The essence of the Digital Enterprise – insights and tools  

By Gerard Wijers  

What exactly constitutes the essence of a Digital Enterprise? And what can you do as a leader or board of directors to become such a tech- and data-driven organization? Anderson MacGyver co-founder and Nyenrode lecturer Gerard Wijers explains what is needed for distinctive customer experiences, new business models and an optimal operational backbone. All to claim a unique position within the market and business ecosystem.  

My vision of the Digital Enterprise is based on my academic work at Nyenrode, combined with the in-depth knowledge and experiences I have gained since 1991 after my PhD in IT Strategy, including  as a strategic consultant in the field of technology and data. Since our founding in 2013, as Anderson MacGyver, we have helped many of our clients become a Digital Enterprise. 

When I started as a consultant, tech and data were still by no means a boardroom topic. Over the years, that changed and our profession became more and more interesting. We now see that with a dedicated officer, the subject is increasingly gaining a permanent position at the boardroom table. Together with people from operations, commerce and finance, the decisions are made. 

Partly because of this broader engagement of leaders, organizations are becoming increasingly digital. In this article, I not only talk about the specifics of modern digital organizations, I also offer tools for becoming such an organization. 

Although the importance of digitalization varies enormously between companies and sectors, sooner or later virtually all organizations will have to deal with digitalization. Technology and data are used to differentiate, to operate more efficiently, to cooperate better within chains or ecosystems, and to respond flexibly to the needs and demands in social and economic dynamics. 

Three Pillars 
Digitalization requires a holistic view of multiple, interconnected aspects. Starting with the so-called “digitization” of the operational backbone – ranging from an ERP implementation to full automation of the production environment. Based on all my experiences with clients, I dare say that for many organizations, this domain accounts for about 40 percent of IT investments. 

Around 2014, when the term “digital” began its rise, this was still mostly about the outside of the organization. This included digital marketing, use of social media and the right digital channels such as apps, websites and so on. This ‘digitalization’ of the customer – and employee – experience in the front office is seen mostly in B2C companies. 

In addition, modern digital leaders create space and capabilities for innovation and the realization of new digitally based business models. Often, organizations start by turning their existing products, solutions into ‘digital’ services. Deployment of technology and data causes people to start thinking about issues such as long-term customer value and thus the introduction of, for example, subscription models and other forms of value creation. 

The three pillars – operational backbone, digital customer experience and value-based innovation – have so-called ‘enabling technology’ as their common basis . This is the digital version of the ‘firm infrastructure’ coined by Michael Porter, which consists of support items such as buildings, communications, administration, energy supply and physical security. 

This preconditional technology does not provide direct business functionality, but without solutions for areas such as integration, data platforms, identification, information security, you can do nothing at all as an organization. Enabling technology is growing rapidly and accounts for 30 to 40 percent of annual IT costs. 

Digital Evolution 
All of this does not make you a digital enterprise, however. A clear evolution of technology and data can be seen over the years. This started in the 1990s as IT management, which in a decade later gave way to the dynamics of demand and supply – where IT started to have its own processes and SLAs. As tech and data became very distant from the business, the step to outsourcing became smaller and smaller. 

As a result, well defined ownership became important. Agile-IT led to the rise of product owners, process owners and other owners some 15 years ago – even at the board level. By now, the more tech-savvy a board is, the more digital the organization. Sectors such as media, travel and retail are really leading the way right now. Some 50 to 70 percent of their revenue is based on digital activities. 

Since 2015 we have been in the era of digital business, with a greater importance of ecosystem dynamics in the last five years, where, for example, within a specific sector you use specialized and often powerful digital platforms. Think of Independer in the world of insurance, or Bol.com in retail and sites where you can book cheap airline tickets and vacations. 

It is important to know one’s position and added value within the network or ecosystem in which one operates. 

Top 5 pains & gains 
With our annual Digital Business Monitor, as Anderson MacGyver, we measure the state of affairs within European organizations. From this we distill a top 5 of pains & gains for board members. One of the most important gains is scalability. The idea behind it is that software is more scalable than people. Organizations are in a better position to grow through digitalization. 

