Top 10 Misconceptions About Digital Business

Rob Preston, ORACLE

There are two kinds of perspectives on digital business: the “we economy,” “customer experience,” “sharing paradigm” perspective, and the more practical perspective grounded in the nuts and bolts of building a sustainable competitive advantage.

Those perspectives tend to get mixed up, leading to misconceptions about what digital business is (and isn’t), who will lead it, what the priorities should be, and who the target customer is. What follows are 10 such misconceptions, drawn from industry research and customer interviews.

1. Digital disruption is a priority in corporate spending.

Disruption is indeed top of mind for most companies—but bottom of their digital investment priorities, according to PwC’s 2015 Digital IQ survey of 1,988 IT and business leaders worldwide.

When given a choice of 11 responses to the question “What value do you expect from your digital enterprise investments?” only 1% of survey respondents selected “disrupt our own or other industries” as their first choice. Likewise, only 1% picked “combat new industry entrants.”

The overwhelming #1 choice was the more mundane “grow revenue” (45%), followed by “create better customer experiences” (25%), and “increase profits” (12%). Granted, all three of those digital investment priorities are growth-oriented, but they don’t reflect a sense of urgency with regard to digital disruption.

Too many industry incumbents talk about the digital “journey” they’re on, as if they’re ambling across the Pampas to some unknown destination. It’s long past time to develop a detailed strategic plan for becoming the next digital disruptor (or heading one off) in your industry.

2. So most CEOs must still see their companies and industries from an analog perspective.

Here’s the irony: Most CEOs—at least at a gut level—do understand the profound implications of the digital revolution, even if their digital spending tends to be incremental.

The vast majority (86%) of CEOs surveyed for PwC’s 2015 Digital IQ report said it’s crucial for them to champion the use of digital technologies. Perhaps more important, three-quarters of the other IT and business executives surveyed agreed that their CEOs are all-in digitally, a big increase from PwC’s 2013 Digital IQ report (when just 57% of those respondents said their CEO champions digital) and up slightly from 2014 (71%).

But now it’s time for CEOs to put their monies where their mouths are.

3. Brick and mortar retailers, print publishers, travel agents, and the like are the most vulnerable to digital disruption. My industry is different.

Sure, those are the obvious disruptees, but everyone in every industry is vulnerable, even the most entrenched companies.

FedEx and UPS, for example, are looking over their shoulders at Amazon.com, as Amazon prepares to offer (drone-based?) package delivery services of its own. Meanwhile, as Google moves into telecom, financial services, transportation, and home control devices, should the likes of Verizon, Bank of America, Ford, and Honeywell be concerned? You bet.

Even the big technology providers are vulnerable to digital disruption. Consider how the likes of Hewlett-Packard, IBM, and EMC have fallen from their perches. At Oracle OpenWorld 2015, in discussing how Oracle rewrote its entire portfolio of applications, middleware, and databases for the cloud starting 10 years ago, Executive Chairman and CTO Larry Ellison commented: “In this business, if you don’t like dodging bullets, you’re in the wrong business.”

4. Still, digital disruption is generally isolated to discrete industries, right?

No. Some 81% of the participants in Accenture’s Technology Vision 2015 study think industry boundaries will dramatically blur as “platforms reshape industries into interconnected ecosystems.”

The study offers the example of Home Depot, which is working with its manufacturer suppliers to ensure that all of the connected home products it sells are compatible with Wink, a popular digital hub, thus “creating its own connected home ecosystem, with a wide range of services that are easy to install.”

Another prime example is GE, which is exiting financial services to remake itself into a “digital industrial company.” Speaking at Oracle OpenWorld earlier this month, GE CIO Jim Fowler said the company intends to generate an incremental $15 billion in annual revenue by selling analytics and other digital services to its customers in such disparate industries as aviation, energy, power and water, healthcare, transportation, and appliances. “GE is undergoing its most important and largest transformation in its 130-year history,” Fowler said.

5. Every company can’t be a digital innovator, so best to copy the latest Amazon (or Google or Starbucks or…) offerings.

Me-too projects—yet another Facebook page, app store, recommendation engine, Wi-Fi hot spot—are hardly the stuff of competitive advantage. Only you and your talented colleagues and partners are in a position to know which kinds of digital innovations will delight your customers and produce the most value for your company. The surest path to becoming a commodity provider is to just copy what the digital leaders are doing.

A prime example is Borders, the defunct bookseller that tried to survive by aping digital pioneer Amazon and fast follower Barnes & Noble. It, too, developed a website, added in-store kiosks, and made other incremental digital additions to its brick-and-mortar house. But it paid the price for never differentiating itself in a meaningful way.

6. Marketers must target millennials as the be-all-and-end-all of their digital strategies.

The 18- to 35-year-old demographic is indeed a coveted one. But as the populations of some of the world’s largest markets, including China, Japan, and the European Union, turn grayer, it’s incumbent on marketers to keep those older generations firmly in their digital sights.

Unless your company is selling nose rings or reverse mortgages, it’s probably serving five generations of customers, not just one. And their willingness to engage with your company’s brand on a digital medium has more to do with their comfort level with the technology than their age, noted Constellation Research CEO Ray Wang during a presentation at Oracle OpenWorld 2015.

Jessica Kriegel, an organization and talent development consultant at Oracle, says it’s a mistake to assume that younger generations are far more digitally savvy than their elders. As part of her doctoral work, Kriegel studied learning-style preferences across four generations of employees at a railroad company. When she asked the participants to select their top five favorite digitally based learning activities from a list of 22, she found their preferences to be “strikingly similar.”

