THE DIGITAL BUSINESS TRANSFORMATION

LEADING A FUTURE-READY BUSINESS:

Vision 2025
The Digital Business Transformation

On pace to effectively compete?

Canon Business Process Services in association with Hanover Research reviews
today’s hyper-competitive business environment and its future trajectory. The
culmination of digital business, disruptive technologies, cultural and demographic
forces put unprecedented demands on business leaders to navigate the
opportunities and threats.

©2016 Hanover Research

THE DIGITAL BUSINESS TRANSFORMATION

TABLE OF CONTENTS

Accelerating technological innovation is disrupting

established business principles within companies
and across industries, and moving businesses
toward a radically different future environment.
This unprecedented pace of change creates a mandate for businesses to
reinvent their operations, restructure their product offering, and rethink
the way they create value. To survive long term, they are forced to adapt
and find new emerging opportunities.

With this backdrop, Canon Business Process Services (Canon) in association

with Hanover Research, a leading market research firm, surveyed the
environment to better understand the forces that are driving change in
business and how they may shape business toward 2025.

The Digital Business

Transformation
1 / The Rise of Digital Business
2 / An Environment of Continuous Change
3 / Emerging Digital Business Models
4 / Trends in Business Process
Execution

The reports can be accessed at:

https://cbps.canon.com/insights/leading-a-future-
ready-business-the-digital-business-transformation

©2017 Canon Business Process Services, Inc. All rights reserved. 1

THE DIGITAL BUSINESS TRANSFORMATION

EXECUTIVE SUMMARY

Digital business is more than eCommerce. It is an organization that

uses technology as a competitive advantage in its internal and external
operations. It is a convergence of concurrent trends, including technology,
demographics, organizational management, outsourcing strategy, and
leadership. This report on Leading a Future-Ready Business: Vision 2025
examines the digital business trend.
Organizations are focusing more and Key Findings
more on leveraging digital technologies, •B
 usiness processes from the back office
such as social, mobile, analytics, and to the customer interface will undergo
cloud, to transform themselves into digital transformation over the next decade.
businesses. However, despite the fact that
over half of all businesses are investing in •E
 xecutives say that top priorities are now
digital technologies, only about a third continuous process improvement and
are investing in technologies as part of an increasing the level of automation.
overall business strategy. • In a digital business, centralized control
facilities will monitor core, extended, and
In order to keep up in the business outsourced service levels. Processes will be
world and to remain competitive and web, workflow, and self-serve enabled.
cost-effective, companies must not only
emphasize investment in new technologies, • Companies will increase their reliance on
but also in managing broader change outsourcing of general and administrative
associated with digital business. functions. But this time the outsourced
services will be digital.
Digital business has shifted from the
province of distinct system acquisitions and • Digital business is a reality, and it is driving
transformation initiatives into mainstream an accelerating pace of change. Yet only
operations. about a quarter of business leaders are
actively responding.
2
THE DIGITAL BUSINESS TRANSFORMATION

THE RISE OF
DIGITAL BUSINESS

Digital business is the interaction of company

leadership, employees, and culture with digital tools “Digital business can mean different
that reinvent old modes of operation and enable new things to executives. Typically we
ways of bringing together people to create value. see it as technology we use such as
eCommerce, online banking, or
booking a vacation. Instead, we
Gartner captures the trend as “the creation of market. New businesses are designed around should see digital business as the
new business designs by blurring the digital digital technologies rather than technologies
and physical worlds.”1 Gartner found that “32 being built to fit existing models. With this state in which we work and live. A
percent of IT and business leaders at large fundamental shift has come an unprecedented digital business organization is one
organizations that have embarked on a digital acceleration in the pace of change. As new
where all its processes are in the
business transformation say their current businesses emerge that are structured to
business is a digital business.”2 This marks the maximize the efficiencies available through digital state and interconnected.
digital business shift from transformation into digital technologies, incumbents must re- The digital state creates value
mainstream operations. invent themselves or risk obsolescence.
through connections to the external
The world has already entered the new era Surveys reveal that the consequences markets, in the business processes
of digital business. Whether it is a webpage of emerging technologies are indeed
for a Main Street hardware store or a cloud- revolutionary, but not in ways that many that execute core business and in
based warehouse management system, business leaders would predict. While the the back-office functions that
businesses of all sizes are finding digital tools popular media focuses on the power of Big support the business.”
to enhance productivity and steer customers Data and the employment consequences
to their goods and services. A pivotal change, of automation, industry insiders worry more
however, is taking place in the orientation of about organizational efficiency and customer Canon Business Process Services, Inc.
corporate perspectives. Digital systems are relationships. The findings of one recent
becoming not just convenient tools to enable survey are depicted in Figure 1: Customer
legacy operating models, but rather are relations were cited nearly twice as often as 1
“Digital Business.” Gartner. http://www.gartner.com/it-glossary/digital-business/
2
“Embed Digital Business Into the Fabric of Your Organization.” Gartner.
driving the basic ways that businesses go to data analytics. https://www.gartner.com/doc/3163226/embed-digital-business-fabric-
organizationDigital
3
THE DIGITAL BUSINESS TRANSFORMATION

