There has been an increased drumbeat in the business press about a recession on the horizon, thanks to the inverted yield curve, trade tensions, slower global growth, earnings pressure, etc. But don’t get too concerned; according to Mark Haefele, Chief Investment Officer (CIO) at UBS, in his August 14th CIO report, “We remain confident that the US will avoid a recession next year (2020). But we expect growth to remain muted.” UBS pegs a recession in 2020 at 50% if the US imposes the full 25% tariff on all China trade! Morgan Stanley’s August 14th Wealth Management Report states that its Global Investment Committee or “GIC expects 2019 will be a better year than 2018 both in terms of absolute returns and the breadth of those returns.” Yes, these folks have been wrong before, but the point is, it’s time to double down on digital transformation initiatives to be ready for a downturn, if it comes.
At ONUG, there have been countless presentations and discussions that show being a digital enterprise increases gross margins and corporate valuations. Tesla is a great example, with its valuation during most of 2018 and 2019 being greater than GM. Spotify, the music streaming service, is valued at $26B, greater than the total revenue from music distribution via physical medium, i.e., CDs, albums, etc. Netflix’s valuation is $126B, 50% greater than AT&T’s $85B purchase of Time Warner last year. In just five years, Wayfair, the on-line furniture retailer, has a market cap of $9.9B, which is 20% greater than the combination of its closest competitors Bed Bath & Beyond, Restoration Hardware and Williams Sonoma.
The point is that digital enterprises Tesla, Spotify, Netflix, Wayfair, et al., will fair much better in a downturn, thanks to their capital and operating cost structures being much lower than their competitors. In fact, in a downturn, it’s highly likely that digital enterprises will break away further from their competitors for two main reasons: 1) they are serving digital customers who tend to be more affluent and value the digital experience these brands deliver, and 2) they are not straddled with legacy systems attributes and costs allowing them to innovate faster and respond to market changes quicker. Here are five action items every large corporation needs to do to double down on their digital transformation strategy:
It’s become clear that the organization silos of chief digital officer, chief technology officer and chief information officer do not deliver the digital transformation effect. A new organization that is fully equipped with the digital skill sets and culture is what works. At ONUG Fall in NYC on Oct 16th, we dive into this topic during the CTO Keynote panel. This is a great place to get insights from those who have gone through this process.
There are many software building blocks upon which to base your digital enterprise. These include hybrid and multi-cloud infrastructure, cybersecurity, observability, data analytics, SD-WAN, AIOps, automation and orchestration. There are many options, and your staff of enterprise technologists will be able to see them all at ONUG Fall in NYC. Making decisions as to which software building blocks your corporation will use is fundamental to speed of deployment and the pace/cadence of digital innovation with which your corporation will be equipped. At ONUG Fall, there will be 60 companies demonstrating software building blocks, thus in two days your corporation can accelerate its decisions as to which blocks it will use to deliver digital outcomes.
To thrive in a downturn, your corporation needs to serve digital customers effectively. The corporate brand needs to live and deliver digital value. Corporate boards are advised to double digital initiatives’ spend to assure they are well funded to deliver excellent digital outcomes. Based upon the above, ROI is not only there, it could mean survival in a downturn. At ONUG’s exclusive private roundtable sessions, you’ll hear how as well as how much others are spending to support their digital strategies.
Reference solutions remove much of the guesswork, friction or trial and error of digital transformation project deployment. Reference solutions guide your teams as to what can be built. We are in uncharted territory; it’s not known which building blocks connect best to deliver certain outcomes. The ONUG Community has been working with solution integrators to develop a set of open reference solutions that any corporation can customize and consume. All of these reference solutions will be on full display at ONUG Fall on October 17th as the working groups take center stage.
At ONUG, we have found it’s best to think about legacy IT applications as offering a huge amount of data on customers and operations. Data analytics leverage this data and derive intelligence out of it. Data is locked up in silos; accessing this data is essential to developing new digital products at speed. There are many legacy applications that drive revenue and need to be supported, but operational cost can and should be reduced via AIOps automation tools such as Robotic Process Automation (or RPA) so that these dollars can be redeployed to support digital derivatives of legacy applications. At ONUG Fall, there are multiple sessions on automation and orchestration plus ONUG Academy tutorials that explain how to automate legacy applications and infrastructure.
At ONUG Fall in NYC on October 16-17, hosted by Cigna, the ONUG Community will dive into these digital topics. Eric Hippeau, Managing Partner at Lerer Hippeau, will keynote during the morning of the Oct 17th on “The Coming Digital Apocalypse” and will answer the question if established Global 2000 firms can pivot fast enough to be truly digital enterprises, or will a new crop of digital companies fundamentally alter the largest players in the global economy.
Eric Hippeau is a Managing Director at Lerer Hippeau, a leading early-stage venture capital fund focused on New York technology startups. Hippeau is former Chief Executive Officer of The Huffington Post and a Special Partner at Softbank Capital, where he served as Managing Partner for many years. Prior to Softbank Capital, Hippeau was Chairman and CEO of Ziff-Davis, which was the largest media company serving the technology sector. Hippeau serves on the Board of various private and public companies, including Marriott International.
I invite you to join us at ONUG Fall and accelerate your corporation’s journey toward being a digital enterprise.