across sectors - whether government or industry - face the common dilemma; the
need to thrive and survive in the digital economy.
Leif Eriksen, research director at Gartner, said digitalisation has enabled the emergence of a sharing economy, exemplified by Airbnb in hospitality and Uber in the transportation sectors respectively.
He said what is happening the sharing economy will impact the utilities industry, and this may not have a happy ending.
Gartner has predicted by 2020, the largest energy company in the world, by market cap, will not own any network or generation asset.
Whether traditional industries like it or not, Uber has a big impact on their business.
Facebook is the largest content company but does not own any content. Uber is the largest car transportation company but does not own any car. Airbnb does not own any rooms.
Five years ago, the hospitality industry would not have known Airbnb and VRBO (Vacation Rentals by Owner) will take away their business.
He said the dotcom companies also had envisioned to disintermediate industries. But this happened today because of the nexus of forces - the confluence of cloud, mobile, information and social technologies.
He cites the power of mobile. Uber would not exist without mobile.
The sharing economy leverages IT to enable distribution, sharing and reuse of excess capacity in goods and services. The information about the goods is shared, typically through an online marketplace, he said.
Market leaders in the sharing economy own the digital platform, which brings together those who have excess foods or services and are willing to share these; and those who do not have goods or are looking for services, and are interesting in using it.
Digital platform is the engine and information or data is the fuel that powers the sharing economy.
Read more: Tech analysts, diplomats and brokers
He said the the utility sector will also be transformed towards Utility 3.0, or digital utility business, where grid power is not the sole choice anymore. This is where different entities manage the distribution network, providing commodity services.
This is the phase following Utility 2.0, which is the current competitive energy market. Different entities manage distribution networks, and grid power is the only choice. Before this was Utility 1.0, which is energy sourced from a monopoly in a certain area or sourced from integrated utility.
His advice for utility companies is to use the principles of the sharing economy to enable “energy from anybody to anywhere” model. They should start discussing the role their company will pay in Utility 3.0 - as asset operator, platform operator or both.
He said organisations need to think bimodal. Most of your investments as an IT department will be dedicated to supporting systems of record, or those used to run a business. But they should also invest in innovation.
He said a survey of Gartner suggested 40 per cent of businesses today are already doing some form of bimodal IT. “If you are not doing it in your own organisation, think about how you might do that.
Or, as he puts it, “transforming while performing”
"That is the challenge of energy companies today."
What CEOs want from financial CIOs
The CEO's task in financial services is clear — to improve return on capital employed. The CIO mindsets of "survivalist" or even "optimiser" no longer support the CEO’s mission.
CEOs expect standout differentiation from their IT capabilities, ones that match their expectations, noted David Furlonger, vice president and Gartner fellow.
So how can CIOs meet their CEO's’ expectations?
Furlonger stars with the new nature of competition. Before, a finance company’s competition is anyone who hangs a shingle (sign) on high street.
But today their competition includes organisations that appear on a daily basis, using the latest application, algorithm, and API.
This makes it much more challenging for industry executives to know where they should prioritise their focus and what kinds of investments they will make to compete.
Meanwhile, shadow IT in their firm is being practiced by marketing and other product heads.
These players do not suffer from compliance overhead and regulatory burden traditional players worry about.
He says finance companies should rethink their notion of the digital ecosystem.
For instance, Alibaba is creating a “walled garden” by making it attractive for customers to stay within their platform. Alibaby has a Mybank, a P2P lending facility and now corporate lending facilities "They have different pieces of puzzle in the digital garden."
Finance services firms need to think carefully what ecosystems they can set up. The longer they avoid that, the more they will be shut out of these digital ecosystems being created.
IT departments should take the bimodal, even multimodal approach to enable this. They should have the ability to investigate partnerships, invest and fail fast as well. But they should also keep the lights on and not get hacked.
“We have to think how many business models as CIOs we can accommodate and support in our organisations,” he said. “Are we positioned to support a business model for a one week period and then throw it away and support one which comes out in a week’s time?”
He said it is important to take an inventory and readiness assessment of your core whether you are ready to move into a digital business/environment.
He strongly recommended CIOs to speak to their CEOs about the need to start a laboratory, a startup bootcamp or work with incubator programs.
All big financial services firms are doing it, and they have technology labs in multiple parts of the world.
He said businesses also need to know how their existing employees can meet the demands of the digital age. You need to have regular meetings with your HR around that. Leading firms in digital are not hiring technologists alone, they are also hiring people who really understand the customer experience. These include anthropologists and ethicists.
The message from CEOs is that that real battlefield is service component, he said. Most firms are focusing on CX (customer experience) as much as acquiring digital talent. CX is where they believe revenue will come from.
Send news tips and comments to email@example.com
Follow Divina Paredes on Twitter: @divinap
Follow CIO New Zealand on Twitter:@cio_nz
Click here to read the Spring 2015 edition of CIO New Zealand
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.
Read more: David Spaziani: CIO to Gartner executive
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.