R. Ray Wang: "Digital disruption is about transforming business models"
28 Jul 2017 IoT General
Digital transformation determines the way we connect a company, the business concept, with its target audience in these modern times. And the Internet of Things plays a crucial role in providing the specific environment in which digital transformation takes place. We got in touch with R. Ray Wang, Founder and President of Constellation Research. As the author of "Disrupting Digital Business," Wang provides interesting insight into the technological context and business strategies of the IoT era.
"Digital transformation is about using digital technologies to transform business models and how we engage," explains Wang when asked about the future of business. But digital transformation cannot be understood without digital disruption, an intrinsic concept in this paradigm shift. "Digital disruption is more than just a technology shift. It's about transforming business models and how we engage them. To succeed, we cannot just look at the coolest set of technologies of the day," explains the expert. "We have to think about transforming business models." This means that we must understand the key metrics that a business should measure to ensure its success.
"For airlines, the key metric is revenue per passenger per kilometer, not safety, customer satisfaction, or on-time performance. For professional service firms, this key metric is profit per employee, not average deals or number of certified professionals " This understanding, Wang comments, is the key point in digital transformation. Nonetheless, understanding must be accompanied by growing innovation that allows product and service lines to be created and improved in order to adapt to the transformation. "Transformational business models require out-of-the-box thinking and the creative destruction of multiple business models."
The Internet of Things in digital disruption
So what role does the Internet of Things play in the era of digital transformation? Its inescapable presence completely determines the way business is evolving. "IoT plays a key role in providing context. The time, the location, the weather, and other contextual clues give you the relevancy to earn permission to engage. That context is where the value is in this new insight economy." With these words, the expert gives us his vision on the place of the IoT in digital transformation.
And in digital disruption, in Wang's words, " IoT provides massive context and fuels the insight economy." Together with technologies such as 3D printing, virtual and augmented reality, robotics, block chain, and artificial intelligence, the IoT is one of the agents of this digital disruption, prompting an in-depth change in the conception of business models. The expert refers to these technologies as disruptive technologies. In the case of the IoT, "business models enable the manufacturer or product company to enter a subscription economy. We can shift from selling to selling services, and ultimately evolving to delivering insights, experiences, and outcomes. This changes the business at all levels, all departments, and all business models," Wang says.
Business models into the future
As a consultant, R. Ray Wang has a fairly clear idea of the process of evolution in a business model: "Start by figuring out how you can disrupt your business models. What non-traditional competitor should you worry about the most? This happens by understanding how you would build your organization from scratch if you were to compete. What kind of product and service lines would you cut? Which product and service lines would you emphasize more? What customers are you not serving today?" But are companies prepared for their digital transformation? Do they understand the importance of this evolution? "As with the beginning of every revolution, those in the midst of it can feel it, sense it, and realize that something big is happening. Yet it's hard to quantify the shift. The data is not clear. It's hard to measure. The pace of change is accelerating. Old rules seem not to apply," he says.
In the case of digital business, these models have progressed over the past twenty years. "However, non-traditional competitors have each exploited a few patterns with massive success." But as the models evolve, companies realize there are more than a handful of patterns. "In fact, the impact is significant and now quantifiable, with 52% of the Fortune 500 gone since 2000 and the average age of the S&P 500 companies down from 60 years to a little more than 12 since 1960. That is a 500% compression that has changed the market landscape forever in almost every industry." The future of the business digitization can ultimately be summarized in three basic questions, says Wang: "Who will lead, who will follow, and who will emerge? The major challenge is people. Technology often changes very quickly. Business models often come as a surprise. And yet, people fail to change."