Strong countries need strong enterprises. Today’s strong enterprises do not necessarily have a large workforce or huge facilities. In the competitive market, it is not the bigs who swallow the smalls, but the fasts who swallow the slows instead.
Competitiveness is an important criterion to evaluate the strength of the business. It is expressed in four factors: (1) access to capital, (2) sources of raw materials, (3) degree of technology application, and (4) management level. It can be seen that two of these four factors are related to technology (elements 3 and 4). According to an analysis by Innosight, a consultancy, 50% of S&P 500 companies will be replaced after 10 years. Clearly technology is the key for companies to keep up with the rapid changes of the market.
Didital transformation and digital enterprises
In this context, digital transformation plays an important role in the technology application strategy of every enterprise, regardless of the industry. Digital transformation is the application of information technology to the operations of enterprises in order to make a strong transformation and achieve outstanding efficiency. According to forecasts by analyst firm IDC (2019), spending on digital transformation worldwide will achieve a five-year compound annual growth rate of 17.1% and reach $ 2.3 trillion in 2023. At the same time, digital transformation investment share of total technology investment will hit 53%. In other words, digital transformation is growing extremely fast and will occupy the number one position in technology investment in the coming years.
Correctly, digital transformation is not a private game for technology giants. Thanks to the Industrial Revolution 4.0, thanks to the explosion of the Internet, every business is more equal in this playground. Every business has the opportunity, the ability in the digital transformation, with the goal of building their companies as a digital enterprise.
Specifically, a digital enterprise needs to build for itself (1) an organizational and business model, (2) business processes, and (3) products, goods, and services on a digital system, on the basis of advanced technology platform. You can refer to a digital enterprise model (in the figure below). The horizontal, as well as vertical business processes (belonging to each industry) of the enterprise, are integrated throughout the value chain from suppliers, sourcing & procurement, production… to sales & distribution, and customers. This digital business core system is built on advanced technologies such as Internet of Things (IoT), cloud computing & mobile support, automation, artificial intelligence & big data, spatial data integration…
As we all know, digital transformation is to transform the way businesses operate on the basis of information technology (IT) systems. Therefore, it must stem from business issues. In other words, the core of digital transformation is the business system of the enterprise, often referred to as ERP (Enterprise Resource Planning).
Since the 1960s, information technology has been applied to business management to automate individual functions such as accounting, sales, procurement… In the early 1990s, the concept of ERP was born to provide a central database storing all business information of the enterprise from supply, warehouse, production, sales… to financial accounting. ERP helps enterprises standardize business processes and objects to be managed such as materials, products, customers, suppliers, cost centers, profit centers… so that managers can evaluate their business in many dimensions. Standardize processes helps enterprises operate professionally, without arbitrary, and avoid errors. As the Industrial Revolution 4.0 profoundly affects every sector of industry and life, ERP has also strongly developed towards that trend. Since 2011 and especially in recent years, ERP solutions have changed dramatically in terms of technology to provide smarter, more convenient, stronger capabilities to meet the digital transformation goals of businesses.
In the past, IT application in business required the purchase of hardware infrastructure, powerful servers, or complex data centers… Nowadays enterprises have more options. With cloud computing, ERP is no longer a system only for large enterprises. Small and medium-sized businesses, even without a dedicated IT team, can completely follow digital transformation. Outsourced IT infrastructure helps them to streamline their organization, focus resources on their core businesses, and optimize investment costs for technology. Large ERP software solutions such as SAP, Oracle, Microsoft Dynamics… support this trend. Oracle explicitly converts their products to cloud or hybrid instead of on-premise systems. SAP provides a full range of cloud-based management solutions such as HANA Enterprise Cloud (ERP), Hybris (CRM), Ariba (SRM), SuccessFactors (HR)… Microsoft integrates ERP and CRM in Dynamics 365 on Azure platform. So enterprises can avoid the worry about IT infrastructure and a dedicated team of infrastructure technicians when they want to do digital transformation.
Support for big data processing and analytics plays an important role in digital transformation solutions. IDC’s Data Age 2025 report predicts global digital data will grow from about 40 zettabytes in 2019 to 175 zettabytes in 2025 (with 1 zettabyte corresponding to 1 trillion gigabytes). Of the 175 zettabytes, over 60% are enterprise data. The number of digital interactions generated per person per day will increase from 1426 in 2020 to 4909 in 2025 – that is about 1 digital interaction generated every 18 seconds. Internet explosion, IoT applications, sensor connections, and automation systems… generate huge amounts of data for every business. The ability to manage that amount of data and exploit the value from that to make a benefit for the enterprise is an indispensable requirement for today’s information system. For example, SAP develops HANA database and S/4HANA application platform, which integrates data warehouse and analytics features, for this purpose. HANA technology allows transactions to access data inside of memory (in-memory) instead of on disk like traditional databases. As a result, it speeds up data processing and data management scale. On HANA platform, SAP provides a wide range of analytical applications including business intelligence, planning, and predictive support.
With digital enterprises, the data generated are always diverse. Not only the transaction data such as finance, sales, materials… but they include also data of location, image, sound… Therefore, the enterprise management system needs to integrate and handle these diverse, multi-source data. For example, a business intelligence system that integrates spatial data (as shown in the following figure) allows us to expand our ability to analyze business indicators not just in the usual transactional dimensions (such as organizational structure, products, customers…) but also in spatial dimensions (such as geographical coordinates, administrative areas…). As a result, the enterprise consolidates all of its data including transaction data (such as finance, materials…) and technical data (spatial data).
Where to start digital transformation?
It is a mistake to assume that digital transformation has to be done for all business operations. It is also wrong to think that there is a common solution for all enterprises. Each enterprise has its own problems and business plans. Digital transformation must start from those particular problems. Business leaders need to clearly identify the need for digital transformation to solve problems and meet their business plans. Once having defined the needs, we can only shape the future system, avoid going in the wrong direction, and wasting investment resources.
In the next step, enterprises must determine the feasibility of realizing the transformation. Feasibility evaluation includes answering: Whether the available solutions meet the transformation needs? Whether the company’s resources are capable of performing it? Company’s resources include not only finance but also people. On the people side, the first element is the leader, who must have the highest determination to carry out the transformation, must be the most responsible for the project. Experience shows that large IT projects where leaders entrust to subordinates are highly likely to fail. Next the enterprise must have sufficient resources to receive, operate, and maintain the system.
Once the feasibility is fully evaluated, the new project begins with tasks such as setting up a project team, scoping, bidding, procurement, implementation, etc. For digital transformation, the most important factor lies in people. They are the people involved in building the system and taking over after the project operation. Because the project changes the way people work, sometimes affecting almost the entire business, the management of human transformation is vital in the digital transformation. A new working culture for the enterprise must be built on the basis of a digital system in which every employee must change himself or herself to adopt the new system and work with others on it. For an enterprise with lots of employees, this is never easy. So before, during and after the project, a dedicated team and processes for organizational change management are always needed.
Digital transformation is an inevitable trend of all businesses in the Industrial Revolution 4.0. Fortunately, nowadays enterprises, big or small, regardless of the industry, are able to approach this trend. Solutions and technologies increasingly support digital transformation more smoothly. Being determined to do or not, knowing how to realize, those are entirely in the hands of the enterprises.
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