This presentation discusses how organizations can build a digital platform and business. It recommends that organizations think differently by creating a portfolio of algorithms, data, and patents to exploit network effects. It also recommends innovating through a bimodal delivery platform to drive speed and scale, and modernizing the core IT infrastructure with an open platform to capitalize on network effects. Recommended actions include investing in a bimodal delivery platform, connecting across delivery modes, and adding IoT and ecosystems to the core infrastructure platform to architect a digital business.
We are now knee-deep in the era of digital business, with many companies reimagining their business and operating models based on digital capabilities. The 2016 Gartner CIO Survey reveals that leading businesses must shift to platform thinking in terms of their business models, delivery mechanisms, talent and leadership, in order to survive and thrive. We would like to thank the many organizations and individuals that generously contributed their insights and experiences to the research, including:
⹠The contributors to our interviews and case studies: Jeff Schreiner, Ardent Mills (U.S.); Jing Wang, Baidu (China); Claus Hagen Nielsen, COWI (Denmark); Bruno Cocchi and Cristina Cocchetto, Grupo Coin (Italy); Chris Saul, Hitachi Consulting (U.K.); Kotaro Takada, Huis Ten Bosch (Japan); Rence Damming, Irene Vanderkrol and Dennis Groot, KPN (Netherlands); Tobias HjÀrtsjö, LFV (Sweden); Alberto Campos, Localiza (Brazil); Paul Clarke, Ocado (U.K.); Kenneth Verlage, PostNord (Sweden); Tan Kah Chai, Sime Darby (Malaysia); and David Brinkman, Whirlpool (Italy).
âą Other Gartner colleagues: Peter Andersen, Marcus Blosch, Frank Buytendijk, Freud Carvalho, Youn Choi, Jeff Cole, Jan Eriksson, A.J. Goldsmith, Alan Goon, Shannon Greene, Carina Hansen, Robert Heselev, Heather Keltz, Kathy Kenny, Kazunari Konishi, Poh-Ling Lee, Changhua Li, Venecia Liu, Jack Mason, Jennifer Mitchell, Rika Narisawa, Else-Marie Ostling, Paul Proctor, Claudia Ramos, Guido Repaci, Alistair Tipple, Charlize Wang, Melissa Rossi Wood and Guang Zhou.
âą Other members of the CIO and executive leadership research group: Suzanne Adnams, Jim Browning, Owen Chen, Ed Gabrys, Partha Iyengar, Jorge Lopez, Eiichi Matsubara, Alvaro Mello, Mary Mesaglio, Simon Mingay, Tomas Nielsen, Mark Raskino, Andrew Rowsell-Jones and Ansgar Schulte.
In "Taming the Digital Dragon: The 2014 CIO Agenda," we introduced the impending wave of digitalization, and asked CIOs to think about renovating the core, building bimodal IT capability and creating powerful digital leadership. In the 2015 CIO Survey, we confirmed that digitalization was coming to all enterprises, and in "Flipping to Digital Leadership: The 2015 CIO Agenda," we advised CIOs to adopt radically different approaches to information and technology leadership, value and risk leadership, and people and culture leadership.
Data from the 2016 CIO Survey and the 2015 CEO Survey (see charts) shows that we are now deep in the era of digitalization, and getting ever deeper, with the average CIO expecting digital revenues to grow from 16% to 37% in the next five years. Similarly, public-sector CIOs are predicting a rise from 42% to 77% in digital processes. Trends in the 2015 Gartner Board of Directors Survey reflect similar results.
Survey responses in this figure show that the top impacts of digital are still relatively operational for most businesses: driving revenue through better operations, using digital channels more and forming tighter partnerships. Much of this may be about doing the same thing digitally rather than reimagining the possibilities in the light of digital capabilities.
Businesses and government agencies are looking less like fixed "systems" and more like platforms. A systems view of a business envisages it as having a very clear inside and outside, with suppliers providing inputs, and internal people, assets and capabilities creating products and services through "step-fixed" business processes â fixed in the short term but changeable over time at significant cost and risk â and delivering the products and services to customers. The function of the systems business model is to deliver value to the customers and retain some of that value as profit.
