazing opportunity for companies to increase revenue, grab market share, and exponentially grow company value. But it also requires an acknowledgement of — and a solid plan to mitigate and control — the risk inherent in this enormous economic model transformation. Riding, and thriving during, the DX wave demands more than merely increasing investments in current digital technology. Organizations must self-reflect, analyzing both their external and internal business models, operations, and processes, and be prepared for fundamental change, not only in terms of organizational structure, but also in how to measure success.

Increasingly, moving toward DX is no longer an option, but is an executive mandate and a top priority for

organizations regardless of size and across industries. In an increasingly competitive world where creating new revenue streams and capturing market share is ever more critical, enterprises must respond to the accelerated rhythm of change largely created by the now almost continuous disruption brought about by digitalization, and be positioned to take advantage of current trends that foretell even further disruption. Digitalization efforts have shifted from a “project” or “initiative” status to strategic priorities. In fact, IDC predicts that by 2021, at least 50% of global GDP will be digitalized, with growth in every industry driven by digitally enhanced offerings, operations, and relationships. This is evidence of the already established importance, entrenchment, and growth of the digital economy: creating new economic models and value based on digital technologies. Undoubtedly, this means that digitalization will have an increasingly widespread effect on the whole economy, continuing to present significant opportunities for those who can successfully tackle these business imperatives. But of course, while the digital economy becomes more pervasive, new cutting-edge technology will continue to be developed and deployed, creating a virtuous circle of even further disruption.

Welcome to the Intelligence EconomyToday’s digital economy, pushed by DX,

leverages the massive number of connections prevalent in today’s world. Connections between people through social media. Connections between consumers and businesses through online retail and enhanced customer relationships. Connections between businesses through greater coordination and data sharing up and down the value and supply chain. And connections between devices through the Internet of Things (IoT). At its core, the digital economy uses data to create ever tighter relationships between people,

1.1

C H A P T E R

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organizations, and even devices — giving rise to new economic models, new business approaches, and a shift in business processes.

But the growth of artificial intelligence (AI) heralds an extremely important and further disruptive shift. The global adoption of AI, both in the enterprise and among consumers, is real and a potential game changing element in economic growth. The use of AI technologies allows machines to identify, process, understand, react, and ultimately learn from data inputs. Embedded in organizations, AI will not only accelerate the process towards greater digitalization, it will take the human component out of its future development.

At its core, AI, including machine learning, can offer an unparalleled opportunity to create innovative business models based on this up-to-now untapped information. Relying on the bedrock of DX, and built upon the digital economy, AI will push business models even further, creating an intelligence economy that will unleash new economic value and exponentially increase productivity.

This intelligence economy will use data, aggregated from artificial and human intelligence sources, as an input factor to generate economic value through new products and services, enhanced productivity of existing products and services, and faster innovation. It focuses on harnessing digital technologies and ecosystems to capture and analyze relevant data in context to create actionable information that leads to informed decisions, information-based products/services, and ultimately, data as capital, driving ecosystem and socio-economic growth.

In this economy, digital technologies are continuously contextualized to create new business models, economic opportunities, higher standards of living, greater well-being for a population, and improved environmental conditions. For organizations participating in the intelligence economy, data is at the heart of everything they do. These organizations focus on building an intelligence core, the habitat for the algorithms, code, and data models, allowing them to glean insights and actions from the data through the use of big data and AI.

Over the past decade, the world has seen the rise of digital native enterprises (DNEs). Companies, such as Airbnb and Spotify, that are digital at their core, agile and nimble in rolling out new services, incredibly responsive to customer and market trends, and laser focused on providing engaging experiences. As a DNE, their entire business model is built around 3rd Platform technologies, including mobility, big data, social media, and cloud.

Thriving in the Digital WorldThriving in the approaching intelligence economy requires organizations to master

all the dimensions of DX, and effectively take the pathways toward becoming a DNE. Only then will organizations be able to ride the digital wave and not get swept away. At that point, digital disruption will become business as usual.

Of course, market competitiveness is a moving target, and new benchmarks will continually be established. IDC expects the intelligence economy to be an evolving marketplace that will bring about new opportunities and requirements. To succeed in this new chapter, organizations must transition from not only harnessing data and analytics (including AI), toward creating new competitive advantages and redefining market benchmarks. Today, 7% of organizations have a priority focus on disrupting markets and industries, while maintaining their already achieved transformation stage and looking toward continuous regeneration. An additional 34% of enterprises prioritize on becoming an adaptive business that continuously leverages real-time insights to create digital products and services. As we move ever forward toward the intelligence economy, organizations must use AI to further advance DX to fully capture the inherent opportunity in the coming intelligence economy.

As part of this inevitable journey, we encourage organizations to start proactively assessing their readiness for the intelligence economy. A key pre-requisite for success in the intelligence economy is your current roadmap towards DX. Only through DX can your enterprise build the infrastructure and processes to compete with the DNEs in the intelligence economy. As we look toward this new model, let’s examine more closely the traits of a DNE, across industries. At the highest level, a DNE has scalable operations (both in its technology platform and business processes), customer-centric (containing an empowered workforce that embraces risk taking), data-centric, and “outside-in” (leveraging its customers, partners, employees, and community as it continues to evolve).

