In this excerpt from the podcast, BPM Managing Editor Peter Schooff and former Gartner VP Jim Sinur discuss Digital Disruption, changing business models, and the need to adapt to a new era.
Peter Schooff: Hello, this is Peter Schooff, Managing Editor of bpm.com. Today I have the great pleasure of speaking once again with Jim Sinur, who is an independent thought leader in applying business process management to innovative digital organizations. Jim's research in areas of personal expertise focus on business process innovation, business modeling, business process management technology, and much much more. All of which you can read on his blog.
Jim is a former Gartner VP, and he will also be one of the keynote speakers at this upcoming BPM Next, which is happening this April in Santa Barbara. Also, Jim has a book coming out, Digital Transformation Innovate or Die Slowly, which is a great title. Jim, thanks so much for joining me today.
Jim Sinur: Peter it's always a pleasure to be on the line with you and talking about digital topics and process topics.
Peter Schooff: They certainly are hot right now. We got BPM Next coming up. What are you going to be covering in your speech.
Jim Sinur: What I'm trying to cover is digital disruption. What is this digital era mean? What does it mean to ... Really two parties ... One is the vendors. Are they going to have to change the way they work and how it's affecting their customers and their clients. This digital disruption is a big deal.
Peter Schooff: Definitely. How would you define digital disruption?
Jim Sinur: It's kind of a continuum. What we hear about are the splashy stories. The Ubers where a business model is changed. It's much more deep seated than just changing a business model and getting knocked out of the water by competition. Not that that can't happen. It's that your competitors or your clients are actually going to be threatened by three major phases. The first one is what I call, "Outside in." You talk about the customer interaction with your processes, your systems, and your applications.
They use that interface and that interaction as a competitive weapon. That's also true of the ... For the vendors that are providing that kind of platform technology to do that. That's going to change. The interface with customers and how they're treated and partners and anybody that would be construed as a customer. That relationship is changing. That's the first phase.
The second phase is operational efficiency or operational effectiveness. You are optimizing your resources and your shifting your resources. You're bringing the right resources at the right time to come to bare on a business problem or a sales issue or that customer interaction we were talking about.
The third part is new services, new products that will be emerging based on your experience with digital. After you spend some time working on your customer interaction and your operations, the next step is to come up with new services and products. All of those fall short of a huge change in the business model, which some companies will be forced to do because their competitors take them to the mat quickly. We think this is a long to medium term transformation that's occurring.
Peter Schooff: Interesting. I think every company, by now, has heard of digital disruption. At least in terms of Uber. What would you say is the cost of actually ignoring digital disruption?
Jim Sinur: Uber is the negative story. Let's start with the positive story. Organizations that not only explore and experiment in that ... Let's call those beginners in the digital. Actually pick a path. Strategically say, "We've experimented enough, we're beginners, we know what's going on." We're going to make that next step. You have a choice of three kinds of style. One is to say, "Well look ... I really ... I'm falling in love with digital technology." I'm going to take it to what I call a fashionista route. We're just going to take on technology and throw it against the wall and see what sticks.
That's one approach. The other is we're not that kind of a company. We're conservative. We know how to manage. We're not going to throw things at the wall. We're going to manage things very carefully. We're going to emerge. You are a conservative. Obviously, the balance between the fashionistas and the conservatives at digital master. That's where people want to shoot for. You say, "If I become a digital master, what's in it for me?"
Digital masters, based on a study that was done by MIT have a nine percent improvement in revenue. They have a 26 percent improvement in profitability, and a 12 percent improvement in market valuation. There is a down side to this, but there is an upside to this. The conservatives will continue to improve their profitability and market valuation, but they're not going to raise revenue.
The fashionistas are going to raise revenue, but not necessarily profitability and market evaluation. Beginners ... If you stay a beginner, you lose on all fronts. You have to make a decision. The risk is, number one, not making a decision going ... Not getting past first base, so to speak in baseball terms. The other risk is not becoming a digital master. That's what you want.