Another gain is achieving operational excellence in the backbone – accounting for roughly 40 percent of all tech investments last year. Also important are an optimal customer and employee experience and realizing a responsive value-oriented organization in which Agile principles are applied at scale. 

Most of the pain is in an overly complex and outdated IT landscape. Also at play are too high costs due to inefficient operations. A word of warning: be well aware of where you are going to cut! Anyone who wants to improve margins or achieve higher sales will really have to invest more in IT. The high-performing organizations prove this. 

Other pain points include compartmentalized management rather than an integrated, holistic view of the organization. Attracting, developing and retaining digital talent also requires attention. Outsourcing driven by digital ambitions often has scarce talent as its trigger.  

Last but not least, poor data quality and the lack of a good data foundation. After all, data is increasingly at the core of the digital enterprise. 

Digital Enterprise 
But what is the core of a Digital Enterprise and what can you do as a leader or board of directors to make it happen? Before that, a word about the dynamics on the outside and inside… 

A unified and distinctive customer experience requires an integrated mix of digital propositions, products, channels and services. Organizations that do this well include Albert Heijn, Rituals and DPG Media – roughly half of their IT investments go toward optimal customer contact. Here it is important to be able to change quickly and energetically in order to respond optimally to current needs. 

There is also the extensive and relatively slow operational backbone, which needs to be automated, standardized and simplified. This stable and well-integrated IT supports the primary operational business processes and staff functions such as finance, HR and procurement. The pain of technical debt and legacy is especially felt here. Companies that focus heavily on having a good backbone include LeasePlan, CZ and Spie. 

Digital infrastructure was also already discussed under the heading of enabling technology. As mentioned, 30 to 40 percent of total IT spending goes to integration and data platforms, IoT and IT4IT. Organizations with a major stake in their digital infrastructure are Tennet and Schiphol Airport. 

Central elements 
Many organizations and their leaders are aware they are not getting the most out of their software and data. To change this, they can make the right tools and data widely available within the organization so that different functions and departments can run artificial intelligence and algorithms on them. In this way, they can become digitally smarter. Efforts in this area tend to lead to more and better insight into customers, products, processes and operational exploitation of these insights into direct action. 

Characteristic of the digital enterprise are this digital smartness and organization-wide shared data. As with the digital outside, inside and infrastructure, these are not things you approach in isolation. For maximum results, you address everything as much as possible in interconnection. with the digital front end, back end and infrastructure. Frontrunners in this area include PostNL and TVH. 

Recommendations 

My recommendation is to start thinking like a digital enterprise: holistically and end-to-end. Based on governance and personal leadership, create business strategies with explicit digital ambitions, leveraging technology and data to differentiate yourself from the competition. 

Moreover, build strategies that are scalable. Meanwhile, keep the overall IT landscape as simple and fit for purpose as possible. Place ownership and responsibility within multidisciplinary teams. Ensure tech and data capabilities within management teams and the board. Also recognize that there is no one type of IT, but embrace a multimodal approach. 

That multimodality means that different aspects of business operations require different kinds of IT. The Operating Model Canvas (OMC) helps determine which IT best fits which business activity. Across the axes of dynamics (from stable to responsive) and differentiation (generic versus specific), our multimodal model has four modes: distinctive versus common, and adaptive versus specialized. 

Conclusion: digital is everybody’s job. Everything you do with technology and data must be scalable and fit for purpose. That requires ownership and leadership – especially within boards of directors – in addition to a multidisciplinary approach. 

What’s next?

Want to find out more about the Digital Enterprise? Take a look at our other page: Stop playing catch-up, start becoming a Digital Enterprise
Want to get more insights? Jump to our pain: a complex legacy IT landscape and technical debt
Over the coming months, we will be sharing fundamental insights and experiences. Don’t wait to dive into this exciting theory! You can also contact Gerard via email or text to spar.