Ultimately, in order to become, and also compete against, DNEs, organizations must rethink core elements of their business, from customer engagement through to data management and analytics; from operations to embedded business processes and talent management. This rethink cuts across people, processes, and technologies. The next chapters discuss what CxOs and IT leaders will need to do and how they can collaborate to accelerate this transformation.

1.2

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A Framework for Digitalization:Where Are You on the

Path to Transformation?FROM the start, an enterprise must have a proper understanding of the goals, and challenges, connected to DX as a key step toward becoming a DNE. To help with this, IDC has created an intellectual structure to utilize along the journey to digitalization.

IDC developed this framework to assess and provide a view of the breadth of business and IT management issues that encompass the challenges facing leaders. While digitalization is a moving target, organizations have set becoming DNEs as their objective. This requires

progressing through different maturity levels and ultimately reaching the Optimized stage (stage 5).

IDC’s Digital Transformation (DX) MaturityScape is the framework that studies the DNE journey, and it is made up of five key dimensions: Leadership, Omni-experience, Information, Operating model, and Worksource. Each dimension targets a key aspect of DX mastery and can be assessed independently as a measure of the relative maturity of a specific aspect of business functionality and performance.

F I G U R E 1

IDC’s DX MaturityScape Framework

Source: IDC DX Practice, 2018

Ad Hoc Opportunistic Repeatable Managed Optimized

Digital ResisterBusiness and IT

digital initiatives are disconnected and

poorly aligned with enterprise strategy, and not focused on

customer experiences

Business OutcomeBusiness is a laggard,

providing weak customer experiences and using

digital technology only to counter threats

Digital ExplorerBusiness has identified a

need to develop a digitally enhanced, customer-

driven business strategy, but execution is on a

project basis. Progress is neither predictable

nor repeatable

Business OutcomeDigitally enabled

customer experiences and products are

inconsistent and poorly integrated

Digital PlayerBusiness-IT goals

are aligned at enterprise level around creation of

digital products and experiences, but

not yet focused on the disruptive potential of

digital initiatives

Business OutcomeBusiness provides

consistent but not truly innovative products,

services, and experiences

Digital TransformerIntegrated, synergistic

business-IT management disciplines deliver digitally enabled product/service

experiences on a continuous basis

Business OutcomeBusiness is a leader in its markets, providing world-

class digital products, services, and experiences

Digital DisruptorEnterprise is aggressively disruptive in the use of

new digital technologies and business models to

affect markets. Ecosystem awareness and feedback

is a constant input to business innovation

Business OutcomeBusiness remakes

existing markets and creates new ones to its own advantage and is a fast-moving target for

competition

Stage

1Stage

2Stage

3Stage

4Stage

5

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70%

60%

50%

40%

30%

20%

10%

At each stage, the IDC DX MaturityScape addresses how capabilities for a particular dimension — for example Leadership — need to change to improve the business’ ability to leverage digital technologies for competitive advantage. The key characteristics of the five maturity stages are illustrated in Figure 1.

Each level builds on the capabilities of the one before it. However, what might be considered optimized this year will change in the future as technologies, and their use, become more sophisticated and transformative. Why pay attention to the optimized standard for DX? IDC believes it is where the visionaries, innovators, start-ups, experimenters, and future business disruptions reside. By identifying how — and which — businesses are employing DX to disrupt industries and reinvent the business model, it’s possible for well-established businesses, and their leaders, to anticipate future change to their own industries and respond in time to thrive in the next era of DX.

F I G U R E 2

IDC DX MaturityScape Benchmark, 2015 to 2018

Source: IDC DX MaturityScape Benchmark, 2015-2018

Scaling to New Heights with DXIDC’s financial analysis of DX leaders across multiple industries, including banking,

hospitality, automotive, manufacturing, and airline sectors, has consistently shown that digital thrivers deliver better financial performance than their DX laggard peers.

Stage 1

Stage 2

Stage 3

Stage4

Stage5

USA Singapore Hong Kong

Stage 1

Stage 2

Stage 3

Stage4

Stage5

Stage 1

Stage 2

Stage 3

Stage4

Stage5

14%

7%

0%

32%

27%

20%

32%

32%

45%

28%

29%

14%

8%

7%

6%

26%

8%

1%

43%

34%

23%

34%

23%

50%

23%

22%

8%

3% 3%

0%

40%

10%

2%

34%

48%

18% 19

%

29%

62%

7%

13% 16

%

2015 2017 2018

According to IDC research, there is evidence of this rapid revolution toward DX over the relatively recent short term. Since IDC began tracking this data annually in 2015 through the IDC DX MaturityScape survey, organizational DX progression, which measures how well an entity masters each of the five dimensions, clearly shows a yearly shift toward greater integration across all levels of the enterprise in the key markets of the United States, Singapore, and Hong Kong (see Figure 2). And this change is indicative of organizations worldwide, all clearly moving quickly, and steadily, toward DX optimization.

1% 1% 2%

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A case in point is Singapore’s DBS Bank. DX leaders like DBS Bank have a digitally determined workforce, spanning from executives to workers (see Figure 3).

While the success of DX leaders is escalating the urgency and raising the stakes in creating and executing a competitive and successful digital strategy, a divide is emerging between organizations that are digitally transforming and those that are struggling to

achieve their goal. IDC characterizes the group that is transforming as “digitally determined” and those struggling as “digitally distraught” (see Figure 4).

