Dec 23, 2014
A recent article in Forbes is just the latest in a series of pieces extolling the virtues of being a digital business. The buzz created by all of these articles raises a series of important questions: What is a digital business? Why do I care? What does it mean to me as a technologist?
The Forbes article defined digital business as “The creation of new business designs by blurring the digital and physical worlds. It promises to usher in an unprecedented convergence of people, business and things that disrupts existing business models – even those born of the Internet and e-business eras.” While I don’t have any fundamental problems with that definition, in an e-book on the topic of digital business that I published on Amazon earlier this year I stated my belief that the phrase digital business is relatively new, has no universally accepted definition, and continues to evolve. In that e-book I also pointed out my belief that while the exact definition of digital business will continue to evolve, that a digital business has four key pillars:
But why should any of us should care about the emergence of digital businesses? According to Dr Richard Foster of Yale University, the long and robust life of business is endangered. “The average lifespan of an S&P 500 company has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today.” Foster also stated that “By 2020, more than three-quarters of the S&P 500 will be companies that we have not heard of yet.” A less academic answer to why I think you ought to care is based on the fact that I have a lot of painful experience working for companies that have dropped out of the S&P 500. Two such companies, Prime Computer and Digital Equipment Corporation, no longer exist. I also used to work for AT&T when it employed over a million people. While AT&T is still a member of the S&P 500, the employee base is a fraction of the size it was in the early 1980s. Combining the academic answer with the not so academic answer yields a sobering conclusion: A changing business environment often leads to businesses either downsizing or going out of business. In either case, jobs are lost. In addition, over the last few decades the pace of business change has been accelerating and the emergence of digital business is likely to further increase that pace.
It isn’t possible in a single blog to definitively answer the question about what becoming a digital business means to a technologist. That said, I want to start a conversation on that topic by giving an example of a traditional company that is in the process of transitioning to become a digital business. The example I will give uses the concept of an omnichannel. If you aren’t familiar with it, the term omnichannel refers to the seamless melding of the advantages of in-store (brick and mortar) shopping with the information-rich experience of online shopping.
The example of a traditional company that is in the process of transitioning to become a digital business involves Home Depot. According to an article in CIO magazine, Home Depot has already implemented:
In addition, Home Depot has started to use analytics to help them with more competitive pricing. Towards that end, in 2012 the company bought an analytics startup and is now using that technology to monitor the online pricing of its rivals and to adjust its own prices in real time.
This is my last blog for 2014 and I want to use it to tee up some of what I will be blogging about in 2015. In 2015 I will continue to write about topics such as wide area networking, SDN and NFV. Next years’ blogs, however, will have more of a focus on identifying the business value associated with these topics whether that value is to a traditional bricks and mortar company or to one that either already is, or is in the process of transitioning to becoming a digital business. Next years’ blogs will continue to have a strong focus on what all of this means to our jobs – no matter what type of company we work for.