THE RISE OF DIGITAL BUSINESS

While 62 percent of businesses are currently investing

in digital technologies such as social, mobile, analytics,
cloud, and the Internet of Things, only 35 percent
are comprehensively investing as part of their overall
business strategy.4

Figure 1: Top Consequences of New Technology

More data-driven
decision-making 21%

Enabling wholly new

business models
24%

More automation of
knowledge-intensive work
24%

Improved organizational
efficiency
32%

Improved customer/client
relationships
37%

Source: Kairos Future, Tieto3

3
 idenvall, L., and M. Lindgren. “The
E
Future of Business Transformation.”
Kairos Future, Tieto; Fall 2013.
4
Daugherty, P., P. Banerjee, and M.J.
Biltz. “Digital Business Era: Stretch Your
Boundaries.” Accenture Technology
Vision 2015 Survey.
4
THE DIGITAL BUSINESS TRANSFORMATION

AN ENVIRONMENT OF
CONTINUOUS CHANGE

Technology alone will not be sufficient for businesses to compete in the

digital era. Information is the driver of the new revolution as Moore’s
Law proves durable 40 years after the seminal prediction. Leaders must
identify which areas of their business are most exposed to change and by
what means processes will transform.

They must grow accustomed to Business process alignment never

continuous transformation. As processes occurs in a vacuum. People, technology,
evolve, challenges arise in maintaining culture, and leadership styles interact
organizational focus and end-to-end to determine the ultimate success or
optimization. Large-scale change failure of an organization. Within a well-
management initiatives will be of equal designed change management regime,
importance with discrete process targeted business process optimization will
modifications in order to maintain enable unprecedented levels of customer
alignment across business units as engagement and productivity. Important
value chains grow more interconnected. trends are already underway.
Expectations of employees, customers,
shareholders, and the public at large will
rise inexorably.

5
THE DIGITAL BUSINESS TRANSFORMATION

EMERGING DIGITAL
BUSINESS MODELS

Figure 2: New Business Models

Digital business generates
enormous speculation over the Model Description Examples

future of established enterprises. Lock in customers by offering Netflix, Dollar Shave Club,
Subscription subscriptions for services JDA/RedPrairie
Some have seen little change traditionally purchased ad hoc
while for others transformation is Customers use basic service for Spotify, LinkedIn, Dropbox,
well underway. Freemium free, but pay to upgrade to full The New York Times
product offering
Technological, social, and organizational
Disrupts with an “if you’re not Google, Facebook, Snapchat,
trends outlined in Figure 2 will make paying for the product you are online magazines
clear the origins of new business models the product” model, involving
Free
that are disrupting existing businesses selling personal data harvested
and enabling entrepreneurs. by offering consumers a "free"
product of service
Bring together buyers and sellers in eBay, iTunes, SAP Ariba, Tradescraper.
Marketplace
return for a transaction fee com
Provide temporary access to goods Zipcar, Peerby, Airbnb, LogFire,
Access-over-Ownership and services traditionally pur- Convoy
chased
Leveraging high levels of market Amazon Business, Apple
Hypermarket power and economies of scale to
dominate an industry
Monetize the value of time by sell- Uber, Operator, TaskRabbit
On-Demand
ing instant access at a premium
Sell interlocking “platform” SAP, Manhattan Associates, Apple
services, the value of which
Ecosystem
increases as more are purchased.
Creates customer dependency
5
 uthored by Syzgy. Marsden, Paul. “The 10 Business Models of Digital Disruption
A
(and How to Respond to Them).” Digital Intelligence Today. August 26, 2015. http:// Source: Digital Intelligence Today5
digitalintelligencetoday.com/the-10-business-models-of-digital-disruption-and-how-to-
respond-to-them/
6
THE DIGITAL BUSINESS TRANSFORMATION