According to the IDC Intelligence Economy by Digitalization Survey (“the survey”), commissioned by Singtel, 45% of organizations are digitally determined to succeed in the digital economy. These entities are “all in” and committed to making strategic, organizational,

Source: IDC Intelligence Economy by Digitalization Survey, 2018 (HK/SG/US N=300)

Digitally Distraught 55% Digitally Determined 45%

DX initiatives are tactical and

disconnected from enterprise

strategy

DX initiatives are initiated at the functional

or LoB level with some connection

to enterprise strategy

DX initiatives are tied to enterprise

strategy but with short-term

focus

Integrated, continuous

enterprise-wide DX innovation is in place with

operations and customer/

service experiences

The enterprise strategy is to use DX to transform

markets and customers by creating new

business models and products/

service

5% 32% 18% 32% 13%

F I G U R E 4

Characteristics of the Digitally Determined and Digitally Distraught

F I G U R E 3

Financial Comparisons Between a DX Leader and a DX Laggard

DX Laggard BankDX Leader

Source: Publicly available financial data from respective banks

Revenue 2018 Revenue 2018

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technology, and financial decisions that will launch them on the trajectory to digitally transform their organization over the next several years and will place them in a prime position in the race for the future intelligence economy.

Already one-third (32%) of organizations worldwide have an ongoing enterprise-wide DX innovation strategy in place that integrates both operations and customer

service experiences, key metrics to achieve. Another 13% have an enterprise DX strategy to transform markets and customers by creating new business models that focus on product and service experiences, essential to generating recurring revenue streams.

Further analysis has shown a direct correlation between digital determination and DX maturity (see Figure 5).

F I G U R E 5

The Impact of Digital Determination on DX Maturity

Base: Ad-hoc (n=3), Opportunistic (n=61), Repeatable (n=157), Managed (n=68), Optimized (n=11) Source: IDC Intelligence Economy by Digitalization Survey, 2018 (HK/SG/US N=300)

Stage 1

Ad Hoc

Stage 2

Opportunistic

Stage 3

Repeatable

Stage 4

Managed

Stage 5

Optimized

33% 67%

5%28%7% 43% 18%

8%31%22%34%5%

25%41%1% 21% 12%

9% 36% 55%

The enterprise strategy is to use DX to transform markets and customers by creating new business models and product/service experiences

Integrated, continuous enterprise-wide DX innovation is in place with operations and customer/service experiences

DX initiatives are tied to enterprise strategy but with short-term focus

DX initiatives are initiated at the function or Line of Business (LoB) level, with some connection to enterprise strategy

DX initiatives are tactical and disconnected from enterprise strategy

Digitally Distraught Digitally Determined

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F I N A N C I A L SInherent Value

F I G U R E 6

The Digital Determination Blueprint


A digitally determined organization has a singular strategy that focuses on how DX can turn its organization into a powerhouse in the digital economy. It has an organizational structure and culture that take DX seriously, reflecting a commitment at the top and discipline across the organization. For a digitally determined organization, their business-enabling technology-led platform is holistic — driving automation, productivity gains, agility, and scale from the enterprise to the ecosystem.

It adopts the digital native operating model to modernize its businesses and compete head-on with digital disruptors. It leverages leadership, engagement, information, business/operating models, and worksource in an “outside in” approach and is a leader in its ecosystem and industry. It continually monitors and adapts to new information, opportunities, and threats while leveraging its ecosystem of stakeholders, comprising customers, partners, employees, and community, to dynamically create, evolve, and launch innovative products, services, and strategies.

It uses a balanced scorecard with success metrics and key performance indicators (KPIs) that matter in the digital economy, such as innovation rate, customer advocacy, and data capitalization. As a result, its financial performance is measured and tracked to reflect the new benchmarks that determine market valuation.

But what does this mean at the real-world level of business operations and execution? At the most basic level, it requires leaders who have the strength

and stamina to confront and respond to potentially difficult organizational and financial decisions. And it demands a disciplined execution that aligns digital initiatives, technologies, and roadmaps across the entire organization.

Figure 6 illustrates IDC’s digital determination blueprint.

There are four crucial elements critical to success:

• A single enterprise-wide strategy. All digitally determined organizations rally around a single strategy across lines of business and functional areas. Coordination across all parts of the enterprise is key to overcome internal rivalries.

• Determination in making required organizational and cultural changes. Digitally determined organizations are two times more likely to embed digitalization throughout the organization, as opposed to having it residing in a central digital group. This demands a change in organizational flowcharts and a drastic shift in company culture.

• A long-term investment strategy around the pillar that digital is inherently valuable to the business. Digitally determined organizations are more likely to fund DX through a capital budget, as opposed to a short-term funding mechanism.

• A single digital platform to scale technology innovations. Digitally determined organizations are focused on scaling digital operations and therefore

S T R A T E G YA Single Strategy

P L A T F O R MIntegrated for Scale

Organizational Structure and Culture

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are working toward a single digital platform. This platform is the future technology architecture that accelerates DX initiatives for the enterprise, enabling the rapid creation of externally facing digital products, services and experiences, while aggressively modernizing the internal IT environment toward an intelligent core in parallel.

In contrast to the digitally determined, organizations that are digitally distraught characteristically approach DX in an uncoordinated, unconsidered non-strategic tactical way. Their leaders do not seem committed to full DX and employ a short-term approach to investment decisions. Over time, as the digital divide widens between the determined and the distraught, the latter’s road becomes more treacherous and steeper.

