By Lillian Barnard, CEO at Microsoft South Africa
Technology today plays a fundamental role in helping businesses and industries transform. Its ability to do this has been augmented by the pandemic, which has fast-tracked the pace of digital and cloud transformation significantly.
This wave is continuing to gain momentum – fuelled by the continued adoption of hybrid work models that mean that people can connect and work from anywhere, at any time, and on any device. This has implications for businesses, who are increasingly seeing the need to use technology to optimise efficiencies, empower employees, accelerate innovation and translate insights to differentiate their offerings and add value to customers.
What has become more clear over the past two years, however, is not just the quickening pace of digital adoption and transformation, but the shift towards organisations building and developing their own digital solutions and capabilities in order to gain a competitive advantage and unlock business value.
The rate at which companies are able to adopt technology as well as build and develop their own solutions and capabilities – by the business for the business – is called tech intensity. And it is rapidly becoming a defining feature of companies: building on the foundation of the underlying, core technologies, structures and systems put in place as a result of digital transformation, and then using these new capabilities to innovate, drive growth and transform their business at speed.
This tech intensity is becoming ever more apparent in South African businesses and is translating to the areas they are investing in when it comes to technology. According to the 2021 South African Science, Technology and Innovation Indicators Report, nearly 70 percent of firms in the country are using technology to innovate.
Our own research, at Microsoft, found that tech intensity has been a critical consideration for businesses going back as far as 2019. Three-quarters of modern companies believe that harnessing tech intensity is the most effective way to build a competitive advantage today, as well as in the future – and 73 percent are already creating their own first-party intellectual property using next-generation technologies such as machine learning (39%), the Internet of Things (37%), Artificial Intelligence (32%), blockchain (29%) and mixed reality (21%).
Creating unique value by addressing business and industry challenges
Mixed reality, for instance, has the unique ability to create value for businesses. The technology addresses specific industry challenges by enabling capabilities that help companies become more competitive and innovative – particularly in the manufacturing, health and retail sectors.
There is a growing body of evidence of global use cases that show that mixed reality has the ability to help solve for current and future business and industry challenges, by enabling simulated on-the-job training, optimising operations, efficiencies, productivity and collaboration through real-time insights and visual guidance, and driving innovation to create a competitive advantage and return on investment.
A Forrester Total Economic Impact Study found, for example, that the HoloLens 2 mixed reality holographic headset offered a 177 percent return on investment (ROI) over three years, as well as improvements to employee health and safety, business continuity, customer experience, and customer outcomes.
This is simply one of a burgeoning number of technologies that have the capability to enable tech intensity. For Microsoft, tech intensity lies at the heart of how we empower our customers.
We are building the platforms that enable customers to combine the best of human creativity and technological advancements to build their own digital capabilities – all underpinned by trust that the highest standards of security and control are built into these capabilities.
This then allows businesses to develop solutions that are able to address their unique business landscape and challenges, augment existing platforms, improve operational efficiencies and productivity, and enable better customer and employee engagement.
The organisations that embrace the opportunities that tech intensity offers will ultimately be the ones to benefit from its competitive advantage and impact by allowing them to differentiate their offerings.
More companies are responding to this growing demand to accelerate their innovation levels and embrace technology to act as a differentiator. They are, for example, building out hackathons, as well as executive briefing sessions to educate and empower their boards, executives, management and teams to understand new and emerging technologies and their use cases so they can use these to improve and accelerate themselves ahead of their competitors.
How should businesses go about investing in technology tools?
For businesses everywhere, technology now acts as more than just an enabler. It forms part of corporate DNA and provides the platform on which businesses operate – and many of the opportunities that organisations are able to harness come as a direct result of technology.
So it stands to reason that when businesses consider investing in technology tools, platforms and systems, top of the agenda is business value and the return on investment they will provide. More and more, modern organisations look at the three horizons model developed by McKinsey.
This framework gives businesses a way to approach growth, innovation and digital transformation by balancing the demands of the present through core systems with the needs of the future by way of new products and solutions. It means accelerating investment beyond the building out of core systems to transforming at speed through customisable solutions, platforms and systems. The three horizon approach measures the time and value of digital innovation and transformation projects that businesses invest in – although how long each horizon lasts depends on the industry that the business is in, and the degree to which it needs the innovation to make the business successful.
Horizon one innovations are typically short-term and yield results in one to three years. These projects optimise the systems, platforms and solutions that the business already has, and enable intelligent processes to help build agility, resilience and flexibility. Horizon two projects usually take two to five years, and focus on transforming the business by adapting and customising solutions, platforms and systems rather than building them from scratch.
Technology has evolved from being just components to entire solutions – and business leaders are embracing this ongoing mindset shift because they have seen how this allows faster transformation, and the ability to scale solutions in an environment with significant market pressures.
Exponential acceleration to value through a culture shift
The majority of business leaders today understand, and are adapting to, this reality. However, horizon three innovations are a very different construct. Horizon three projects are long-term, often taking between five and 12 years to produce results. These projects focus on the ability to digitally transform at scale because of an encompassing cultural transformation – when the foundation of the core systems is already in place, and businesses have started accelerating the building out of certain of these strategically selected systems.
This essentially means embedding a value system within the business to keep digital transformation going at scale. And that is often the hardest part – because if businesses are not able to get that right, then the other investments they have made will likely fail to translate into tangible business value.
It is for this very reason that we are sharing our own journey and cultural transformation as Microsoft with our partners: to help them reap the value of their investments in digital transformation as they adapt to evolving business and market needs, and navigate the move to the three horizons model.
Sharing the insights and learnings of the company’s shift to a growth mindset culture and how it is possible to translate an investment in digital solutions that enable business innovation and empower businesses to do what they need to, at scale, has the power to help businesses across sectors become more competitive, resilient and agile.
In a world defined by change and growing pressures, digital is without a doubt the key building block of businesses today – allowing them to pivot and deliver innovation, productivity, and flexibility.
But to truly realise this return on investment, organisations must ensure that they lay a solid foundation of core systems and platforms, build on these systems to transform at speed and then overlay these efforts with a cultural transformation and mindset shift – and collaboration with the right partner. Only then will they unlock the real business value of investing in digital solutions and platforms.
The three horizon model offers the approach to unlock this value. To realise this potential, companies will now need to look at their investments through these lenses. This will ensure that when they are making strategic decisions around the way in which they use technology, they consider the measure of success they will be working towards and how they can find the right partners to enable and accelerate these capabilities.
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