TRENDS IN BUSINESS
PROCESS EXECUTION

Figure 3: Executives’ Key Priorities in 2015 and 2025 (on

Business processes from the back office to the a 7-point scale)*
customer interface will undergo transformation over Focusing on 5.06
the next decade as process redesign and automation continuous
improvement
5.12

gather momentum.
Increasing level 4.89
of automation 4.5
One tool driving digital business will and niche “As-a-Service” providers alike,
Increasing degree
be robotic process automation (RPA), who will offer new opportunities for firms to of functional 4.27
defined as software that captures and focus on core capabilities and relegate the process integration 4.14

interprets existing applications for the rest to the experts. 8 Increasing

purpose of transaction processing, data functional 4.24

manipulation, and communication across One indication of the importance of scope 3.90

multiple IT systems.6 KPMG suggests that automation in today’s economy is

Developing
with RPA advancements, companies are illustrated by a survey of 183 global analytics
3.91

able to focus less on a “model of cheap executives across a variety of industries capabilities 4.75

employees,” and more on “a model of involved in shared services.9 The responses

Increasing
digital processes.”7 After installation of RPA are summarized in Figure 3. Executives geographic
3.36
2.59
infrastructure, an expert service provider say that top priorities are now continuous scope

can automate a process in as little as two process improvement and increasing the
Developing a 2.35
to four weeks, and can supervise as many level of automation. While data analytics global business
3.09
services model
as ten processes with a single employee. and globalization of service models rank
The systems enable new levels of revenue lower, they show the strongest potential for 0 1 2 3 4 5 6 7

optimization to empower decision-makers. increased importance over the 2015 2025

Such short payback periods and high coming decade. *1=least important, 7=most important
returns will be tempting for big business Source: Deloitte9

6
“Driving Back-office Efficiencies with Robotic Process Automation.” WSJ.com. September 29, 2015. http://deloitte.wsj.com/cfo/2015/09/29/driving-back-office-efficiencies-
with-robotic-process-automation/
7
Ibid.
8
“Driving Back-office Efficiencies with Robotic Process Automation,” Op. cit.
9
“2015 Global Shared Services Survey.” Deloitte. February 2015.
http://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-2015-ss-survey-interactive-030415.pdf
7
THE DIGITAL BUSINESS TRANSFORMATION

TRENDS IN BUSINESS PROCESS EXECUTION

From finance to pharmaceuticals, constraints Centralized control facilities will monitor

in office operations are similar across core, extended, and outsourced process "In its infant stage, RPA has demonstrated
industries. The most common headwinds performance and service levels. Processes great potential to replace the high-
include disparate technology architectures, will be web, workflow, and self-serve
difficulties with data management, and a enabled.11 The adoption of cloud computing repetition, low-cognition work being done
lack of return on investment in integrated across the enterprise will alleviate by people. Some examples include data
enterprise resource planning.10 These the problem of disparate technology entry and data validation. And currently the
challenges drive decentralized decision- architectures.12 Notably, the back office will
making, which increases responsiveness and transform from a transactional function to an payoff is being realized by the organizations
adaptability at the expense of synchrony and analytics factory for the enterprise, providing that have large-scale use cases and few
efficiency. Over the next decade, successful leaders with information needed to make
robots are needed. In ten years, however,
implementation of innovative technologies effective decisions.13
has the potential to allow businesses to the cost of soft robots will decrease
overcome these constraints and empower significantly and robots will be deployed to
new company nerve centers.
do work we do not do today because the
cost is too high. Examples of this include
high-frequency data collection from meters,
or checking the location or status of
equipment/vehicles/people. With richer and
timely data, we can make more precise
decisions that lead to greater value, better
quality, and less waste."
10
“Healthcare and Life Sciences Predications 2020.” Deloitte. 2014. http://www2.deloitte.com/content/dam/Deloitte/global/
Documents/Life-Sciences-Health-Care/gx-lshc-healthcare-and-life-sciences-predictions-2020.pdf
Ibid.
Canon Business Process Services, Inc.
11

12
[1] Ibid. [2] “Cloud Computing Changes the Game.” Accenture.com. 2013. https://www.accenture.com/t20150523T061907__w/us-
en/_acnmedia/Accenture/Conversion-Assets/Microsites/Documents3/Accenture-Insight-Life-Sciences-Cloud-Computing.pdf
13
[1] “Healthcare and Life Sciences Predications 2020.” Op. cit. [2] “Path to a profitable future: Integrated business services model for
life sciences.” Accenture.com. https://www.accenture.com/ph-en/insight-integrated-business-services-model-life-sciences.aspx

