It’s no surprise that the first wave of digital transformation focused on the most visible customer-facing functions, but IT leaders are now turning their attention to reinventing heart-of-the-business operations.
For many in the business and tech worlds, the word digital conjures thoughts of the marketing, sales, and customer experience initiatives that have dominated business mindshare—and investments—to date. It only makes sense given the imperative for organizations to improve engagement with their key constituents, be they customers, patients, citizens, or business partners.
However, savvy CIOs quickly realized that any effort to transform their customer-facing systems and processes would be limited without equally effective and integrated back-office operations. That digital interconnectedness is required to make key data and intelligence residing in the core—related to pricing, product availability, logistics, quality, financials, and more—available to customercentric operations.
Tying together enterprise functions and the core is a start, but it only scratches the surface of the digital transformation opportunity. Over the next 18 to 24 months, CIOs, CFOs, and supply chain leaders will begin developing new digital capabilities in their core systems—and not simply new point solutions or shiny digital add-ons. They will begin constructing a new core in which automation, analytics, real-time analysis and reporting, and interconnections are baked into systems and processes, fundamentally changing how work gets done.
More Meaningful Change
Efforts to digitize core business processes are hardly new. Over the last two decades, companies have invested in ERP implementations, large-scale custom systems, and business process outsourcing to transform their core operations. Some of these investments delivered tangible benefits, such as standardized workflows and automated tasks. Others created unintended side effects, such as subpar user experiences, rigid operating procedures, or even stagnation because needed changes were too costly or difficult to implement.¹
This time, it’s different. In the coming months, CXOs will target core business areas such as finance and supply networks for meaningful change. Rather than focusing on discrete tasks or individual tools, they will broadly explore digital technologies capable of supporting global ecosystems, platform economies, complex operational networks, and new modern workplaces.
Individual emerging technologies will still have a role to play as essential enablers. Blockchain’s distributed ledger, for example, has promising implications for trade finance, supply chain validation processes, and other areas. Yet blockchain alone is only one component in a more dynamic, interconnected core stack. As companies begin their core transformations, it will be critical to understand how individual innovations can work in concert with existing capabilities to drive business value.
The Future of Digital Finance
New core principles can be applied to all heart-of-the-business functions and processes. However, focusing on a couple of areas with long histories of technology-enabled transformation, such as the finance function, can help to illustrate the changes ahead.
For finance organizations, the digital revolution presents both significant opportunities and nagging challenges. Exploding volumes of structured and unstructured data contain insights that could transform business and operating models. By harnessing digital technologies and enhancing existing analytics capabilities, finance could become the enterprise’s go-to source for strategic advice. At present, however, many finance organizations struggle with the data they have, lacking the technologies and skill sets to capitalize on this opportunity.²
Nonetheless, forward-thinking CFOs and CIOs are charting a course toward a digital future built on interconnected and automated systems, unified data sets, and real-time analysis and reporting. Though the specifics of the digital finance organizations will vary by company, they will share the following characteristics³:
Agile and efficient. New product integration and upgrades are faster and more effective thanks to the utilization of public, private, or hybrid clouds.
Increasingly automated and intelligent. Robotic process automation (RPA) enables increased efficiencies and lowers operating costs. Cognitive computing capabilities simulate human intelligence, grinding through mountains of data to automate insights and reporting in real time.
More detailed and accessible insight. Predictive algorithms and visualization technologies enable more seamless oversight, planning, and decision-making by planners and analysts. Advanced analytics illuminates connections and trends buried within data for more detailed, accurate, and efficient reporting.
Built for big data. Next-generation technical architectures can handle massive data sets without sacrificing availability, timeliness, or the quality of books and records.
Dynamic Digital Supply Networks
The digital revolution is driving profound change in every core function, but perhaps none more so than the supply chain. The traditional supply chain was built to support a linear progression of planning, sourcing, manufacturing, and delivering goods. Supply chain systems enabled large numbers of transactions for each of these functions and their dependencies.
With the rapid digitization of the enterprise, this model is giving way to a more fluid system in which data flows through and around the nodes of the supply chain—dynamically and in real time. This interconnected ecosystem economy calls for more efficient and predictive digital supply networks (DSNs) with the following characteristics:4
Always-on agility and transparency. Integrating traditional data sets with data from sensors and location technologies provides visibility into all aspects of the network. DSNs can dynamically track material flows, synchronize schedules, balance supply with demand, drive efficiencies, and rapidly respond to changing conditions or disruptions.
Connected community. Multiple stakeholders—suppliers, partners, customers—can communicate and share data directly.
Intelligent optimization. By connecting humans, machines, and analytics, DSNs create a closed loop of learning, which supports on-the-spot human-machine decision-making and solving challenges such as commodity volatility, demand forecasting, and supplier-specific issues.
Holistic decision-making. More transparent supply chain processes result in improved visibility, performance optimization, goal setting, and fact-based decision-making.
Where to Begin
Creating a new core is neither a marathon nor a sprint—rather, it’s a series of sprints toward a long-term goal. As you begin exploring digital possibilities, the following steps can help you get off to a good start.
Study the masters. If you haven’t already, create a small cross-functional team to help you understand digital transformation possibilities. Chances are, peers in other parts of the company are already leading digital initiatives. Talk to your colleagues and learn from their successes—and their failures.
Map the journey. Make a transformation plan for your function, focusing first on applications that have proven clear winners in other organizations. This can serve as a master blueprint, but remember to execute it one step at a time. Things are changing fast in the digital world.
Be realistic. Before committing to bold visions of digital grandeur, consider the hardest part of the equation: Where do your people, organizational structure, processes, and technology fit in this brave new world? Many established assets can serve as building blocks for the new core, but make sure any modernization needs are well understood before provisioning budget and locking down milestones.
Start cleaning data. Data is the lifeblood of the digital core—and a potential source of trouble in any new core initiative. The data needed for use cases may be siloed and rife with misspellings, duplicate records, and inaccuracies. Consider creating a cognitive data steward to automate the tedious process of resolving data issues.
Many boardrooms may lack the appetite to fund expansive—and expensive—transformations, particularly when the focus is back-office operations. Nonetheless, as digital’s disruptive march across the enterprise continues, digitizing the core presents a host of potentially valuable opportunities to redefine heart-of-the-business work and establish a better foundation for customer-facing innovation and growth.
—by Bill Briggs, chief technology officer, Deloitte Consulting LLP; Steven Ehrenhalt, principal, Deloitte & Touche LLP; Doug Gish, leader, Deloitte Consulting LLP; Adam Mussomeli, principal, Deloitte Consulting LLP; Anton Sher, principal, Deloitte Consulting LLP; Vivek Katyal, principal, Deloitte Advisory; and Arun Perinkolam, principal, Deloitte & Touche LLP