A platform provides the business with a foundation where resources can come together â sometimes very quickly and temporarily, sometimes in a relatively fixed way â to create value. Some resources may be inside, permanently owned by the company; some will be shared; and some can come from outside. The value largely comes from connecting the resources, and the network effects between them. Customers choose the value that they experience, and the business model focuses equally on generating value and learning.
Economists have noted that even the biggest and most successful companies in the world are looking more like platforms and less like product factories. Marshall Van Alstyne of Boston University and MIT, a leading thinker on the topic of platform businesses, has said that "platforms beat products" and that 14 of the top 30 global companies are in some sense platform businesses, with their value being driven by ecosystems.
Platforms require different economic thinking, and are potentially very powerful, in that their network effects can create tremendous momentum, lending considerable value to first movers.
Note: Need to check and clean-up this visual for consistency with other Gartner positions in peer review â particularly Don Scheibenreif and Steve Prentice
Not every business is ready to be a platform business due to its economic model, but the concept of platforms is important to all businesses â public or private sector, large or small, information-intensive or physical-asset-heavy. Key aspects of a platform business that distinguish it from the more traditional systems view of a business are as follows:
âą Creating value through connections and interactions rather than ownership of individual resources
âą Flexible, dynamic connections rather than fixed hierarchies
âą Semiporous boundaries rather than hard delineation of inside and outside, exposing components that are not yet products to the outside, and allowing resources to be accessed from the outside
âą Supporting continuous learning and change rather than focusing on "running the machine" with expensive step-fixed change
Technologists have long understood the notion of platforms in terms of internal architectures (buses, APIs, object orientation, modularity, reusability, etc.) and technology products and services. The challenge is that sometimes these platforms have been designed for technical elegance rather than business value. Technical platforms are a view from the bottom; platform economics is a view from the top. The change happening now, and the insight gained from this year's CIO survey is that platform concepts need to penetrate, and are penetrating, all aspects of the business. Specifically, the CIO survey results and case study interviews reveal the need to exploit platform effects in managing talent and delivery, and in executing leadership. The rest of this report shares powerful practices, case examples and action plans around exploiting platform effects in these layers of business.
The need to innovate is driving penetration and deepening of the bimodal construct. Bimodal captures the platform characteristic of continuously building and refactoring capabilities for the future.
Not every business is ready to be a platform business due to its economic model, but the concept of platforms is important to all businesses â public or private sector, large or small, information-intensive or physical-asset-heavy. Key aspects of a platform business that distinguish it from the more traditional systems view of a business are as follows:
âą Creating value through connections and interactions rather than ownership of individual resources
âą Flexible, dynamic connections rather than fixed hierarchies
âą Semiporous boundaries rather than hard delineation of inside and outside, exposing components that are not yet products to the outside, and allowing resources to be accessed from the outside
âą Supporting continuous learning and change rather than focusing on "running the machine" with expensive step-fixed change
Technologists have long understood the notion of platforms in terms of internal architectures (buses, APIs, object orientation, modularity, reusability, etc.) and technology products and services. The challenge is that sometimes these platforms have been designed for technical elegance rather than business value. Technical platforms are a view from the bottom; platform economics is a view from the top. The change happening now, and the insight gained from this year's CIO survey is that platform concepts need to penetrate, and are penetrating, all aspects of the business. Specifically, the CIO survey results and case study interviews reveal the need to exploit platform effects in managing talent and delivery, and in executing leadership. The rest of this report shares powerful practices, case examples and action plans around exploiting platform effects in these layers of business.
The top areas of new technology spending (see figure) make it clear that significant spending and opportunity continue in various aspects of big data and analytics, and that cloud continues to have significant momentum, As has always been the case with business intelligence, the key to big data is to point it at opportunities to harvest real business value from insight.
Infrastructure and data center spending continues to be very high on the list, confirming the large amount of expenditure it continues to represent. Note that enterprise approaches to digital are more varied and unique than approaches to traditional IT. The top five priorities represented 55% of the priorities mentioned in 2014, only 47% in 2015 and an even smaller 44% in 2016. This implies that the pressure is on to be smart and selective in choosing digital focus.