8
THE DIGITAL BUSINESS TRANSFORMATION

TRENDS IN BUSINESS PROCESS EXECUTION

As illustrated in Figure 4, 72 percent of 189 buy-side executives regarding how Figure 4: “Over the next two years will your company
increase/reduce its reliance on the following operating
respondents indicate that their companies business process outsourcing (BPO) buyers models for your general and administrative functions?”
will moderately to significantly increase see the changing importance of different
their reliance on outsourcing of general technologies. As it illustrates, effective Internal business units (distributed)
and administrative functions. According to analytics solutions are regarded as the most 13% 43% 20% 7% 12%
Accenture, over 90 percent of enterprises urgent capability required. Furthermore, 32 4%
with revenues over $1 billion use external percent of respondents indicated that they
providers for one or more of their business expect their service providers to deliver Hybrid services (centralized governance) 1%
process operations. However, despite the “predictive and descriptive insights on my 10% 46% 28% 12%
digital business transformation, external processes and my business outcomes.”17 3%
sourcing of operations “has in many cases Automation was regarded as the second-
continued on an analog path.”15 Many most important technology. Automation Shared services 2%

businesses see outsourcing as purely a cost- is a “critical source of value creation” in 24% 37% 28% 7%
cutting measure rather than as a solution processes where the smallest error can result 3%
that is integral to streamlining operations. in significant negative implications (such as
With well-established economic theory payroll processing), as well as in processes Outsourcing 4%

predicting that outsourcing relationships where regulatory compliance is critical (such 13% 59% 17% 6%
will shift dramatically with the changing as claims processing).18 2%
transaction costs enabled by digital tools,
business leaders must take note.16 Increase significantly Increase moderately

Reduce moderately Reduce significantly

The technologies that help create digital
Stay at the same level N/A
businesses focus largely on social, mobile,
analytics, cloud, and automation. Figure 5 Source: HfS Research and KPMG14
highlights findings based on a survey of Note: These figures may not total 100% due to rounding.

14
 rown, D., and P. Fersht. “Executive report: The State of Services and Outsourcing
B
in 2014.” HfS Research and KPMG, 2014.
15
“Digital Operations for the Digital Business.” Accenture. https://www.accenture.
com/us-en/~/media/Accenture/Conversion-Assets/DotCom/Documents/Global/
PDF/Operations_1/Accenture-Digital-Operations-for-the-Digital-Business.pdf
16
Coase, Ronald. “The Nature of the Firm.” Economica 4(16), 1937, 386-405.
17
“Digital Operations for the Digital Business.” Op. cit.
18
Ibid. 9
THE DIGITAL BUSINESS TRANSFORMATION

TRENDS IN BUSINESS PROCESS EXECUTION

Business process outsourcing buyers Automation and the efficiencies driven Figure 5: How BPO buyers see the changing importance of
different technologies to their engagements
and providers can take advantage of by cloud computing, data analytics, and
opportunities associated with digital other important technologies will present 3%
Social
technologies in a variety of ways. Accenture leadership challenges as the workforce
18% 41% 30% 8%
identifies four key components for high- adapts to the new paradigm. There is little
performance digital operations and business agreement on the long-run effects of the
Mobile 1%
services. First, resilient digital platforms accelerating pace of change. Tom Standage,
35% 45% 17%
within externally sourced operations digital editor for The Economist, takes a
engagements will be based in the cloud. relatively pessimistic position: Previous 3%

Second, digital business services providers technological revolutions happened much

Cloud 3%
will move beyond simply analyzing what has more slowly, so people had longer to retrain,
38% 40% 19%
happened to predictive and prescriptive and [also] moved people from one kind of
insights to help clients anticipate the unskilled work to another. Robots and AI 2%

future. Third, digital operations will connect threaten to make even some kinds of skilled
Automation 2%
the workforce, enabling information work obsolete (e.g., legal clerks). This will
47% 31% 20%
workers across the value chain to improve displace people into service roles, and the
productivity, collaboration, and customer income gap between skilled workers whose 2%

service. Finally, technology will drive a jobs cannot be automated and everyone else
Analytics 2%
constantly changing ecosystem, wherein the will widen. This is a recipe for instability.21
56% 29% 12%
technology landscape for an organization
is expanded and optimized to include a 2%

combination of on-premises and on-

Increasing significantly Increasing slightly Staying the same
demand cloud-based solutions.20
Decreasing slightly Decreasing significantly

N=189 buy-side executives. Source: HfS Research, via Accenture19

Note: These figures may not total 100% due to rounding.

