How to Start Digital Reinvention?

Data Is the Basis of Competitive Advantage

Many corporate customers promote new customer services from various perspectives by strengthening the use of AI and the cloud. Some companies move data to the cloud, some collect data needed for data analysis, or try to introduce AI technology into the company. Today, we are gradually entering another stage of digital reinvention, driven by enterprises, and digitalization. AI will be more scalable and embedded in every corner of the enterprise.

Expanding the scale of digitization and AI, as well as hybrid cloud applications, will be the key to digital reinvention. It will be important to establish an AI platform to examine the AI life cycle. The integration and management of cloud environments has also become a challenge.

The following five strategic considerations for digital reinvention of enterprises can be summarized:

• Outside in:
  According to the needs of customers, the enterprise reengineers the customer experience digitally, and optimizes, improves or changes applications and services.
• Inside out:
  Companies start with digital reinvention of processes and data, modernize their core applications, and realize a flexible infrastructure.
• Business platform:
  The above two are connected through a business platform, which is data-driven and has AI functions for data analysis and decision-making.
• AI platform:
  Just as traditional software requires a full life cycle development platform, companies also need an AI platform, because AI also needs to track its life cycle.
• Information architecture:
  Companies spend 80% of their time manufacturing data, but without IA (Information Architecture), there would be no AI (Artificial Intelligence). Expanding AI requires a corresponding information infrastructure.

Today, 20% of enterprise applications have been transferred to the cloud. This part is mainly based on customer-oriented applications, but the remaining 80% are critical applications. This part of cloud migration requires a higher breakthrough point. Cloud applications combined with digital reinvention are hybrid, multi-cloud, open, secure and have unified management. They use an open, co-creation method to provide enterprise customers with a unique open cloud solution. Cloud services empowered by AI technology will help enterprise customers quickly digitize and scale, and enable AI to be implemented in every aspect of the enterprise, provide a more innovative customer experience, and create a unique corporate competitive advantage.

Technological innovation has completely changed the overall situation of the enterprise in many aspects. Lack of digitization may seriously harm existing companies in many industries. Companies that have not adopted technological innovation may reduce revenue growth by half and pre-interest and tax by one-third. (EBIT)

Matters Needing Attention in the Process of Digital Reconstruction

Existing companies can reverse the digital disaster and recreate a more profitable growth method, by being willing to adopt a more active approach, adjust the company’s business activity portfolio, and using new business models to strengthen other activities.

In addition, existing companies should wisely choose the "platform approach", which is to act as a transaction intermediary for other participants (such as transactions between suppliers and consumers) to create value. Doing so can eliminate gaps in the industry chain and open up ways to create more value. We call this method "digital reconstruction".

1. Pay attention to the coming storm:
   Usually, the ownership of existing companies will be disrupted because of their signals of changing market trends. Conversely, companies that understand the severity of the digital storm are the most aggressive in taking the offensive. Companies in the most advanced digital industry, such as the high-tech industry, have already felt the pressure of digitalization and are more willing to take positive actions.
2. Understand all threats and risks, not just worry about the risks from startups:
   One of the common mistakes made by existing companies is to only look at the turbulence signals from the digital new entrants. But as long as there is a digital start-up company in the industry, there is likely to be digital reinvention of another existing company taking shape. If a company wants to become a digital reinventor, it would be wise to not only continue to pay attention to the practices of digital new entrants, but also to carefully observe the traditional competitors that may become digital reinventors. Attention should also be paid to the cross-industry competition of digital reinventors in other industries.
3. Adopt a dual attack strategy:
   Core and diversification. Many companies now intend to consolidate their core business first, and then attack through diversification. A typical existing company will only put 30% of its resources on activities outside of its core business. On the contrary, true digital reinventors are betting on the resources to revise their core business models as much as they invest in resources outside the core business. But it may be a mistake to invest only in non-core businesses. First of all, revenue and part of the profit growth may be diluted by diversification, because the company will spend time to open up territory in each new field. In addition, the company's resources and capabilities outside of its core business are not as comprehensive and deep-rooted as in the existing market. Secondly, as we discussed earlier, the core business is still the lifeblood of many companies, so the digital reinvention of the core business may still bring better growth. When digital reinventors take active actions in both core and digital businesses, both total revenue and profit growth will increase.
4. First adjust leadership skills:
   Many existing companies still face major obstacles in their digital journey. In some respects, this is normal, because existing companies have successfully established stable conventional practices and strong capabilities for many years of operation. Generally speaking, when a company has the capabilities, the more successful it is to create assets that cannot be replicated, the more difficult it is for the company to give up these capabilities. However, we also found in statistical analysis that when leaders are committed to taking action, companies are more likely to embark on the path of digital reinvention. For example, the CEO strongly supports the reengineering plan, or the senior executive committee assigns specific managers to take charge of this transformation process etc.
5. Priority to choose demand-centric business activities:
   When an existing company converts its business model to a platform approach, the rate of return will increase. If the existing company promotes other indicators of digital reinvention, the effect will be more significant. And it also contains two nuances. The first difference is that the reason why digital attackers are usually more successful than incumbents is that the rate at which they put the platform model as the priority is 2.5 times that of the incumbent companies that choose digital reinvention. The second difference is that if the platform model refocuses on the demand side, the possibility of becoming a digital reinventor and creating better profits will increase. The secret of digitization is the result of huge potential demand through network effects.
6. Experiment with cutting-edge technology:
   Only when companies master the correct digital technology structure can digital reinvention be effective. As with other similar research results, we also found that digital reinventors will confirm that all digital technologies have been adopted and promote these technologies to the entire organization to support key applications and processes that help achieve their goals. In addition, they are already studying and incorporating emerging artificial intelligence technologies, such as upgrading machine learning algorithms to deep learning algorithms, or investing in a new generation of smart robots to create advantages. Surprisingly, there is no obvious evidence from the data that companies have made major advances as a result. Companies that have never mastered the first wave of digital technology, such as social media or mobile technology, and have directly entered artificial intelligence technology, rarely get a full return on investment in artificial intelligence. Companies must quickly become good at each generation of technology to become digital reinventors, and obtain a good return on investment in technology.