David Foote, whose research advisory firm, Foote Partners LLC, specializes in tracking compensation for IT skills, knew digital business disruption was real when he started getting calls from companies like Fender Musical Instruments Corp.
“Fender makes metal and wood products — musical instruments, amps. And they call me and say, ‘We’re putting together this digital group and we have no idea what to pay these people and how to reward them,'” Foote said. “‘Wait a minute,’ I said, ‘You’re a manufacturing company, what does this mean?'”
The storied guitar maker told Foote it wasn’t exactly sure, but it was looking for ways to grow its business. Guitar is a hard instrument to master. It had a couple of ideas for digital products that would make it easier for people to learn how to play — and help sell more guitars.
All corners of the manufacturing sector are seeking digital skills compensation data, Foote said, citing Lowe’s Companies Inc. and Honeywell International as two more examples. “Lowe’s is the store you walk into when you want to build a deck on the back of your house. We’re working with them and find out they’re doing stuff with NASA on all this crazy robotics stuff and 3D imaging,” he said. Honeywell, making a big push into the connected home market, now has “nine, very well-staffed digital innovation groups around the United States and Canada,” according to Foote.
“It’s not that people are doing digitization that’s so amazing. It’s that the companies calling us and asking for help now are hard-core manufacturing companies. They’re all getting into digital software, and things are getting serious,” he said.
GE picks up and moves to a digital hotspot
A marquee example of a hard core manufacturing company in the midst of business digital disruption is General Electric. Foote, who lives about five miles from what will soon be G.E.’s former headquarters in Fairfield, Conn., said the manufacturer’s move to Boston isn’t just about tax breaks. “They are going digital in a very big way and they want to put their headquarters closer to the action,” Foote said, referring to Boston’s thriving high-tech ecosystem. Indeed, CEO Jeffrey Immelt recently asserted that the industrial powerhouse would be a “top 10 software company” by 2020.
Digital skills held back by culture
As the manufacturing and other sectors come to terms with doing business in the digital era, the questions for companies and CIOs, as well as for Foote Partners, is what IT skills and roles are required to deal with digital business disruption, and what do companies need to pay these people to be competitive. But hiring the right people doesn’t necessarily put companies closer to digital transformation.
One example, said Foote, is the role of DevOps engineer. DevOps — the blending of tasks performed by a company’s application development and systems operations teams — has been around for a long time, but only recently has there been enough compensation data to follow the role of DevOps engineer.
Foote had long wondered why more companies hadn’t gone after a skill that would help them integrate their IT, operations and business strategy — and conceivably give them a competitive edge.
“Then I realized after talking to companies is that DevOps is really not a technical skill; it’s a whole mindset. And a lot of companies were really turned off by that, because they don’t adapt very well when they have to change. Change is tough.”
For more on which skills are hot, and which not, in digital business transformation, check out part two of this post, “IT job skills, digital mind-set in short supply.”
PTC Inc., a software company based in Needham, MA, is in the midst of a transformation. Known for its design software, PLM and service management products, PTC is placing big bets on the Internet of Things and augmented reality technology.
“The digital and physical worlds are converging,” Jim Heppelmann, president and CEO at PTC, said at last week’s live streaming Thing Event. “This convergence is transforming everything. It’s transforming how we design and manufacture things, how we operate and service them.”
But, added Heppelmann, one area that hasn’t converged just yet is how people interact with smart, connected things.
That’s a gap PTC believes will be filled by augmented reality (AR) technology. Unlike the artificial environment created by virtual reality technologies, AR layers contextual information over the real world in real time. Think Google Glass, which uses eyewear to, say, display a map view to the user with directions to a destination.
In addition to changing how consumers interact with the world around them and how companies market to those consumers, PTC believes AR technology will change how employees get work done within the enterprise. “The number of potential applications for AR in the enterprise is limitless,” Heppelmann said. His list includes everything from validating product designs to training new employees on how to use a product in the field.
PTC is using AR to help businesses fix and maintain complicated machines. Deere & Co, a manufacturer of agricultural, forestry and industrial engines and equipment, and KTM-Sportmotorcycle AG, a global company that designs and manufactures racing motorcycles, are two PTC customers using AR to this effect.
