Lights, camera, action! Much has been said before about capabilities, but the reality is that in the digital world everything needs to be about action. This means turning capabilities into a set of re-usable assets that deliver business outcomes. IDC defines digital capabilities as enterprise resources designed to be industrialised and scalable. Capabilities are formed by combining five key elements:

  • Talent
  • Process
  • Governance
  • Technology
  • Data

In the digital economy, data becomes a critical capability because it entails the business concepts, information and context combined across — and beyond — the enterprise, to support new digital products and services. It is important to highlight the role of data as the most critical digital capability because information inconsistency and the lack of synchronisation are the top obstacles that stop organisations in their journey to become digital enterprises.

Five key elements for forming capabilities

Figure 1: Five key elements for forming capabilities

Historically, organisations have recognised the need to acquire capabilities that enable them to achieve their strategic goals, but as their business models evolve, so does the set of resources needed to succeed. IDC’s research has found a strong correlation between digital maturity and performance against financial metrics. Consequently, we predict that by 2029, 25 per cent of European organisations will see their market share evaporate completely, because they won’t have the necessary capabilities to compete in the digital economy.

Which capabilities should a company develop to win?

The bad news is that there isn’t one size that fits all organisations; it all depends on what you are trying to achieve in the long term. Many trends and capabilities are emerging at the same time that distract the attention of digital leaders and fragment organisational resources. Executives need to sacrifice certain possibilities to establish a clear direction that avoids siloes of innovation, with a focus on establishing a capability road map that supports their long-term goals.

Therefore, the first step towards winning this race is to lay out an integrated enterprise-wide corporate strategy that has digital embedded and provides a single direction to all business units. Then, it is important to put in place a very granular digital road map that breaks that high-level strategy into  .

Nevertheless, a strategy alone will not enable your organisation to win this digital race. Your people need to follow the digital road map, leveraging a new set of capabilities. To plan ahead, the teams involved in the various use cases that support your digital road map will need to have access to a reference model that maps out the range of resources (technology, process, governance, talent and data) needed to achieve their objectives in the short term, the midterm and the long term.A digital road map with three horizons

Figure 2: A digital road map with three horizons

Take, for example, a manufacturer that is trying to deliver near-real-time personalised outcomes at scale in Horizon 3. This digital vision will require the company to develop an agile supply chain, which is able to deliver more specific orders based on a deeper understanding of consumers in Horizon 2. Therefore, the first step the company needs to take is to adapt to a broader menu of options in Horizon 1. Let’s dive into each of these horizons to understand the capabilities needed to execute the strategy.

Adapt to a Broader Menu of Options in Horizon 1

Adapt to a Broader Menu of Options in Horizon 1

The first step towards the delivery of near-real-time personalised outcomes is the creation of an optimal product portfolio and the achievement of higher levels of design effectiveness. This is possible only by understanding what consumers really want and proactively adapting the range of offerings to satisfy their needs. Therefore, the focus in the short term is on generating a single view of the customer. The figure above illustrates the capabilities that support that strategic priority in the short term.

Create an Agile Supply in Horizon 2

Create an Agile Supply in Horizon 2

In the midterm, this manufacturer should focus on making its operations agile, lean and efficient enough to cope with consumer requirements for more customisation. At this stage, there is a major shift toward enabling quick and effective adaption to changes in design and demand. Consequently, the main strategic objective in Horizon 2 is to infuse the operations with intelligence, and the figure above provides an overview of the capabilities needed in the midterm.

Create Dynamic Operations in Horizon 3

 

The concept of dynamic operations refers to an ecosystem of several manufacturing partners that respond to ever-changing consumer expectations and market events in an agile fashion. They do this by quickly re-orienting their processes to take advantage of market opportunities and tackle operational disruptions.

Be prepared to sacrifice

IDC’s research finds that several disconnected trends provide a myriad of possibilities to business leaders, but they impede the development of an integrated strategy that gives a direction for the capabilities needed in every step of the journey. Defining this strategy requires bold leadership that is able to make big bets and, even more importantly, big sacrifices. While the organisation goes through a metamorphic process, it is important to keep in mind the business model you would like to deploy in the future, and then all your digital investments should be directed towards generating the capabilities that enable your organisation to achieve that goal.

 

This article is part of the IDC series “Your pathway to digital success,” written to inspire business leaders to overcome common challenges along their organisations’ journeys.