Tue | Feb 18, 2020

David Allen | Forward-looking CEOs have SDX on the brain

Published:Friday | September 14, 2018 | 12:06 AM
David Allen

If you are a chief executive officer or a chief financial officer and you are not already thinking about 'software defined everything' - SDX - your business could be late to the game.

In fact, given the rate of change in technological development, if SDX is not being considered for operational transformation, you could be threatened or even overtaken by previously unknown competition.

I have found that many CEOs don't really get software. Some of them do, but many, I find, often think about it as something in the background that the 'tech guys' handle. That kind of thinking prevents companies from utilising software to identify new opportunities or new business channels; or how integrated software applications can lead to exponential growth in existing channels.

In simple terms, 'software defined' is the digital means of powering a business.

The impact of software on businesses is a well-known story, with big names such as Amazon and Netflix served up as winning examples of software's power to change the retail and entertainment industries in enduring ways.

More recently, Walmart joined the watch list of software-led business disruptions. The 2015 merger of its IT department with the central operations was a strategic move to accelerate the synergy between the physical stores and e-commerce operations.

Fast-forward to 2018 and despite the fears from investors, sales on this channel grew by 33 per cent in the first three months of the year. Walmart's transition to the new normal is already creating a better customer experience, boosting the bottom line and most critically, it has future-proofed the business in a way that only software can.

Another aspect of this new normal is the disintermediation of business. This is where software connects the consumer directly to the manufacturer and, in turn, reduces the need for the 'middleman'.

The travel agency business is one sector of the travel Industry that has been seriously disintermediated, just speak to any local travel agency. Airlines have long incorporated software that makes it easy for customers to search and book their own tickets. Consequently, travel agencies have had to downsize and may eventually become obsolete, unless they too can find a way to use software to change business models and reinvent their businesses.

We are entering the digital transformation era, where most industries will be affected by SDX and where software is at the core of operations for industry leaders. In such companies, both the data centre and the local and wide area networks - LANs and WANs - are software defined, making the business agile and exponentially more responsive to internal needs and external forces.

The local banking industry is one sector that is already preparing to succeed in this era. This year alone, we have seen two of Jamaica's largest banks roll out digital transformation projects as they see the banking and finance sector across the world changing, where digital transactions are the default, as things are better, faster and more efficient.

Customers' expectations are also changing in step with this trend. One corporate executive recently recounted that she responded to an email she received for a preapproved loan from a local commercial bank. Though she clicked the link, with some scepticism, she was effusive in explaining that it took less than 10 minutes to complete the sign-up, and within two days the loan amount was in her account. In her words: "They brought the bank to me on my phone." The digital era is here!

Now to the big question: What should businesses do to prepare for the software-defined future?

It's not the same for everyone, but businesses need to think of their operations in a more digital manner and start making strategic moves that are in line with that thought. To that end business leaders should seek to disrupt their own businesses first. Don't wait for the competitor or a new player to do that for you.

A software-defined operation makes disruptions easier to implement and can speed up the evolution of innovation in existing businesses.

In order to achieve this, leaders should start asking questions, such as: "What in my business do I need to change today? or Which aspects of our operations need to be run in a different manner? or How can I get to my customer faster?

Companies could also consider assigning a software transformation czar within their organisation to steward and champion policies that synergise the relevant parts of the business and lead the transition to a software-first operation.

The manner in which software has changed the way of life of consumers in markets outside of Jamaica is a sign of things to come.

The businesses that will survive this era of digital transformation are those whose leaders embrace a change in thinking, those who are prepared to run an operation in which software defines everything.

- David Allen is CEO of Info Exchange Limited.