At KTM, for example, one of the challenges the company encounters in new growth markets is the lack of technical experience needed to service the bikes. “This can make it difficult to make repairs correctly and it can be difficult to make those repairs on time,” Jens Tuma, head of customer service at KTM, said during the webcast.
KTM is using AR as an interactive resource to guide new technicians when making repairs. Using a tablet, the technician can run a diagnostic test on KTM’s smart bikes, isolate the problem and then follow step-by-step visual instructions overlaid on the bike itself that shows how to make the repair.
“Augmented reality will help us deliver more consistent service around the globe,” Tuma said.
PTC’s IoT and AR play has been years in the making. In 2014, PTC acquired Axeda and ThingWorx, companies that specialize in building Internet of Things applications. In 2015, PTC acquired Vuforia, an AR platform for developers, and ColdLight, a predictive analytics platform.
PTC’s acquisitions total up to more than $700 million, which is a sizable investment to equip the company with connectivity, cloud and analytics technology. “PTC needed to transform our technology portfolio to align with the transformation happening in products today,” Heppelmann said.
Terry Kline is a proponent of innovation contests because he’s seen how they can change the work dynamic. “What’s made me do it everywhere I’ve ever worked is that I’ve had employees who say, ‘Hey, I’ve got this great idea, but no one will listen to me,'” Kline, senior vice president and CIO at Navistar International Co. in Lisle, Ill., said in an interview with SearchCIO. So Kline creates opportunities for employees to pursue those great ideas right in the workplace.
Innovation contests or hackathons are a way to crowdsource ideas for new products or new ways of doing things. In the last few years, as the engineering talent wars rage on and as new competitors continue to emerge from unexpected places, innovation contests have become popular in the enterprise and beyond. Kline has used the technique for years, even before taking up his IT post at Navistar, a manufacturer of industrial vehicles and engines, in 2013.
Kline hosts innovation contests at least once a quarter, but he doesn’t do so on a set schedule. Instead, he uses innovation contests as a leadership tool when he either needs to find the most efficient way to execute on an idea or he’s interested in teasing out new ideas. One critical component? He doesn’t limit innovation contests to the IT department.
Instead, with the backing of the CEO to whom he reports, he encourages cross-functional teams to work together whenever possible. “IT by itself is back office, under the covers,” he said. “So if you don’t have a business problem or a solution, [the results are] not as attractive,” he said.
Top ideas are awarded prizes. (Kline has been known to gift his spot in the executive parking area for a month. “I give things away that you can’t buy,” he said.) And the very best ideas are implemented. Over-the-air re-programming, a feature in some Navistar engines that will enable drivers and fleet owners to update engine control modules over a Wi-Fi connection rather than having to return to a service bay, came out of an innovation contest. “It started off as a 1.5-page idea that was then turned into a prototype,” Kline said. “Now it’s a real project, funded, and everyone in the company knows about it.”
Innovation contests are just another process
Innovation contests have the potential to yield great results, but to get there, CIOs should think about them in a basic way: At the core, innovation contests are just another process, according to Tim Kastelle, a teacher of innovation management at the University of Queensland Business School.
In a column he penned for the Harvard Business Review, he wrote that idea generation is the easy part. It’s all of the steps required to turn an idea into practice that’s hard. Ideas have to be sorted, employees have to be given a chance to execute on the selected ideas, cheerleaders have to keep the organization enthusiastic about the idea, and marketers are needed to “get your great new idea to spread,” he wrote.
Kastelle provided readers with a couple of tips on how to build a successful innovation practice: First, evaluate the organization’s innovation strengths and weaknesses; second, invest in improving those weaknesses, he said. “It will likely involve making genuine changes in the way things are managed,” he wrote. After six months to a year, Kastelle recommends repeating the evaluation process.
Selecting the right big data use case is on every expert’s list of big data best practices. Another? Getting the right stakeholders involved.
Before CIOs can take a big data pilot into production, they’ll need to figure out who to get involved and when. Those two questions may be tough to answer, especially for CIOs at companies that have a siloed approach to the work they do, according to Micheline Casey, former chief data officer at the Federal Reserve who is now an advisory board member for the big data analytics company ClearStory Data.
