You study a situation, you make assertions about what will likely happen -- and then you see real-world examples of those predictions becoming reality.
The big notion? Traditional enterprises will be forced to recognize their aggregated information as a strategic asset, much in the way they think about money and people.
Enterprises with digital business models already view the world this way. Traditional enterprises are evolving into digital ones. Ergo, as they evolve, one of the visible markers should be a pronounced shift in how they view their information resources: from ancillary to strategic.
I now have enough observed examples at hand to claim at least partial validation of this effect. And, as a benefit, I think I can now start to make more confident assertions about what more organizations will be likely seeing in the next few years.
Inside The Digital Business Model
Not surprisingly, the best examples of digital business models can be found inside businesses that were "born digital", e.g. they never really existed in the physical world. Familiar names like Google, Amazon, eBay, Facebook et. al. fit this bill, but the pattern is actually much broader.
Take oil exploration, for example -- it's essentially a digital business. As is being any sort of media company these days.
Since I wasn't able to find a generally accepted model of how a digital business model is constructed, I've sort of come up with one of my own, discussed more fully here.
What makes it digital? The majority of the inputs are information-based. The majority of the outputs are information-based.
If you're in the IT business, digital businesses are where most of the really interesting IT work is being done: web-scale, cloud, big data, devops, etc. -- all are concepts that originated with these organizations.
Because when information is your business, you take IT very seriously indeed.
The Traditional View
I can easily spot a traditional business model, because information is simply seen as an adjunct to the primary business at hand, which is delivering a product or a service. They build stuff, and they use some information to help a bit. Or, perhaps, they deliver a service, and they use some information to help us do that better.
As a result, IT tends to be viewed as an expense to be controlled, not an investment in growing the business.
In these traditional business models, "resource assets" are thought of primarily as "people and money".
Clearly, any organization runs on smart people: talent, skills, process know-how, relationships and so on. Most successful organizations put an enormous amount of effort into maximizing the value of their talent pool: hiring, on-boarding, continuing education, career paths, use of outside consultants and so on.
Consider the size of the HR function in most organizations, and you'll see what I mean.
The other "resource asset" is, of course, money. There's only so much to go around. Consider how much effort is put into budgets, rates of return, financial controls, asset management and the like. Right next to the big HR department is the big finance department, and you don't want to mess with either of them.
One of the clear markers of a digital business model is a corresponding investment in maximizing the value of the organization's information platform -- something you rarely find in a traditional business model.
But, as a business changes from traditional to digital, that visibly changes.
Markers Of A Digital Business Model
I follow with great interest those business models that have started a rapid transition from traditional to digital, with more to inevitably follow. Health care and life sciences are obvious examples, as are retailing and certain sectors of manufacturing.
Generally speaking, these transitioning organizations are starting to approach information management very differently than their traditional peers.
For example, it's not unusual for digital business to keep their information bases available in raw (and not summarized) form. Every transaction, every click, every measurement, every event, every document -- as much data as possible, for as long possible, and in its native form.
I think this is for two important reasons.
First, summarizing or aggregating any information source inevitably removes some of the signal. People looking for new insights from data always want to get as close to the source as possible -- much in the way audiophiles prefer master recordings vs. compressed MP3s.
Second, answering new business questions inevitably involves going back to look at older data sets to learn from past experiences. Those historical data sets are the foundation for future organizational learning. Sure, keeping all those massive, dusty data sets around can be expensive and cumbersome, but that's what they do.
Another key differentiator is their approach to information sharing. In any digital business model, there's a significant investment to make as much information as available to as much of the business as possible. Internal *and* external information.
You won't find the typical organizational information silos, or familiar information hoarding going on -- or, at least, not much of it.
A wide range of services are easily exposed to everyone, and different parts of the business are expected to know what's there, use them intelligently, and express their unmet needs so more information services can be created.
Farther up the stack, there's always an investment in experimentation around data. The classic corporate "R+D" function is now information-based, the "research lab" is in fact a sandbox for messing around with different forms of data. Insights are gained, experiments and trials are run, results are analyzed, recommendations are made, and put into practice. The faster, the better.
Finally, I've noted that just about all of the software components in these stacks are seen as short-term investments.
New applications are created quickly, with the clear expectation that their shelf life will be short, and continually updated and replaces.
Quick: how many new application updates are waiting for you right now on your mobile device?
That continual-improvement philosophy appears to carry through to other parts of the stack: data management, application frameworks, infrastructure and service delivery management, and so on.
You just don't see the massive, 10-year investments in software technologies that are so familiar in traditional IT environments. Digital businesses are powered by software, and -- as a result -- they're seem always willing to invest in the next better thing. This leads to modular architectures where components and subsystems can be continually improved, hopefully without disturbing the neighbors too much.
Is A Transitioning Happening?
Yes -- for me, the signs are everywhere.
A healthcare CIO who's started to keep all the data around in raw form. A retailer who's built a new-style application team. A global manufacturer that wants to establish an analytics-as-a-service capability for all their business units.
For me, these are clear markers of a transformation starting to happen -- from traditional business models to digital ones. The words they use may be different than mine, but the ideas and motivations are often the same.
Thorny Questions Remain
One important concept that nobody seems to have gotten their head around is how best to value information itself. We just don't have the tools and the frameworks to assess the value of an information asset, much as we might do with other forms of assets.
That's particularly interesting when looking at larger-scale digital business models.
Facebook, Apple, Amazon, Google et. al. are amassing stupendous amounts of information, and there's no ready way to directly measure the value at hand. That limitation doesn't seem to stop any of them from carrying on, though.
Just because you can't easily measure something doesn't mean it isn't important :)
Another thorny issue that's waiting to be explored is the notion of information ownership -- is it owned by the entity that created the event, or the entity that captured and preserved it?
Perhaps the most familiar example is the digital clickstreams we all leave as we surf the web. Governments are starting to think of "digital mining" as a potential revenue stream in the way that they used to think about physical mining.
Again, that doesn't seem to be slowing anyone down.
Loftier Goals Ahead?
Diving a bit deeper, what part of the organization should be responsible for the information asset base, much the way HR owns human capital, and finance owns financial resources?
You might think it should be IT (and its CIO -- the chief information officer), but that appears to be a very aspirational goal indeed for so many businesses I've met. The way IT is practiced in digital businesses is fundamentally different than traditional enterprises -- night-and-day different.
For the IT function to assume this new role, they will have to undergo a substantial and non-trivial transformation. It won't be a sequence of incremental improvements.
When I talk about IT transformation, I usually frame the motivations in two ways: do a better job of what you've been asked to do today, but -- more importantly -- to ready yourself for what you'll be asked to do in the near future.
Because change appears to be inevitable.