7. Chief digital officers, not CIOs, will lead the digital charge.

IDC predicted last year that by 2020, chief digital officers will “supplant” 60% of CIOs at global companies “for the delivery of IT-enabled products and digital services.” PwC’s upcoming 2015 Chief Digital Officer Study predicts much of the same “marginalization,” especially in North America, where it sees CIOs leading digital efforts at 40% of companies today but only at 31% of companies in three years.

In other words, most CIOs will be relegated to managing and securing what’s left of their companies’ infrastructure and applications in a cloud-centric world. Meanwhile, CDOs, many of them from the marketing ranks, will take on the more strategic role of applying cloud, mobile, analytics, social, and other digital technologies to boost revenue, maximize profits, and engage customers.

“What good CIO would let that happen?” responded a skeptical Cathy Bessant, head of Bank of America’s 100,000-person Global Technology and Operations unit, when I asked her late last year about the prospect of CIOs being marginalized in that way.

Predictions of the CIO’s demise are wrong on so many levels. Not only do most marketing-reared CDOs lack the technical expertise to lead the digital charge, but they also lack the project management, vendor management, and integration chops. A more likely scenario is that the CIO—ever more customer-focused and business-savvy, but also technically grounded—will drive the digital strategy alongside the CEO, CMO, CFO, and other business leaders.

The chief digital officer title will likely go the way of the chief innovation officer and chief evangelist: the first position to cut when the euphoria dies down.

8. All CIOs are locked in mortal combat with their companies’ CMOs for control of the digital hill.

The CIO-CMO relationship continues to be among the weakest in the C-suite, according to PwC’s Digital IQ survey. But even when that relationship is a work in progress, it’s more often standoffish or uneasy than downright belligerent.

During an intimate roundtable on CIO-CMO issues at Oracle OpenWorld 2015, one CIO conceded that his is a “very, very difficult dialog with the CMO” because of unrealistic expectations about what it takes to deliver complex digital functionality quickly.

One CMO at the roundtable admitted he had some growing up to do when he first took that job. He conceded that too many CMOs are drawn to that next “shiny object”—the latest marketing automation or social semantic analytics tool—and show up at the CIO’s door with a list of needs before having a firm grasp on the company’s strategy and priorities.

But there’s plenty of evidence that the CIO-CMO relationship is strong at a variety of companies. Take hotel group Marriott International, which has gone so far as to formalize that relationship, combining most of the company’s customer-facing activities, including marketing and revenue management, with all of its IT activities under one global unit, called Brand, Marketing, Sales & Consumer Services.

Leading that group is Chief Marketing & Commercial Officer Stephanie Linnartz, one of whose direct reports is CIO Bruce Hoffmeister. That organizational structure allows for better-informed technology decisions and much faster tech rollouts, Linnartz says. “We get buy-in early on from all parties,” she says, “and there’s better understanding when things don’t go exactly as planned.”

Another CIO at the Oracle OpenWorld roundtable said he and his company’s CMO “are together more than any other two executives,” in mostly productive conversations. But it takes a lot of work to build that kind of relationship.

So how do we get these teams on the same digital page? PwC chief technologist Chris Curran told me last year that most CIOs know they must take on more of a customer-facing role, but they don’t always have the expertise or corporate mandate to do so. Meantime, many CMOs have built their own technology portfolios, mainly because they fear the IT organization is too slow or lacks the needed digital and user experience skills.

“In the end, once you peel back the rhetoric, and you look at what the work is, I don’t think marketing wants to do all the IT work, and I don’t think IT wants to do all the marketing work,” Curran said. “It’s about figuring out, ‘Can we add the two together and make something more productive?’”

9. Companies with the best left-brained talent will win the digital war.

Much of the heavy lifting of cutting-edge digital business—personalization, predictive analytics, complex event processing, data encryption, and the like—occurs in the realms of math and science. But right-brained creativity matters as well.

Forbes contributor George Anders maintains that certain technology industry roles, such as marketing, sales, and even product development, are best suited to the liberal arts crowd. For that reason, digitally minded employers are starting to expand their talent searches beyond STEM (science, technology, engineering, and math) majors to STEAM, factoring in people with an arts sensibility.

Take Maritz Motivation Solutions, which builds rewards sites for clients that marry advanced data analytics and neuroscience principles with creative design thinking. Or Marriott, which launched a studio in September to create movie shorts and other original content in order to engage “next-generation travelers” on YouTube and other social channels. Constellation Research’s Wang calls the people involved in these kinds of left-right brain partnerships “digital artisans.”

10. Companies must rip out and replace their IT infrastructures and architectures for the digital world.

If only it were that easy. There’s no glossing over the fact that legacy applications, often highly customized, remain deeply ingrained in the sales, marketing, financial, manufacturing, supply chain, and other core business processes of most large companies, even the most digitally aggressive ones. Not everyone’s a greenfield startup.

Oracle’s Ellison foresees at least a “decade of coexistence” between cloud and legacy applications. “Customers are telling us they want to do cloud where that’s appropriate, and they want to do on-premises where that’s appropriate, but they want to manage all of that as one single thing: easy to manage, fully compatible, with the ability to quickly and easily move workloads back and forth,” Ellison said. “You can say this will be a 10-year transition—and that’s certainly when the biggest changes will take place—but I think the coexistence will go on forever. This big period of transition and essential coexistence will be a huge issue over the next decade because customers really want the public cloud to look like their data center, and their data center to really look like their public cloud.”

The challenge ahead is how to manage the old stuff—pay down the creeping “technical debt,” as Gartner analysts call it—while investing in new and extended mobile, analytics, social, and other modern digital functionality. This may be the single biggest challenge in front of enterprise IT today.

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