Big data projects often end up requiring input from across business functions. Getting stakeholders involved early means CIOs could tap into that input and lean on them to generate support for the larger project. But knowing when to bring people in can be tricky.
Too many cooks in the kitchen can be a big data pilot killer, and so some CIOs may decide to hold off involving the chief privacy, risk or security officer or legal counsel in an effort to give their teams room to experiment. At other organizations, doing so could ultimately backfire. “You could have a really successful pilot or a first attempt at a big data project, and then realize you totally forgot to do something vis-a-vis your security or privacy policies, and you have to go back and start from the beginning,” Casey said.
That’s especially true for highly regulated industries such as pharma, health care or insurance where a privacy, risk or security officer can ensure strict data governance policies are being met — even for a pilot project, Casey said. And she speaks from experience. When working for a health care company (“who will remain nameless,” she said), one of its first big data pilot efforts focused on customer engagement.
It was the early days of big data when businesses weren’t as scrupulous about anonymizing personally identifiable information (PII) as they are today. Casey and the team (composed of business intelligence and technology employees) kicked the pilot project up to the next senior level to vet, and that person rang the anonymization alarm bell.
“We realized we needed to have a privacy officer involved and things had to be tweaked,” she said. The discovery didn’t eat up too much time, setting Casey and the team back only about a month. Nor did it put the company at risk because the flaw was caught at an early stage. “Making sure you have a wide array of stakeholders at the table from the very beginning is really important to the long-term sustainability for these projects,” she said.
Getting a privacy, security or risk officer or legal counsel isn’t a de facto step. For a big data pilot doesn’t utilize PII, “these folks aren’t needed,” she said.
Shawn Banerji cringes when he hears someone called a “rock star CIO.”
“I can’t stand the term,” he said during a recent phone call from his offices in New York City. “The CIO job or equivalent is bigger than any one person, and it’s been going that way for a long time,” he said.
Banerji is the managing director of the technology officers practice at Russell Reynolds Associates, the executive search firm. We touch base a couple times a year to trade information on technology trends. He tells me what companies are looking for in IT executive talent.
Look behind the curtain at companies with dynamic CIOs, Banerji said — a Dana Deasy at JP Morgan Chase, formerly CIO at BP; or Eash Sundaram at Jet Blue. “What you’ll see is a team of people who work together exceptionally well, who understand their roles and goals, and have a terrific leader who’s able to ensure that people are in the right place and properly empowered — that’s how you get the best results.”
Moreover, talk to so-called rock star CIOs, he said, and most will tell you their success is not about them but about surrounding themselves with excellent people.
“Do you think Tom Brady would be half the success he is if he did not have an organization behind him — coaching staff, receivers, lineman, all those people?” Banerji said, with a nod to SearchCIO’s Boston base.
“This is a guy who succeeds no matter what the changing parts are, because they have a great system in place in Foxboro.” If something happens, the organization is able to reach down to the next level on its bench and bring up another capable person. So too, with IT organizations.
(His sports analogy, made a couple weeks before the fateful matchup at Mile High, indeed shows that a rock star is still just one member of a team.)
Corporate values vs. corporate culture
Besides a deep bench, great CIOs often have another thing going for them, Banerji said: They work for companies that live by a set of core corporate values.
Not culture, mind you — values.
“Culture is tribal. Culture is esprit de corps, the tenure of your daily interactions,” Banerji said. The same company can have many subcultures. Marketing has its culture, IT another, the New York office has a different culture from the Boston office. And that’s perfectly OK, he said.
But cultural independence shouldn’t be mistaken for core corporate values.
“Values transcend function, they transcend geographies and times zones and business lines. They are the irrefutable tenets companies put forward to define who they are,” he said. It could be the corporate philosophy revolves around integrity, or creativity, or putting the client first. “But whatever the corporate values, it doesn’t matter whether you’re in the Mumbai office in finance or in the New York office in marketing, they are the things you all have to embrace.”
At Russell Reynolds, people call it living the Lucite, he said, because the values that founder Russ Reynolds infused in the firm often show up behind plastic on a lot of people’s desks and in conference rooms. “Russ believed that if you don’t have a core set of values, you can never create a company. He was a little old school that way, but on to something, I think,” Banerji said.