The most successful DX leaders are DNEs. IDC believes that the DNE has achieved sustainable competitive advantage in the digital economy and will continue to thrive in the intelligence economy, where disruption is a constant. Beyond this, the DNE has embedded self-disruption — the ability to track, react, and benefit from disruption — into its very organizational fabric.

To become a DNE, organizations and their business leaders must undergo transformation: mastering the five DX dimensions of leadership, omni-experience, information, operating model, and worksource. Organizations that successfully transitioned into leaders in the new digital economy will have “digital” ingrained in the most vital aspects of their business, as shown in Figure 7.

F I G U R E 7

Mastering the Five Dimensions of DX - the Path to the DNE

Source: IDC, 2018

Leadership Model

Innovation Management

Business Model

Planning and Governance

Finance and Economic

Experiential Engagement

Ecosystem Management

Platform Service Delivery

Omni-dimensional Marketing

Data Discovery

Data Monetization

Data Management

Knowledge Management

AI/Cognitive

Digital Products

Connected Products

Process Management

Decision Making

Organization Structure

Digital Mindset

Talent Management

Talent Sourcing

Work Optimization

LeadershipTransformation

Omni-experience Transformation

InformationTransformation

Operating ModelTransformation

WorksourceTransformation

These attributes describe the characteristics of a mature DNE along the five dimensions of DX. To reach mastery in each dimension requires developing capabilities in one or more of each defined area. To view the opportunities and challenges more clearly, organizations need to understand the following five critical masteries:

• Leadership DX: This set of disciplines enables businesses to develop the vision for DX of products, services, and experiences that are optimized to deliver value to partners, customers, and employees.

• Omni-experience DX: This dimension describes an omnipresent and multidimensional ecosystem approach to continually amplify experience excellence for products and/or services.

• Information DX: This dimension encompasses the focused approach to extracting and developing the value and utility of information relative to customers, markets, transactions, services, products, physical assets and business experiences.

• Operating Model DX: This dimension describes the ability to make business operations more responsive and effective by leveraging digitally connected products/services, assets, people, and trading partners. Operating model DX defines “how” work gets accomplished in terms of DX.

• Worksource DX: This dimension covers the evolution of the way that businesses will achieve business

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objectives by effective sourcing, deployment, and integration of internal (full-time and part-time employees) and external (contract, freelance, and partner) resources.

Leadership Drives ChangeReaching DX requires commitment from stakeholders across the organization. But

in the end, it greatly depends on the dedication and resolve of leadership at the top. The C-suite team must be focused on the real challenges, both operationally and culturally, to be tackled to reach the goal.

In IDC’s discussions, C-suite leaders mention multiple obstacles on the road to DX, including a lack of agreement on strategic priorities across the enterprise. A key factor in being digitally determined is that DX must be approached as a team sport; it requires effective collaboration across the C-suite, and then transmitted down through the organization. Although there are multiple stakeholders that must lead DX, including the CEO, CIO/CTO, and Chief Digital Officer/Head of Digitalization, in the end someone must take the lead to operationalize DX.

But who should it be? Interestingly, the survey has shown that instead of a single person, the combination of the CEO and CIO partnering to drive DX is becoming popular across Hong Kong, Singapore, and the United States. And this partnership is important as DX cannot fully meet its potential without the personal commitment of the CEO sustainably driving it across the organization.

And of course, while advanced IT and technology understanding has become more mainstream in all levels of the enterprise, often due to IT consumerization, the rapid advancement of digital capabilities is creating new skills requirements for business leaders. This is pushing traditional non-IT focused business executives and employees to work more closely with and leverage the knowledge and expertise of their IT peers and technology partners to power transformation.

After business leadership does the hard analysis to become organizationally aligned in their approach, the organization is then ready to move forward. Of course, much remains to be done on this voyage, with many pitfalls, obstacles, and risks, or what IDC often describes as digital deadbolts to unlock.

Interestingly, the survey has shown that instead of a single person, the combination of the CEO and CIO partnering to drive DX is becoming popular across Hong Kong, Singapore, and the United States.

2.2

1212

Overcoming Digital Deadbolts with DX Pathways

ALTHOUGH the pace of DX has accelerated and there are more DX leaders than ever before, many organizations have arrived at a digital impasse, with 55% of organizations currently in a digitally distraught state. In addition to the traditional obstacles impeding DX, including legacy culture, processes, and financial incentives, a new set of challenges has emerged and is slowing progress for many organizations. These challenges manifest themselves only after an organization begins its DX journey — while organizations are running digital projects and making progress, they are not advancing toward the overarching goal — to digitally transform the overall organization. These challenges, also known as digital deadbolts, are:

• Tactical (digital) plans• Outdated KPIs

• Siloed organizational structures• Silos of innovation, and• Limited expertise.

Consistently across Hong Kong, Singapore, and the United States, the leading digital deadbolt is the short-term focus of a digital roadmap that does not factor in the long-term transformation of the industries where the organizations compete.

