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Comment: The four critical success factors for “di:conomy” – manage your digital risk

March 2015 by KuppingerCole

This year’s CeBIT runs under the headline of “di:conomy”, an artificial term covering major business and IT trends such as the digital transformation of businesses and “Industry 4.0”, which stands for connected manufacturing being fully integrated with business processes and far more adaptive than ever before. There is no doubt that organizations have to rethink not only their product offerings but their business models in this age of digital transformation, with the IoT (Internet of Things) adding billions of connected devices and virtually everything else also becoming connected. Smart grids, smart homes and smart cities, connected vehicles, wearable computing, but also new payment models, competition for traditional taxi drivers and other changes demonstrate that that transformation is not just at the horizon, but already reality.

Business can not wait longer. They have to rethink their business models today. “The digital transformation of business is unstoppable. Business either act or they will die”, says Martin Kuppinger, Founder and Principal Analyst at KuppingerCole, a leading European analyst firm focusing on Information Security and the Digital Transformation of Businesses. However, blindly issuing apps, connecting things or fusing the production chain and the business value chain will not lead to success. Business have to understand the critical success factors for this transformation and the “di:conomy”, as the CeBIT organizers call this trend. KuppingerCole has identified four critical success factors for the digital transformation of business: 1. Reinvent the business model: Business models are changing. Service business might replace traditional product sales, new competitors will arrive. Rethinking and reinventing the business model is mandatory to succeed in the changing competitive landscape.

2. Foster innovative services and products: Innovation is a major challenge for established players. Organizations must become faster than ever before and leave their traditional way of working and thinking, while still leveraging their long-standing experience.

3. Enable people and the organization: New business models and new products require new skills. Education, skill management, and organizational change management are critical for success.

4. Manage digital risks: Everything that is connected has an attack surface. Understanding the digital risks, the potential attackers, attack surfaces, changing liabilities of new products, services, and business model is mandatory. Managing digital risks is about knowing the risks, being able to measure risks, and mitigating risks. Product risk is one of the major challenges in the di:conomy. “Connecting things and connecting manufacturing creates a new level of risk organizations have to deal with. Security no longer can be an afterthought, it is a critical success factor of the digital transformation”, says Martin Kuppinger. “Digital Transformation is not only about inventing new business models and transforming the organization, it is about Security by Design and Privacy by Design. It is about understanding the opportunities of security and privacy for the business, instead of lack of security – security as an afterthought – becoming a limiting factor for this business transformation” so Kuppinger. Information Security, in particular managing the identities and the access of everything and everyone, and protecting data and connected systems, has never been that important for the success of organizations as today. Information Security, as part of the management of digital risks, becomes one of the crucial factors for the rise or fall of organizations.

KuppingerCole’s Leadership Brief about Digital Transformation can be found here. Journalists may request this comment, the Leadership Brief and all other analyses from KuppingerCole free of charge. Please send us specimen copies of any published articles or links to online publications referring to our articles.

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