19
Ibid.
20
Ibid.
21
Smith, A., and J. Anderson.
“AI, Robotics, and the Future of Jobs.” Pew Research Center, August 6, 2014.
10
THE DIGITAL BUSINESS TRANSFORMATION

TRENDS IN BUSINESS PROCESS EXECUTION

On the other hand, some experts predict may be imperceptible from the perspective Figure 6: What is the attitude of your company’s
leadership toward digital disruption?
that the job market will keep pace with of an office desk, but in historical terms it is
technology as it has throughout centuries of profound.
innovation and change. JP Rangaswami, Actively
Clearly, the impact of technological 25%
former chief scientist for Salesforce.com, Responding
states: advancement goes far beyond the IT
department. Technology is affecting Taking Follower
Some classes of jobs will be handed over 32%
customer engagement strategies and Approach
to the “immigrants” of AI and robotics, but
business processes, and at the same time
more will have been generated in creative
it is shaping the way younger generations Not Responding 43%
and curating activities as demand for their
think and interact. Millennials have radically
services grows exponentially while barriers
different expectations of their employers and Source: Global Center for Digital Business Transformation23
to entry continue to fall. For many classes of
their own future careers. Millennials tend to
jobs, robots will continue to be poor labor
value opportunity more than money. They
substitutes.22
will switch employers more often than their
Whichever way the market moves, business predecessors, and will demand flexible work
leaders will be responsible for the daily arrangements and corporate responsibility.
decisions that shape macroeconomic At the same time, they will bring deep
trends. As they build businesses of the understanding for the technologies that
future they will face a myriad of challenges. have shaped these expectations. Leaders
Research by the Global Center for Digital who can speak their language and meet
Business Transformation suggests that their needs will win in the competition for
many of them have their heads in the sand talent and will build organizations that out-
(Figure 6). Digital business is a reality, and innovate their peers.24
it is driving an accelerating pace of change
for which many are unprepared. This pace Ibid.
22

23
Ibid.
24
Ibid.

11
THE DIGITAL BUSINESS TRANSFORMATION

THE BUSINESS
LANDSCAPE IN 2025

As these trends in organization and process execution

continue over the next decade, many aspects of the
business landscape will fundamentally change.

One likely focal point for these changes In this world, leaders will reach out not only
will be the back office. Historically, to the front lines of business operations to
business administrative functions have get the ground truth. They will turn to data
been somewhat transparent to operations, analysts, RPA operators, and even external
only garnering attention when something parties supporting these advanced functions
goes wrong. With tools like robotic to understand the state of their business.
process automation and its accompanying Their decisions will have more immediate
advanced analytic capabilities, functions and far-reaching impact as automation
formerly escaping notice will become bypasses the obstacles of organizational
vitally important to making sound business culture to execute commands without
decisions. Fewer employees will be needed question or resistance. The scale of business
to execute basic tasks, and those who is likely to continue growing as leaders gain
remain will be more skilled. The systems the ability to see and control operations at
they operate will gather data from across the a wider scale, but we are also likely to see
organization and will automatically integrate more catastrophic failures when decisions
and analyze it to provide insights that are go wrong and organizations have fewer
essential to driving efficiency, optimizing human checks and balances on executive
revenue, and remaining competitive. authority.

12
THE DIGITAL BUSINESS TRANSFORMATION

SUMMARY

Companies are focusing more and more on

leveraging digital technologies, such as social,
mobile, analytics, and cloud, to transform
themselves into digital businesses.

However, despite the fact that over half leadership. Successful business leaders are
of all businesses are investing in digital finding ways to redefine their businesses
technologies, only about a third are along these lines.
investing in these technologies as part of an
overall business strategy. In order to keep To read or download this series, please visit
up in the business world and to remain https://cbps.canon.com/insights/leading-a-
competitive and cost-effective, companies future-ready-business-the-digital-business-
must not only emphasize investment in new transformation
technologies, but in managing broader
change associated with digital business.

Digital business is a convergence of

concurrent trends, including technology
but also demographics, organizational
management, outsourcing strategy, and

13
THE DIGITAL BUSINESS TRANSFORMATION

ABOUT THE CONTRIBUTORS

About Hanover Research

Hanover Research is a global research and analytics
firm that provides high-quality, custom research
through a cost-effective model.

We deliver customized, timely, and

authoritative insights to clients in the
corporate, education, and healthcare
sectors, enabling them to make informed
decisions, identify and seize opportunities,
and heighten their effectiveness.
Learn more at www.hanoverresearch.com

About Canon Business Process Services

Canon Business Process Services offers a
comprehensive portfolio of managed services
and technology for information and document
management, business process outsourcing,
and specialty workforce services.

Combining singular experience and domain

knowledge, we enable organizations to
improve operational performance while
reducing costs and risks.
Learn more at cbps.canon.com.

14