Enterprise Digital Labs (EDLs) driving Digital Transformation

Changing Business Landscape

We are in a digital era, where the convergence of emerging technologies is resulting in new possibilities for consumers, enterprises and technology vendors. Consumers having access to significant technology resources are playing a key role in determining what products they need, with businesses being forced to offer new age products and services, and evolve themselves as per customer needs.

Technology trends such as social media, mobility, analytics and cloud computing (SMAC) are changing the traditional relationship between customers and enterprises, resulting in increased collaboration between the two. An apt example can be companies such as Frito Lay and Ben & Jerry who engage their customers through both traditional and social media channels to vote for the next flavor of potato chips or ice cream that they would like them to introduce.

The Digital Era

Digital is not about implementing SMAC for your customers as they already are leveraging these tech trends. Digital is about enabling the customer re-imagine the way they do their business in the context of connected world and customer data now available by leveraging SMAC and other emerging technologies.

Today digitally native retailers have fundamentally changed the business and operations landscape, and consequently moved ahead of the pack. Digital native retailers such as Amazon, Flipkart and Myntra are targeting customers and engaging with them in newer & innovative ways via a range of channels. Instead of dispensing mass promotions, digitally native retailers target every individual by triangulating data procured from multiple sources such as social media, browsing footprint, point-of-sale devices, in-store interactions, and app usage. This helps in ensuring an ongoing relationship with every customer in a meaningful and personalized manner. In addition, context-based targeting helps digitally native retailers predict customer behavior thereby requirements and purchases more accurately.

As per our research estimates, over USD 30 trillion of market capitalization would be disrupted by digitalization. This disruption will impact 7 key industry verticals including Retail, Media & Entertainment, Travel & Hospitality, BFSI, Telecom, Healthcare, and Energy & Utilities.

The exponential disruption in today’s world by the digital natives has made it imperative for traditional enterprises to transform. Their only solution for staying relevant is Enterprise Digital Transformation (EDT).

The Growing Need for Enterprise Digital Labs (EDL)

Enterprises are aware of this disruption and are expected to spend USD 70 billion to stay relevant in today’s day and age.  To transform digitally, enterprises are transforming key workflows by leveraging emerging technologies.

Today, it has become essential for enterprises to undertake digital transformation in order to align themselves better with the evolving business needs.  Therefore, assessing and building organizational readiness is crucial for an organization.  In order to build organizational readiness, enterprises are increasingly setting-up digital labs in geographies such as Bay Area and Bangalore, which has a large presence of the required digital skill set.

A majority of the companies are setting up their digital labs at these locations to accelerate digital transformation initiatives.  Some of the examples include:-

Lowe’s: Lowe’s has recently announced its plan to set up a digital lab in Bangalore, which will focus on the next-generation customer experience. It will lay emphasis on technology and analytics to provide customers with a more personalised shopping solutions and omni-channel experience.

Walmart labs: Walmart invested USD 300 million to buy Kosmix, which turned into Walmart Labs.  Setup in Bay Area, it focuses on Omni-channel retailing .It has been on an acquisition spree of new age start-ups  with the focus of doing everything possible to increase Walmart’s digital footprint.

American Express: American Express is planning to set up a new tech lab in Palo Alto to focus on big data, cloud computing, and mobile engineering. The company has development teams all over the world, but with the payments industry undergoing digital transformation, American express is focusing on accelerating the same within the organization and   Palo Alto lab will provide help by providing access to the talent and innovation going on in the Valley.

Why Bay Area and Bangalore?

Presence of a large number of product companies, a developed and mature ecosystem, availability in abundance of fresh as well as installed talent pool, and a widespread start-up culture has resulted in several traditional enterprises setting up their digital labs in the Bay Area. Whereas increased globalization of tech enterprises, a booming start-up landscape, proliferation of new-age technologies, availability of digital skill sets is driving to companies to set up digital hubs in Bangalore.

Change in the organizational structure

Often it is asked ‘What is the need of setting up a digital lab?’ ‘Why can’t the CIOs in an organization lead digital initiatives?’

Over the last decade, CIOs and the IT function in general have often been tasked as IT cost managers and service quality assurers. The mandate of the IT function has always been to run and manage. However, in digital initiatives, the mandate required is to ideate and incubate. A digital lab will help an organization turn its digital transformation initiatives into a program that can be repeated within the organization.

An Enterprise Digital Lab (EDL) will be led by Chief Digital Officer (CDO) reporting directly into CEO.  The structural change in the organization will prove effective in breaking silos that are typically created in traditional enterprises and help the organization be more responsive to changes in the market.  Also, the mandate for digital initiatives will directly come from the CEO and CDO, and will be in line with the overall organizations goals.

Setting up an EDL

How enterprises can set up these labs. We have identified the following 4 key enablers to set up enterprise digital labs:-

People: People with the right skillset will play a key role in digital transformation initiative undertaken by an organization. The important aspect that needs to be taken into consideration is differentiating Digital Talent from Typical IT talent to effectively structure your hiring, L&D and retention strategies. Digital talent should possess strong computing skills in Natural Language Programming, Machine Learning, and Artificial Intelligence.

Given that digital requires a very specific talent pool, it becomes essential to focus on hiring from USA, UK, India and China which are the major EDT talent hubs. San Francisco and Bangalore have the largest concentration of digital talent.

Hiring strategies need to be focused in these geographies to prove effective.

Process:  Digital solutions are best implemented incrementally and iteratively. It is imperative to build agile capabilities and adopt new agile frameworks that could cater to your organization’s complexities. Agile methodologies such as Scrum and Extreme Programming (XP) are time proven and tested approaches for building software in dynamic environments. However as large companies have always raised concern it holds true that these approaches typically work best with relatively small, self-organizing teams.

Large organizations need to scale agile which means going from a few agile teams to multiple or even hundreds of agile development teams. Scaling Agile above the team level is supported by various agile approaches including Lean Startup, SAFe, DAD, LeSS, or Radical Management.

Scaled agile framework (SAFe ) remains the most popular of all the approaches. Scaling Agile to the enterprise level is a challenge that SAFe aims to address as it combines agile approaches with more enterprise-centric organizational practices.

Technology: Technology is a key enabler in enterprise digital transformation. While IT modernization is imperative, it is time-consuming and enterprises do not have the luxury of time today. To improve the speed of digital implementations, enterprises need to look at an abstraction layer which will access and expose data. The API layer for instance effectively exposes the data to developers and partners and enables successful legacy system integration.

Additionally, Enterprises also need to adopt new age tools and technologies to effectively laying the foundation of the Digital Enterprise. At the data layer, enterprises are using new database technologies that cater to their digital initiatives effectively. For instance, enterprises are moving away from traditional RDBMS and bringing in newer databases such as MongoDB which helps enterprises build applications faster. MongoDB also supports scalability and provides various options to handle data consistency.

At the application layer, enterprises are using new age frameworks such as Sencha for quick and effective UI development. Enterprises are also realizing that data without a context means nothing and are adopting tools such as Tableau for contextualizing and visualization of data effectively. This is just a fraction of the new age tools and technologies available in the market and is definitely worth your time

Ecosystem Connect: The last enabler is the ecosystem-connect in which enterprises need to partner with start-ups, platform partners, service providers and universities to accelerate digital transformation.

To conclude, Digital era will play a crucial role in defining the coming years, where digital technologies and platforms will have a significant impact on how businesses are being done. Therefore, it has become imperative for the organizations to undertake digital transformation and evolve as per the need of the time.

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