Cap Gemini Consulting recently collaborated with MIT to "find out what fast-moving digital innovations mean for large traditional companies." Their report on the different phases of maturity in digital transformation—"The Digital Advantage: How digital leaders outperform their peers in every industry"—found digital masters to be, on average, 26 percent more profitable and have 12 percent higher valuations than digital beginners.
Masters of digital transformation
The digital masters all have a few things in common:
- They do not do traditional IT; it is too expensive and slow.
- They have laser focus on customer value creation.
- They use data to drive their always improving operations.
- They are all service providers.
- They iterate on value creation very quickly. Their customers are their focus group and their behavior (via collected data) is their opinion.
Today the base of most companies' digital efforts is traditional IT, which was not designed for the scale, efficiency, and automation required for digital transformation. Hence, traditional IT is at "end of life."
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In contrast, Ericsson has always built digital infrastructure for service providers and—with 3 billion daily users around the world who never think they are using our software—this infrastructure has been proven to work (and to scale). Now we need to build a new infrastructure and today is, metaphorically, the first day of this new journey.
The first digital wave
This is business as usual for Ericsson. In fact, it’s the third wave of scale for us. In the early 1970s, we started digitizing fixed communications using a highly industrialized and highly programmable approach. The core system was known as the AXE 10, and its design center was voice.
Mobile: the second digital wave
After we connected all the buildings, we moved to connecting all the people, using the same principles. The design center moved to mobile, and the core system was known as the RBS 6000. The RBS 6000 inherited many of the core components and principles of the AXE 10 system, plus radio innovations from other companies.
But connecting 5 billion people versus 1 billion businesses could not be five times more expensive. We had to improve the economics of the system, and we did this through a generational approach, continuously improving the unit cost of delivery and enabling networks to exponentially deliver more throughput for less.
Let’s put it another way: the initial mobile packet data was limited to kilobits. It is now gigabits, yet the supporting infrastructure is cheaper than it was before.
Hyperscale: the third digital wave
The next journey is to connect 50 billion things, a 10x scale increase. The core system enabling the approach is the Hyperscale Datacenter System 8000, and it inherits many of the core components and principles from the RBS 6000 system plus outside cloud innovations.
The design center of the hyperscale system is data, since all devices are connected to enable the sharing of data, either for collection or control. And data shares the same governance needs of voice. To enable value creation, both have to be highly accessible and convenient while in parallel being highly secure and trusted, because opinions on governance can differ tremendously in different industries, geographies, and societies.
Open and interoperable
One constant through all these years is an open interoperable approach to enabling infrastructure. All customers need an open market that is interoperable and enables fair competition. If you don’t have that, it leads to fragmentation and the bad economics and performance that follow. In fixed communications, this was ETSI and ANSI. In mobile, this was GSM and 3GPP. In the IoT and 5G, this is Intel® Rack Scale Design, while the governance mechanism has moved from standardization bodies to open source communities.
We did not invent fixed telephony or mobile telephony. We did, however, industrialize both and built them out in 187 countries. Along these lines, we did not invent cloud, but we do intend to industrialize it and take it into 187 countries—a journey that now involves adding compute and storage to the already industrialized mobile infrastructure approach.
Again, traditional IT is over. Are you ready for what's next?