Tactical (Digital) Plans In transforming the organization, many organizations fail to build a long-term digital

roadmap. This results in tactical plans that are focused on achieving near-term goals. The survey identifies tactical plans as the leading digital deadbolt (among 32% of the organizations), as shown in Figure 8. For

F I G U R E 8

Top DX Challenges to Overcome in 2018-2019


Developing a long-term

strategy and digital roadmap

Implementing new KPIs for

a better gauge of DX success

Inculcating a digital mindset in every employee

Bringing all digital innovations across the enterprise into a single platform

Building new capabilities

required to run a digital

enterprise

3.1

32% 28%

13% 13%

3%

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The challenge is that as digital strategies evolve, the roadmap must evolve in parallel. A better approach is for organizations to start planning with a “vision” session, forecasting how their industry may transform in the coming years. From there, the organization builds a roadmap that dovetails with that scenario and identifies strategies to push the organization toward the vision. According to IDC’s Worldwide DX Executive Survey 2018, the largest pool organizations in Hong Kong and Singapore have plans to establish a DX roadmap in the next 12 and 24 months, while those in the United States have two roadmaps in place, one for DX and one for the business.

When building a roadmap, use cases are essential, and allow the roadmap to develop a certain amount of modularity, with solutions swapped in to satisfy situations that mirror the case studies as they emerge. The roadmap should also span across multiple possible future horizons, as shown in Figure 9. For example,

F I G U R E 9

The Horizon 1-2-3 of Use Case Priority Roadmap


these organizations, their digital roadmaps focus on the short term and do not factor in the inevitable long-term transformation of their respective industries. This is also reflected in the way ICT selection and funding is performed by organizations. The largest pool (31%) of organizations’ ICT investments to support digitalization are still siloed, with business and IT strategies not well coordinated and IT plays the key outsized role in system selection and funding. Shadow IT is widely present in these organizations.

“Horizon 1” of the roadmap should encompass solutions that satisfy use cases being deployed today and the underlying technology to support them. While “Horizon 2” includes the use cases being incubated, and “Horizon 3” focuses on other possible developments.

DX leaders and the digitally determined such as Starbucks and Ikea adopt this Horizon 1-2-3 approach, identifying and investing in use cases to take advantage of current market dynamics, enabling longer-term growth by leveraging emerging digital capabilities, and building new market benchmarks through cutting-edge technologies and innovations.

Outdated KPIsThe survey identifies outdated KPIs — in effect, utilizing previously adopted KPIs to measure

an organization’s digital efforts — as the number 2 digital deadbolt, at 28% of organizations. This obstacle infringes on DX progress and is the most important for organizations to overcome in 2018 and 2019. IDC research shows that many organizations are using only lagging and/or traditional indicators. Traditional metrics — such as revenues, cost efficiencies, and other indicators that track past performance — are no longer enough to measure success, given the agility required to succeed in the digital marketplace.

The tools an organization uses to communicate its digital success to employees, investors, and board of directors do not necessarily reflect the operations

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

USE CASE

H O R I Z O N 2 The use cases being incubated to enable growth beyond the current fiscal year.

H O R I Z O N 3 The use cases that

imagine the possible. An organization’s venture

capital arm may be placing bets on the technologies that

underlie these use cases.

Current Business

H O R I Z O N 1 The use cases being deployed

today and the underlying technology to support them.

High GrowthFuture High Growth

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F I G U R E 1 0

How Digitalization Decisions and Plans are Being Made or Put in Place

of a digital enterprise. Organizations need KPIs that communicate the real-time nature of the future enterprise. As long as organizations use traditional KPIs to measure new digital businesses, their investors will penalize them.

To communicate effectively and successfully with employees, investors, and partners, a new set of KPIs that capture the capabilities of a digital enterprise are in order. The new digital KPIs need to include financial, business, and operational KPIs, and they need to be developed for each part of the new digital business.

Siloed Organizational Structures A fundamental challenge of DX is the need to change legacy culture and processes,

which are embedded in the organizational structure. The third digital deadbolt is the adoption of siloed organizational structures. According to the survey, 28% of organizations treat DX as a special project or run it out of a special department, which limits DX being perceived as part of everyone’s job (see Figure 10).

As the organization transforms, this needs to evolve. Digital organizational structures can be categorized into the following archetypes. While most organizations adopt one of these structures, 8% have a hybrid model with two or more structures in co-existence.

• Digital special projects team. For organizations that are just beginning their digital journey, this team is a central group that typically reports to the CEO and explores digital in a structured and formal way. Less than one-third (29%) of organizations fall under this category across the geographies and is the leading organizational structure in Hong Kong.

• Office of DX. For those organizations that are ready to move their digital strategy to the next phase, they put together a more formal centralized group that typically reports to the CEO and are focused on providing governance around digital strategy. Almost one-fifth (19%) of organizations fall into this category. It is important to take note that unlike in the United States and other Western geographies, in Asia including Hong Kong and Singapore, there are few Chief Digital Officer (CDO) titled positions in place.

• Embedded digital business. This archetype embeds digital resources into the various lines of business that are digitally transforming. Typically, there is still a central “digital” group that orchestrates digital initiatives for the company and provides common core platforms and digital expertise. Among organizations surveyed, 28% currently fit this definition, and it is the leading organizational structure in Singapore and the United States as well as among advanced DX organizations, i.e., those in stage 4 (Managed) and stage 5 (Optimized).

3.3

Digital Special Projects TeamA central group that is exploring

digital for the company in a

structured and formal way.

The Embedded Digital BusinessAs an intentional

strategy, the company

embeds most of its digital

resources into the various lines

of business or functional areas.