Alan Waite, an analyst at Gartner, asked an audience at the market researcher’s Catalyst convention in San Diego last year whether anyone had chartered a private jet to get there. Of course, no one had. Airlines specialize in air transport and usually can do it better and cheaper than private jets.
“Well, guess what?” Waite said. “There are organizations who can do cloud probably more effectively and more efficiently than you can do it yourself, no matter what size organization you are.”
It’s a sound argument. But vendors that sell products to build private clouds often rely on a provocative thesis: that there comes a point when it’s cheaper to use a private cloud infrastructure over a public cloud provider. One vendor-sponsored report I read said when your costs reach $7,644 a month on services in Amazon Web Services — the largest public cloud vendor — it’s time to think about going private.
Who’s got it right?
“I don’t think there’s a hard-and-fast rule,” said Judith Hurwitz, president of consulting company Hurwitz & Associates and an author of many books on technology, including Cloud Computing for Dummies. “I think it depends what you’re actually doing with that cloud.”
There’s a lot to consider, she said. If a company has a commercial product in the cloud that it plans on offering to a lot more customers, cost is a huge consideration — especially if a lot of data will be moved around.
“As things scale, the costs go up,” Hurwitz said. “A public vendor is not in the business as a charity. They’re there to make as much money as they can.”
If it’s a small, contained workload and you can control the costs of managing it, then public cloud is fine. But if a company already has huge investments in data center technology, public cloud will often end up being more expensive. It may have sensitive data it wants control over no matter how much cheaper the public cloud is – or customers may demand a “significant level of accountability” – including security and compliance. In such cases, private cloud infrastructure wins out.
John Burke, an analyst at Nemertes Research, agreed that if a company has the “sunk expenses” of corporate data centers, then making use of them can be considerably less expensive than going with a public cloud provider — especially if it has “a baseline load of work that gets done and there’s not a lot of fluctuation and consumption so they don’t need to rapidly scale up or down.”
That said, Burke and other Nemertes folks are “pretty bullish” on prepackaged cloud applications, namely software as a service. In fact, that they are close to recommending SaaS before any other type of cloud product. Before they get there, Burke said, more data is needed to complete SaaS cost models, which are used to estimate how much the apps will run people.
“We’re dancing with that one right now,” he said.
If you’re about to take an analytic crack at unfiltered terabytes or even petabytes of complex, unstructured data, it can stay in a public cloud provider like Amazon Web Services, said Judith Hurwitz.
The consultant and author of numerous IT books, including several in the For Dummies instructional series, said analyzing big data in the cloud often works “because you’re still in the process of separating the wheat from the chaff,” so there’s no reason for the extra security of keeping it in-house.
“It has not become mission-critical at that point,” Hurwitz said.
But once you complete your analysis and have your unique, core data, bring it back on terra firma. Private cloud computing, especially the sort that is built in a company’s data center, is the preferred place, she said.
“Companies will be more likely to then move their data into a private environment, into the data center, into a private cloud, because those are now the crown jewels.”
John Burke, an analyst at Nemertes Research, said if you have data in several places — some in on-premises systems and some in the public cloud, “you have to look carefully at whether or not it would make more sense to either leave the data where it sits or bring it all into one of the cloud environments from others and do the analysis there.”
There are lots of variables, Burke said, from the method and cost of connectivity to the infrastructure you have on-site to how varied your big data workloads are.
“Is it something where you’re running roughly the same volume of information through your system and you’re maintaining roughly the same volume of data in storage all the time — or does it fluctuate wildly?” Burke said.
Judith Hurwitz, president of IT consulting company Hurwitz & Associates, said there is no boilerplate analysis for determining the return on investment on cloud infrastructure, public or private. It depends on lots of different metrics.
“Maybe a metric is, ‘Are you meeting the requirements of partners?'” Hurwitz said. “Maybe you’re not in a highly regulated market, but your customers are and they have certain requirements that they expect you to fulfill before they’ll do business with you.”
Questions first — ROI later
That could push you toward a private cloud model — either a cloud built on the foundation of your company’s data center or a cordoned-off corner in a cloud vendor’s data center. So could a bill from a cloud provider that balloons from one month to another.
