Have You Embraced Digitalization?

Digitalization, or digital transformation, is one of the top enterprise trends being discussed today, but according to recent research from McKinsey & Company, "the forces of digital have yet to become fully mainstream."

An article detailing the research, "The Case for Digital Reinvention," provides a snapshot of 10 industries and the state of digitalization within each. On average, the article states, industries are less than 40% digitalized, "despite the relatively deep penetration of these technologies in media, retail, and high tech." This blog will focus on data from the McKinsey report and explore what ROI enterprises are seeing as they invest in digital transformation initiatives.

Where Are You?

Digitalization has begun to transform many businesses and industries. Digitalization's influence and impact on an organization's economic performance has delivered positive results, but the transformation is not nearly complete. Some industries that report digitalization success over 50% penetration are healthcare systems and services (51%), high tech (54%), and retail (55%). Media and entertainment lead with 62%.

If you are in telecom (44%), professional services (42%), financial services (39%), automotive (32%), or consumer packaged goods (31%), there's more work to be done. The McKinsey article confirms that by reducing economic friction, digitalization fosters competition that puts pressures on revenue and profit growth.

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Positive ROI Not Guaranteed

Executives need to determine how they will monitor the ROI of digital investments. McKinsey discovered that the results are not the same for every organization. Some participants in each industry are earning significant returns, while others in the same industries are experiencing returns below the cost of their digital capital investment. There will always be organizations in any industry that out performs their competition, as is demonstrated in the chart below displaying the wide range of ROI accomplishments.

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This also leads to the conclusion that some organizations are investing in the wrong areas or investing the wrong amount (too much or too little) in the right ones. It's also possible that the competition has negated the investments through better digital investments.

Where to Invest

Digital technologies have expanded the available number of investment options. The McKinsey report investigated five dimensions of digitization's penetration into industries: products and services, marketing and distribution channels, business processes, supply chains, and new entrants acting in ecosystems. In investigating these, it noted that there appears to be mismatches between opportunities and investments.

The investments and the ROI produced can be negated by the infrastructure used to support the digital business. Even if you have no direct responsibility for the digital investment, the infrastructure used can seriously impact the digital investment success.

Focus on Business Continuity

If the infrastructure does not work, there is no ROI. The goals for your infrastructure are resiliency, agility, adaptability, robustness, and business continuity. The concept behind business continuity is to provide alternative ways to continue the business, to avoid interruptions, or restore service rapidly. So you need to take a look at those elements that could fail easily and interrupt your digital services.

While any component can malfunction during system operation, there are three candidates that typically cause most failures. These are in order of most likely to least likely:

  • Disk drives -- These types of mechanical systems tend to malfunction as a result of becoming "worn out."
  • Power supplies --These electrical components tend to age and are often prone to heat-induced failures.
  • Memory -- An electrical component that can sometimes be forgotten, a single memory error can remove the unit's entire memory from operation.

You can warehouse these components and replace them as needed, but this will cause an outage. You could also implement fault tolerant configurations that can be switched from a failed to live component without interruption. In fault tolerant configuration, the use of "dual" components can help minimize and mitigate the failure of standalone components. The common condition that causes the most failures across all three components is fluctuation in the electrical power used to run the hardware. Surge protectors can help forestall the fluctuation issue, but isolating the hardware through the use of an Uninterruptible Power System (UPS) is usually the best solution.

The same fault tolerant configurations can be applied to the network connections. You should connect to two different providers over different physical paths. If voice is a major component of your digitization implementation, then you should have fault-tolerant dual session border controllers (SBCs). If you have SBCs properly configured, they can be used to create the fault-tolerant provider connections. The SBCs can mirror each other, send each other "keep alive messages," and switch uninterrupted from one SBC to the other.

(For more on the topic of resiliency, see related blogs, "How to Approach Resiliency Planning," and "Verifying Resilience.")

Focus on Security

The second problem area to focus on is a data breach. Malware can be inserted in your endpoints, network devices, or servers, and can go undetected for months. The end result is that once the malware is detected and the business notifies its consumers and internal operations, there is a loss of reputation and a hesitancy to use the digitized service. Interruptions and poor performance for the service can defeat your digital implementation.

Ransomware can prevent access to your information, which will keep you from continuing services. This is a form of failure that is worse than having a component failure or a network connection failure. There is a period of time when you don't have access to your information. Paying the ransom may return access to your information, but as a cost to your business.

Your digital projects will be on hold and by the time that you fix the ransomware you may have lost all the benefits of your digital projects. Ransomware is most likely the product of poor user security behavior. To keep security problems at a minimum, how you train for user security is important (see "IT Security: Training and Beyond").