What Is Driving the Digital Economy?By Eileen Feretic Print
Technologies by themselves are not playing the biggest role in supporting and growing the digital economy: New business models are playing the greatest role.
Lindsey Anderson is the chair and general manager of the MIT Sloan CIO Symposium, taking place on May 18, 2016, at MIT in Cambridge, Mass. His mission is "to bring together the academic thought leadership of MIT with the hands-on experience of leading global CIOs." Before chairing the symposium, Anderson worked for Monster, PUMA, Sybase and Underwriters Laboratories. He also served on the board of the MIT Sloan Boston Alumni Association and was involved with the MIT Sloan Software Symposium. Anderson took some time off from his many responsibilities to answer Baseline's questions about technology and the digital economy.
Baseline: Which technologies will play the biggest role in supporting and growing the digital economy?
Lindsey Anderson: The cloud and big data have been tremendous enablers of the digital economy, and they will continue to have an impact as they evolve and develop. But I think the next breakout technology will be the IoT [Internet of things] because it will impact a wide range of industries—insurance, health care, automobiles, appliances, etc., and it will unleash new thinking around business models.
But technologies by themselves are not playing the biggest role in supporting and growing the digital economy—new business models are. These models are being created through new combinations of people, processes and technology. Yes, this old triad still matters, now more than ever. Think new combinations, not just technology.
Michael Nilles, recently promoted to Schindler’s chief digital officer and the 2015 MIT Sloan CIO Leadership Award winner, offers a great example of how new business models are driving the digital economy. Schindler was an old-line manufacturer of elevators that reinvented itself into a mover of people, moving more than 2 billion people a day.
Schindler found a way to move office workers more quickly and effectively to their appropriate building floor. As employees enter their office building, their smart phone application automatically tells them which elevator to use.
Here is how Schindler achieved this innovation through new combinations:
People: Recognizing the importance of digital, Schindler created a separate digital business, combining experts from outside the company with internal business experts. This team was charged with rethinking Schindler’s business.
Processes: Schindler developed innovative processes that enabled it to get people on the right elevator.
Technology: Schindler developed smart phone apps that automatically communicated with building elevators.
In summary, new combinations, enabled through technology, drive the innovation of the digital economy by spawning new business models.
Baseline: How will digital disruption change the way companies conduct business? How will it change the competitive landscape?
Anderson: According to Leading Digital, a book written by Didier Bonnet and MIT Sloan CIO Symposium speakers George Westerman and Andrew McAfee, companies that thrive in the digital economy are 26 percent more profitable than their industry peers. These companies are thriving by improving customer experiences, optimizing operations and creating new business models—all through superior digital expertise and leadership.
The 26 percent profit differential will shrink because the digital laggards will fall by the wayside, leaving the digital winners to compete among themselves. This is not as grim as it sounds: There is still time for the digital laggards to catch up … but not much time.
We are already seeing the impact on the competitive landscape. According to R “Ray” Wang, principal analyst, founder and chairman at Constellation Research, half of the Fortune 500 companies on the 2000 list have since fallen off as a result of mergers, acquisitions and bankruptcies due to a failure to adapt digitally. Don't get cozy, he warns the Fortune 500, it’s do-or-die time for digital disruption.
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