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|In: Architecture|Last Updated:

“Digital” has replaced “Cloud” as the hot synonym for “Everything.”

No matter what a company plans to do and how it plans to do it, it’s now officially Digital.

Not that I’m a Digital skeptic. I’d just like, when we talk about “Digital,” to be confident we’re talking about the same thing.

Google a bit and you’ll find quite a few different accounts of why Digital is so important, along with several definitions, some of which, reprehensibly, make it a noun.

My favorite: Digital enables new business models. Examples include Uber, AirBNB, and Zipcar, all of whose “new” business models amount to being brokers — companies that bring buyers and sellers together in exchange for a cut of the action.

It’s a very new business model, certainly no older than the Phoenicians.

For whatever it’s worth (probably what you pay to receive KJR) here’s my take on why business leaders not only can’t ignore matters Digital, but have to embrace the subject. Truly Digital companies:

  • Observe: Constantly scan the technology landscape for the new and interesting.
  • Orient: Spend serious time and energy, at the executive level supported by staff analysis and modeling, investigating whether and how each new technology might turn into an opportunity if their company gets there first, or might turn into a threat if a competitor gets there first.
  • Decide: Far too many business executives and managers, and therefore whole businesses run away from the decisions that matter most as if they were rabid weasels (the decisions, that is, not the executives, managers and businesses). Digital businesses have to become adept at making fast, well-informed decisions.

And remember, it isn’t a decision unless it commits or denies the time, staff and budget needed to effectively …

  • Act: It isn’t enough to make the right decision and then either flail away at it or not actually do anything to make it real. Successful Digital businesses must execute their decisions, and with high levels of competence.

It’s OODA again. Digital businesses are built on OODA loops focused on the potential impact of new technologies. Not static list of specific technologies. New and interesting technologies as they arise and mature.

For Digital businesses the Orient stage has outsized significance, because many of us humans have a strong tendency to reject the new as either wrong or no different from the same old same old.

Digital businesses can no more afford to fall into that trap than the opposite extreme — dying from the shiny ball syndrome of chasing the next huge thing before giving the current huge thing a chance to succeed.

So Digital business have to establish methods, and not just methods but a supporting enterprise-wide culture, that let them go beyond the lip service of “that’s what we’ve been doing all along” to accurately recognize what really are familiar old concepts hiding behind shiny new buzz-phrases and what are truly new and important possibilities.

And none of this will matter if the company’s IT organization hasn’t figured out just how different the Digital world is from the standard collection of “best practices” followed by old-school industrial-age IT.

Recent history — how IT responded to two past transformational technologies, the personal computer, and the world wide web — illustrates the challenge. In both cases, IT ignored them completely until long after they’d become entrenched elsewhere in the business.

Why was that? Boil everything down and it came to this: When they first appeared, and for several years afterward, neither the PC nor the world wide web fit what IT did. They were out-of-scope, and outside IT’s current areas of expertise. CIOs didn’t know what to do with or about them, so it was safer and easier to declare them Someone Else’s Problem.

In the Digital era this attitude just won’t cut it because new technologies that can have an impact on your business are emerging faster than ever. Digital businesses need IT that provides technology leadership to the business, at all levels of the business, and at all levels of IT.

Technology leadership means more than just (for example) the CIO explaining to the other members of the executive suite how the Internet of Things represents a threat to the company’s current product line.

It means the IT organization knows how to recognize, research, pilot, and incubate new technologies. And, for those that succeed, how to integrate them into both the company’s technical architecture and IT’s organizational architecture.

All levels of the business and IT means the conversations between a help desk analyst and a workgroup manager about collaboration technologies are just as Digital as the CIO’s executive-suite conversations about the Internet of Things.

And are just as important.

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|In: Industry Commentary|Last Updated:

The CIOs of most large enterprises can sympathize with New York’s Metropolitan Transit Authority. As described last week, the MTA runs its entire, vast, complex subway system on 1930s technology. Compared to this, the 1970s-vintage boat anchor IMS DBMS so many CIOs can’t get rid of because mission-critical applications run on it seems positively modern and benign by comparison.

As pointed out last week, when depreciation was first incorporated into the world’s Generally Accepted Accounting Principles (GAAP), it was supposed to represent how a capital asset declined in value over time. Were business executives to take depreciation seriously, they’d look at their balance sheets, see that the company’s asset value is declining, and do something about it.

Well, no. It isn’t that simple.

First and foremost, one of the key metrics Wall Street Analysts rely on is Return on Assets (ROA). As most 5th graders can tell you, there are two ways to improve ROA: Increase returns, or decrease assets.

It’s metrics at its finest: decrease asset value as reported on the balance sheet and voila! Without any change in actual competitiveness the company’s financial performance magically improves.

Now imagine you’re in charge, and you have a relentless focus on long-term sustainability instead. What would you do differently?

High on your list might be squirreling away the funds needed to replace obsolete business assets as they become increasingly valueless, ROA be damned.

Nice thought. One minor gotcha: Time, trends, and evolving marketplaces have made some of those assets irrelevant. Or, worse, they’re part of a business infrastructure that impedes your ability to redirect the company in a direction that’s more in harmony with changing competitive demands.

So it isn’t as simple as replacing assets as they become obsolete.

In IT it’s even less simple, because assets that aren’t the least bit obsolete … well-engineered business applications that support important segments of the business quite well … can still require platforms that for one reason or another are marketplace failures.

Like it or not, and it’s usually not, your choices are limited: Redevelop the offending application on and for platforms that seem to have some staying power, or replace it with a commercial package that will do the job and seems to have some staying power.

It’s Hobson’s Choice: Rewrite or convert.

For this case, the underlying principle seems to hold: The business needs to keep money in the bank for use replacing applications and their underlying infrastructure when one, the other, or both are reaching their limits of viability.

It’s downright strange, isn’t it? While you have to replace a perfectly serviceable application because it or the platforms it uses aren’t making it in the marketplace, your buddy down the road has to replace a major application … an ERP suite, perhaps … that’s a major marketplace player, only it’s become a liability because it can’t be configured to effectively support the company’s future business strategies and tactics.

Or, another friend finds herself retiring one application because it supports a business her company is no longer in, while also having to implement an entirely different piece of software that’s needed for the business it’s going to be in.

What do all these permutations have in common?

In every case, dealing with the situation will take time, effort, expertise, and money. It will take them because of a fact known only to a small number of highly insightful individuals who belong to a secret society called, with apologies to Drew Carey, Everyone.

That fact: The future is generally different from the present. More, it’s different in ways that are only predictable in the million-monkeys sense that if enough people make predictions, the odds are pretty good that through nothing more than random chance, a few of them will end up guessing right.

Its future being different from its past, the tools a company will need to deal with the future will be different from those it needed in the past, too, not to mention that the tools available to it will be different from those that were available in the past.

Which gets us to this: Running a sustainable business calls for constant reinvestment, and when it doesn’t that just means the investment that isn’t needed this year will be needed in spades next year or the year after.

Which is yet another reason stock buy-backs are such a terrible idea: They take cash that could be invested in sustainability and get rid of it in order to prop up the price of a share of stock. So when the company finds it needs the money after all, it only has one choice left to it:

Issue a bunch of new shares of stock.

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