The Office of DX

A more formal centralized group that is focused

on providing governance around the

digital strategy.

The Digital Business Unit The company

elects to create a separate

business unit.

No Structure

No coordinated

digital transformation

approach in my

organization.

9%7% 8%28% 19%29%

CombinationA combination

of two or more

structures.

IT Development Approach

IT Priorities

IT Challenges

IT Delivery Cycles

Waterfall Start-up Practices

Everything

Finding Right External Partners

Months

Agile Value Stream

Customer Experience

Managing Innovation Sprawl

90 Days or Less

Agile Design Thinking

New DX Business Models

Integrating Innovation

90 Days or Less

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• The digital business unit. Unlike the other three models, this model does not focus on transforming the organization. Rather, it is focused on creating a disruptive and innovative portfolio. This model is most often deployed at large organizations that are too burdened by their legacy processes and culture to embed digital into the existing enterprise. Here, the organization elects to create a separate business unit which typically has its own real estate, talent hired from the outside, and new business processes. Among organizations surveyed, 7% currently adopt this approach, and this organizational structure is more likely to be adopted by progressive DX organizations which have the resources and ecosystem networks to either build organically or buy digital IP to eventually commercialize in the marketplace.

Figure 11 illustrates the ideal progression of an IT organization’s maturity as it digitally transforms.

Silos of Innovation The lack of a single technology architecture platform is holding back many enterprises’ DX.

Among organizations surveyed, 13% have not brought

F I G U R E 1 1

An Illustration of How an IT Organization Should Evolve with DX Maturity

together digital innovations across their organizations onto a single platform and is mainly driven by the fact that digital IT environments are often established separately from the traditional enterprise IT platform. However, IDC is expecting a large build-out of digital platforms over the next three years.

But before this takes place, technology executives should rethink their approach and develop a technology architecture that is integrated and spans IT, digital, and business domains. By 2020, IDC expects that 60% of all enterprises will have fully articulated an organization-wide DX platform strategy and will be in the process of implementing it as the new IT core for competing in the DX economy.

At the heart of a digital platform should be the “intelligent core”. This is where the algorithms, the code, and the models live, enabling the organization to turn data into insights and actions. The foundational services do not go away — IT governance, architecture, integration, and development services are enablers for this new digital platform (see Figure 12).

DX DX

DX DX DX DX

The DX Special Projects Team

The Office of Digital Transformation

The Embedded Digital Business

Source: IDC Tech Buyer Presentation - Doc # US43278517, Dec 2017

3.4

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Source: IDC, 2018

F I G U R E 1 2

DX Platform

Limited ExpertiseAs organizations evolve to the digital enterprise, new capabilities — “what” an

organization does to deliver value — need to be developed. Digital capabilities require bringing together technology, talent, governance, processes, and data into a holistic and self-perpetuating ecosystem. However, too few organizations are actively working toward developing new digital capabilities, with the majority preoccupied only with building the individual parts.

IDC believes the top three most important capabilities are experiential engagement, data monetization, and operating a digital business at scale, with the last the leading DX capability priority across Hong Kong, Singapore, and the United States.

• Experiential engagement capabilities allow an organization to create and continually innovate. To deliver immersive and frictionless customer experiences. Building a capability around experiential engagement requires the organization to be able to sense change within the customer base, innovate to meet those changes, and orchestrate activities to ensure a single experience. And this is reflected in the survey, with 28% of organizations ranking this as their top capability priority.

• Data monetization allows an organization to build capabilities that take data as input and create viable revenue streams. The organization is able to identify data that has economic value, refine the data into an asset, and distribute the data through effective channels. Among organizations surveyed, 22% ranked this as their top capability priority. The largest pool of organizations’ current priority, showing a result of 35% of enterprises surveyed, is to become a data-driven organization, where data is widely used to inform decision making and planning. To be a successful data-driven brand, organizations will need to learn to harness data to adapt to changing market conditions and redefine market benchmarks as they enter into the intelligence economy. These will require data monetization capability to be in place.

• Scaling a digital business will require capabilities in scale, scope and speed. As an organization scales its digital business to deliver hyper-personalized digital services, it will need to implement more autonomic processes while driving down costs as volume increases. Half (50%) of the organizations ranked this as the number 1 capability priority. This is aligned with the previous digital deadbolt. The DX platform is an important architecture to enable digital at scale.

3.5

1717

The DX Playbook and the Path Forward

THRIVING in the digital economy and ultimately succeeding in the intelligence economy requires organizations unlock the five digital deadlocks. Only with the right technologies and capabilities will organizations be able to accelerate the pathway to DX.

Increased digitalization of processes, things, and human interactions, together with the availability of digital technologies, have ushered in opportunities to digitally transform the enterprise. Business and IT

executives are increasingly looking to technology not only to improve cost through efficiency and productivity gains, but also to drive new revenue streams through accelerated innovation.

Along these lines, IDC has developed the 10-step playbook, a framework to guide you as an IT leader/executive for any DX program/initiative/project in its first 100 days (see Figure 13).

