servitization

As investments in digital transformation continue to increase, enterprise-level guardrails are emerging to keep the transformation journey from veering off-path.

On the Amalfi Coast in Italy is the spectacular “Sentiero Degli Dei,” the Path of Gods. It provides a stunning scene. I have been lucky enough to stand there and take it in. However, I recall that to my left there was a steep drop of several hundred meters to the sea – with nothing in between.

Why am I telling about my trip to Italy? Because it made me realize that yes, sometimes it is wonderful to go freely, without limitations or assistance and gain a spectacular view, but guardrails can help to stay on the right path.

In a business context, transformation principles present guardrails that help guide the organization about decisions and behaviour, especially in VUCA times like these. These principles provide a particular direction for the reasoning and execution of all activities of an enterprise towards data-first. Data-first because anything, whether a human, a machine, or a thing, is constantly generating data in an era in which computing and connectivity are ubiquitous. And the right leverage of this data enables insights that unlock real business value and the full potential of organizations.

Digital is now a permanent yet dynamic fixture in our world, with IDC predicting direct digital transformation investments will increase to 55% of all ICT investments by the end of 2024 ². Organizations can expect to see increasing investments returning greater value to the business and ultimately their customers.

Many customers have expressed their aspiration to become data-first digital enterprises, by leveraging the right guardrails to help their organization demarcate their journey and keep them from going off the path.

Let me share a real example from a recent meeting with a customer in the telecommunications (telco) industry. One might argue the telco industry has already been an “online” industry compared to many other verticals where the digitalization has just started taking off with the pandemic. It is estimated that the amount of data being created daily is equivalent to 200 million DVDs per day (what are DVDs?!), according to the World Economic Forum. With this amount of data being triggered through connected objects, areas, and individuals, we see telco providers making significant shifts in their business models towards pervasive communication and entertainment platforms in addition to linked telco services.

With this customer, we identified the following three transformation principles informing all their digital outcomes and guiding their initiatives’ realization:

Sustainability

Almost every HPE customer has to contribute to their organization’s Sustainable Development Goals. Indeed, the current transformation wave is recognized and driven as a twin evolution of becoming a more digital and concurrently more sustainable business. In this example, the customer articulated three major components of their principal sustainability goals: Reducing CO2 emissions in production and usage of products, a green network, and ESG reporting.

Here the emission reduction effort reaches from scope 1 (e.g., production of network components) to scope 3 (usage of products) emissions according to the GHG protocol. In fact, this principle also includes the data-first aspiration directly: how and where is what data stored and analysed to drive insights and business and ultimately customer value? Embracing data truths strongly informs how to execute on this aspiration while reducing emissions and reporting responsibly. While data centers continue to play a role in customers’ recognition that the future will be hybrid, centers of data – connected through a green network – increasingly gain more importance.

Sovereignty

Although sovereignty could also be seen as part of this principle, using it as a transformation principle itself has compelling implications. Digital sovereignty means having state-of-the-art capabilities in key technologies, services, and platforms, while also having the ability to freely and responsibly choose between one’s own solutions and sustainable options from trusted global partners to act autonomously in an ecosystem. Thus, it describes the intersection between dependency and autarky; neither someone else is deciding the future path nor does the organization do everything themselves. In this exemplary case, on the one hand the customer is aiming to scale and expand their own platform business without unilateral control while evolving as openly as possible, offering sovereignty for their ecosystem. On the other hand, this customer also strives for cooperation and involvement in the European sovereign cloud initiative Gaia-X in view of omnipresent collaborations with one or multiple hyperscalers and their strong services – which also entails considerable power regarding the data.

The transition to servicizing

Servicizing – or servitization – presents the shift from offering products to providing services. Exchanging the words “offering” and “providing” to “consuming,” we shift the focus from the selling to the buying cycle while the core definition remains the same. This may involve the entire replacement of former products through services (e.g., DVDs vs. Netflix) as well as the enrichment of products through the integration of services (e.g., receiver or smart TV).

As an advanced enterprise offering a variety of products and services in the telecommunication and entertainment field, the customer was eager to further evolve their service business models and provision methods to become a provider of platform and ecosystem services, and potentially data-driven services in the future. With additional offerings such as asset lifecycle services (similar to HPE’s service offering for IT assets), servicizing also drives circularity and ultimately sustainability.

In a nutshell, digital technologies can:

1. advance innovation for sustainability,
2. ensure optimized consumption,
3. and support in protecting and gaining insights from your data to drive intelligence and trust when the organization leverages guardrails effectively towards a data-first business. At the same time, we see those effective guardrails such as sustainability, sovereignty, and servicizing also stimulating better profitability overall in organizations’ transformations.

Of course, these three principles are not exclusive in guiding a data-first transformation and keeping the organization’s journey – and investments – on path. Other customers have emphasized different guardrails for their transformation, such as ethics, resilience, and ecosystem thinking. Undoubtedly, these guardrails and their prominence can vary and change depending on the digital aspiration of an organization and its maturity in realizing a digital business.

Learn how to better address your principles in your digital execution and frame them into ongoing activities and planned initiatives. Engage with a Digital Advisor from HPE to get started.

²https://www.idc.com/getdoc.jsp?containerId=US47115521 https://itbrief.co.nz/story/idc-over-half-of-all-ict-investment-will-be-linked-to-digital-transformation