“It really depends on taking a step back and looking at, ‘OK, what am I doing here? What’s critical to me? What’s critical to my customers?'” Hurwitz said.
Then start asking more questions, she said, but swap the word cloud with infrastructure. Does the infrastructure you have in place meet the needs of your customers?
“If the answer is no, you’ve got to change,” Hurwitz said.
The human side
John Burke, an analyst at Nemertes Research, suggested a brute-force approach for determining cloud ROI. Just calculate it.
“There’s nothing particularly mysterious about the cost structures for systems of the data center,” he said. “You’ve got infrastructure, you’ve got staff, you’ve got services — and you can assign costs to each.”
Burke said IT shops can figure out — with a good deal of precision — costs for cloud services and infrastructure like hardware and software. Where they sometimes get fuzzy is “the human side of their expense structures,” he said.
“Something that they often miss when they’re modeling a shift to [software as a service] or some other external variety of service is the ongoing staff cost of making use of that external service, which may be dramatically less than using the inside service or may not be depending on the specifics of the situation.”
Does your organization have a private cloud? Are you sure?
“Nearly 60% of the folks that we spoke to were happy to say that they had a private cloud,” Burke said. “But when you started to pick it apart and get to what the actual functional aspect of it was, you’d wind up with maybe 10% to 15% having an actual cloud of any sort internally.”
What is private cloud? According to National Institute of Standards and Technology, a private cloud is “provisioned for exclusive use by a single organization comprising multiple consumers (e.g., business units). It may be owned, managed and operated by the organization, a third party or some combination of them, and it may exist on or off premises.”
There are two main types of private cloud. One is what’s called hosted private cloud: An organization rents exclusive infrastructure space in a provider’s data center and the managing and maintenance is done by the provider. The other is internal private cloud, which an organization builds in its own data center and manages it itself.
Private clouds also must have characteristics NIST calls essential to be called cloud — they need to have elasticity, for example, so resources can be scaled up or down to meet demand. They also need to be available on-demand without having to contact the service provider — what is called self-service — and resources need to be measured, like electricity or other utilities are, so users know exactly what they have used.
In the Nemertes study, Burke said most respondents had a “well-virtualized data center” in which they can spin up new computing environments quickly but which required some manual network task — so not meeting the self-service requirement. These so-called private clouds lacked other cloud features, like metering capabilities such as chargeback and showback.
Naveen Chhabra, an analyst at Forrester Research, said there are various reasons CIOs and other IT leaders might say that noncloud environments are cloud, including internal politics or fear that competitors might be ahead on the latest technology.
“Who would want to say that ‘I do not have a cloud,’ right?” Chhabra said.
During his keynote talk, Nigel Travis, CEO at Dunkin’ Brands Group Inc., provided a handful of leadership tips to the CIOs and senior IT leaders who attended the recent SIM Boston Technology Leadership Summit. Here’s one: When CIOs get a seat at the leadership table, he said, “be strategic, not technical.”
His advice comes from years of working in customer-facing organizations from likes of Blockbuster, where he learned the value of customer data, to Papa John’s, where he served as CEO and president and helped build the company’s online ordering sales from 6% to 30% in four years, to Burger King, which included a brief stint in IT.
Some of his most detailed leadership tips focused on how to manage teams effectively, what he called his “tenets for success.”
- Avoid turnover, invest in your people. Travis recommended two ways to build greatIT teams: First, provide avenues for extra training or additional benefits. Second, pay to get the best. “If you’ve got great people, reward them well,” he said. “Because the cost of losing them is unbelievable.”
- Communication is key. As the CEO of a global company, Travis can’t be everywhere at once, so he regularly uses technology to communicate with employees and franchisees — from quarterly webcasts to weekly voicemails to in-person coffee talks. “You can never communicate enough,” he said.
- Inspire your employees. IT leaders have a reputation for “being dull and unexciting,” he said after asking attendees not be offended by the comment. Good leadership, he went on to say, means motivating the troops. “Do you truly inspire your department? That’s a question you should think about,” he said.
- Create the right culture. Culture is “absolutely critical,” especially as markets become increasingly competitive, Travis said. What the culture looks like is less important than how the culture functions; he suggested CIOs build a culture “that engages people, that encourages people, that makes people feel good.”