F I G U R E 1 3

The 10-step Playbook

1

2

3

4

56

7

8

10

9

Assess Readiness

Create a Sense of Urgency

Create a Strategic Vision for DX

Engage an Executive Council Team

Develop Strategic InitiativesDesign Your Organization

Communicate Broadly

Remove Barriers

Create Short-term Wins and Celebrate

Institutionalize Culture

I T E R A T I O N 1

Build Credibility

I T E R A T I O N 2

Scale Up

I T E R A T I O N 3

Broaden the Scope

I M P L E M E N T A T I O N P R E P A R A T I O N

Continued on next page

C H A P T E R

4

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Assess Readiness Implement assessments to include DX maturity,

people, financial, process, customer experience, and business readiness.

Create a Sense of Urgency Use a crisis to accelerate change. Strong rationale,

emotional reactions, and sense of urgency are the three key drivers of change.

Engage an Executive Council Team A team of senior executive stakeholders must

be mobilized to provide both the authority and the resources to fuel IT transformation. It is important that no delegation of authority is allowed and the executives in place clearly articulate the strategy and set objectives with quantified goals (metrics and dashboards).

Create a Strategic Vision for DX Program/Initiative/Project

Key questions to address:• What does digital mean to your business?• Does DX change the business you are in?• Does DX change the business you should be in?• Does your target customer change with digital

technology?• Does your added value change?• How does digital technology enable you to

differentiate?• Does digital technology enable new competition or

new entrants?

Develop Strategic Initiatives If this is a significant program, limit the number of

strategic initiatives to no more than five. In the digital age, the ability to compress time to completion is critical. Define objectives toward a forecast future situation or context, not the present. Align leadership and teams. Transformation aims at rationalizing capabilities and leveraging synergies across silos to achieve scale and become competitive. This step is where the digital deadbolts are specifically targeted.

Design Your Organization Here is where the DX organizational structures or

archetypes come into play. This can be a “permanent” or an “initiative-based” self-managing team. Should it be centralized, decentralized, or federated? What are the accountabilities? Does it focus on internal, external, or a hybrid environment?

1

2

3

4

Communicate Broadly Communication speed is critical. Change

management and communication is by far the most important component in DX. • Articulate your strategic initiatives• Create a shared sense of purpose • Articulate clear and simple messages, with no jargon• Consistently repeat key messages • Communicate early • Invite everybody to collaborate• Quickly respond to negative feedback • Help employees transition from the current situation to

the new

Remove Barriers There will always be roadblocks to test leadership’s

determination. All barriers must be addressed. To remove barriers:• Company thought leaders will have to inspire other

leaders to keep moving forward• Leaders will need to continually refine, improve, and

reiterate the big picture vision • Understand that speed can help to minimize barriers

Create Short-term Wins and Celebrate Short-term wins create and extend momentum.

They help to propel travel to further unchartered territories and translate hard work into valuable business outcomes. They create proof and establish credibility quickly. Good candidates for these wins include:• Low-hanging fruits• Easy-to-solve issues• Issues that involve limited scope• A small first step in a large project• Acknowledge that new technology is good for morale

Institutionalize Culture Cultural change comes last, not first. Culture

usually changes after benefits are evident over a period of time, and once a clear cause-and-effect relationship is established. Culture defines good behavior and shared values for the team moving forward. The iteration process is key to build on the new reality as well as to continue and extend the virtuous cycle of innovation, integration, and incorporation.

5

6

7

Continued from previous page

8

9

10

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The key questions to address are:

Questions: What for? How to address: Business challenge/opportunity

Questions: Why? How to address: Business initiative

Questions: What is my mission? How to address: Mission and expectations of commitments

Questions: Who are the players? How to address: Partners, competitors, disruptors

Questions: What is the situation? How to address: IT capabilities

Questions: What is the plan? How to address: IT strategy and planning

Questions: What is urgent? How to address: X to 100-day imperatives

Questions: How to start? How to address: X to 100-day plan

A Critical Self-assessment: Points to Consider When Creating Your DX Roadmap

Part of building a DX roadmap requires a clear assessment of not only internal challenges but an analysis of technology requirements. In this regard, IDC has outlined below important guideposts to keep in mind as you build your strategy to become a DNE based on your current DX stage.

Stage 1

Ad Hoc• Enterprises at the Ad Hoc stage will typically be starting

to invest in 3rd Platform solutions such as mobility, cloud, security and IoT but in a responsive nature to a particular business need and these solutions are not always aligned to the overall IT directions of the company.

• Most of the investments will be in mobility solutions to enable Internet and VPN services. Some enterprises will opt for some of these services to be managed by a vendor so that they do not need to build an IT team to attend to communications needs such as WAN, LAN and unified communications. Investment in cloud solutions will be just starting out and further

investments in this area will be vertical dependent, and email is often one of the first to go into the cloud.

• Solutions such as security and IoT will be limited and if required, off-the-rack solutions will be chosen for ease of deployment and to suit the budget assigned to these areas.

Stage 2

Opportunistic• Having the basic IT infrastructure in place and running

it well for a few years, enterprises at the Opportunistic stage are starting to focus on rolling out a digital strategy in order to be competitive in the market space that they are playing in and in response to the needs articulated by their key customers. However, the articulation of this digital strategy is not company-wide and hence deployments are on a standalone basis and are not streamlined.

• Mobility solutions will receive a boost to the next level in terms of speed and coverage and remains as one of the IT areas with the biggest investments. Cloud solutions will be expanded to cover more areas other than emails, with first explorations into IaaS and SaaS in areas where management is unsure if those are the areas that the company will explore in in the long-term, and for cost control purposes.

• Off-the-rack data analytics tools are deployed in selected customer-facing, revenue-generating departments. Security becomes more prioritized and will be deployed in key areas but on a need-to basis due to limited budgets. IoT will also be deployed in specific areas as a response to customer needs and using off-the-rack solutions.

Stage 3

Repeatable• These enterprises at the Repeatable stage have had

a digital strategy running for a few years and have spent the last 1-2 years aligning their business and IT directions to bring an alignment company-wide and involving all stakeholders. Enterprises at this stage typically are not yet focused on using digitalization to tap onto new frontiers and are still focused on the needs of their existing customers.

• Mobility solutions will no longer be a management priority and therefore a key investment area as they have been fully deployed. The provision of mobility solutions will be the same for all, both local and regional teams, and portal services have been deployed as well. Cloud investments will be expanded

4.1

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to cater for deployments in the area of security other than the earlier IaaS, PaaS and email services.

• More advanced data analytics tools, requiring some form of customization, are invested in for selected departments. Cybersecurity will become a key investment area as customer requirements become more pronounced in this area, and in response to regulatory requirements. IoT will be deployed in all departments that require them and will include areas such as sensors along with vertical-specific solution areas.

Stage 4

Managed• Enterprises at the Managed stage have a business-

IT alignment for their digitalization strategy and is working on ensuring this plan works for them across different business cycles. This is to enable digital experiences that are consistent across all offices and toward all customer groups. There is often a strong digital leader in the company at this stage to drive digitalization efforts from both a top-down and a bottoms-up perspective. They are recognized by peer groups as a leader in the digital space and are looked upon as a transformation model.

• Mobility solutions will be invested in minimally and is to keep the lights on. Cloud deployments are completed and all contracts have been aligned company-wide to ensure that costs are kept low and the benefits optimal for all departments and across all offerings. Managed services will be utilized appropriately after different rounds of deployments with different vendors and across different offerings; Contracts have been negotiated with terms and conditions that suit the company’s operational needs.

• Data analytics tools are in place and will continue to be invested in to ensure that the data captured can be used by different stakeholders, and trends can be pre-empted according to business cycles. Professional services are being used for profiling and advanced analytics. IoT investments will involve vertical-specific solutioning with customization for different customer groups. Also, at this stage, cybersecurity is fully deployed in the organization.

Stage 5

Optimized• With a digitalization strategy that has received steady

and increasing budgets, and brought about topline growth for the company, enterprises at the Optimized stage are ready to disrupt and innovate to remain

competitive. They are recognized by both peer groups and ecosystem players as a leader in the digital space and are looked upon as a transformation model.

• Mobility and cloud solutions are invested in minimally

and must be driven by the new digital programs, otherwise there is no additional budgets assigned to them. Managed services and other professional services investments are to enable the new digital programs to be rolled out on top of existing solutions. All existing digital technologies will be reviewed to see if there can be a disruptive element added to them for shorter time-to-market.

• Data analysis is focused on the preemptive use of data from the different 3rd Platform solutions and to be used across departments and offices. AI is being trialed with solutions from different vendors and will be heavily invested in by the company in the near-term. A few other disruptive technologies are going through proof of concept and will be evaluated in the near term, with considerations across all verticals and customer groups.

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Sources of other research in this white paper:

• IDC FutureScape: Worldwide IT Industry 2018 Predictions, Oct 2017 — Doc # US43171317

• IDC Worldwide DX Executive Sentiment Survey 2018 (N=1,987; Hong Kong=100, Singapore=101, USA=310)

• IDC FutureScape: Worldwide Cloud 2018 Predictions, Dec 2017 — Doc # US43253017

• IDC FutureScape: Worldwide Security Products and Services 2018 Predictions, Oct 2017 — Doc # US43159217

• IDC FutureScape: Worldwide CIO Agenda 2018 Predictions, Nov 2017 — Doc # US43203417

• IDC FutureScape: Worldwide Datacenter 2018 Predictions Dec 2017 - Doc # US43303217

• IDC FutureScape: Worldwide IoT 2018 Predictions Oct 2017 - Doc # US43161517

• IDC FutureScape: Worldwide Telecommunications 2018 Predictions Nov 2017 - Doc # US43260117

Survey MethodologyCommissioned by Singtel, the Intelligence Economy by Digitalization Survey was conducted in June-July 2018:

300 respondentsC-Level CIO/CMO/CSO/CGO

11%

Vice-President

12%

Owner/President/CEO

1%

Director

76%

IT decision making

72%

Line of business

28%

Primary DX decision maker

15%

Part of a team that makes DX decisions

45%

Influences the team that makes DX

40%

3 countries

USA

Singapore

Hong Kong

100% of respondent organizations are actively engaged in

Employee sizeAcross the organization worldwide, including branches and subsidiaries

500 to 999 10%

5,000 or more 45%

1,000 to 4,999 45%

DX

Copyright NoticeExternal Publication of IDC Information and Data — Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from the appropriate IDC Vice President or Country Manager. A draft of the proposed document should accompany any such request. IDC reserves the right to deny approval of external usage for any reason.

Copyright 2019 IDC. Reproduction without written permission is completely forbidden.

About IDCInternational Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,100 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries worldwide. For 50 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world’s leading technology media, research, and events company.

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