By 2020, more than 7 billion people and businesses — and close to 35 billion devices — will be connected to the Internet. The prediction, from IT consultancy Gartner, helps make that current “It” girl of IT buzzwords — “digital business” — less abstract. In a reality where the digital and physical worlds are intertwined, old business models don’t suffice.
Hence a need for new digital business designs. Look no farther, says Gartner, than Walt Disney World where wearable RFID-enabled MagicBands now function as room key, wallet, admission ticket and line skipper. (See Gartner’s definition of digital business below.)
The creation of new digital business designs, however, is really underway at only about a third of companies (32%), according to the firm’s recent “2015 Digital Business Survey of IT, Business and Marketing Executives,” and the front-runners, as Gartner calls them, are “breaking from the pack:”
“…a widening gulf is forming between organizations already undertaking digital business initiatives and those only in the planning phase,” analyst Jorge Lopez and his co-authors state.
Gartner’s data is consistent with recent data from McKinsey & Co., which showed that most companies have not yet realized the full value of digital.
Digital business doers vs. planners
The report, published last month, is based on responses from 304 executives at organizations with $250 million or more in 2014 revenue. The survey showed that digital doers don’t think or act like digital planners. Companies that are already doing digital initiatives, for example, don’t make a distinction between digital business strategy and plain old business strategy. Planners, on the other hand, see the two as separate. Digital investments by the doer group are for “piloting and deploying,” while the planner group “is into investigation and experimentation.” Makes sense.
Here’s where the gap is more than just semantic: Digital business front-runners overwhelming list “adopting new technology” as their highest priority, followed by “creating a highly collaborative environment” and “supporting customer-driven technology change.”
Adopting new technology is also the top priority for digital business planners (although by 21 percentage points lower than the doers: 70% vs. 49%), but — and this is the telltale data point — “renovating core IT toward a digital business future” is their No. 2 priority.
In other words, the doers are already busy transforming corporate culture to support customer-driven change, among other initiatives, while the planners are still mired in renovating legacy IT systems. Widening gulf indeed.
Veep of digital business
Here are a few more findings of interest to CIOs:
“Securing business and customer data” was cited as the leading requirement for digital business design, followed by “digital marketing capabilities to reach new customers” and “system integration of people, business and things.”
When respondents were asked who were the people responsible for leading digital business innovation at their companies, the leading candidate varied depending on who was doing the answering: CIO or IT director was among the top three roles, according to 57% of IT executives; CMO was among the top three, according to 38% of marketing execs, and business unit manager or managing director was among the top three, according to 35% business executives.
Also, a new role appears to be gaining ground: VP for digital business was cited by 22% of all survey respondents, up from 11% in 2014.
One thing seems clear in the morass of biased opinion: Everybody wants to get in on digital business.
Here is Gartner’s definition of digital business:
The creation of new business designs that not only connect people and business, but connect people, business and things (physical objects that are active players and contribute to business value) to drive revenue and efficiency. Examples: use of sensors, asset tracking, smart machines, smart grid, 3D printing and robotics, smart cities and drone delivery.
United Parcel Service Inc.’s transformation from analog to digital business is well-known in the logistics industry. At the recent Big Data Innovation Summit in Boston, Jack Levis, director of business process management at the Atlanta, Ga. delivery company, walked attendees through the years-long transformation from manual to digital processes for every step — from route generation to real-time driving instructions to truck-loading.
The digital processes are enhanced by analytics. Handheld computers carried by UPS drivers are smarter because of the built-in GPS chip; and analytics also play an increasingly important role in decision making for things like preventive maintenance.
“I don’t know if it’s big data; I don’t know if it’s analytics or if it’s just process re-engineering,” Levis said. “The key is, data needs to turn into insight and insight into better decisions. If you have insight that doesn’t turn into a better decision, that’s trivial,” Levis told the group.
UPS continues to build out its digital platform with additional functionality. Levis explained that new digital tools were built exclusively for employees until it dawned on his team that UPS customers might also enjoy using them. “If I can flip a bit to change where a package goes, why don’t we let our customers flip that exact same bit,” Levis said.
The idea turned into My Choice, which notifies customers of an upcoming package delivery and gives them a chance to manage their options if, say, they’ll be out of town that day. “We took what we built for ourselves, and we opened up those tools to our customers,” Levis said.
MyChoice debuted in 2011, but turning process tools over to customers is fast becoming a best practice for the digital business.
McKinsey & Co. published new data this month on how C-suite executives rate their progress on digital initiatives.
Bottom line for CIOs: The shift to digital is a super-high priority for the 987 executives surveyed by McKinsey, but it is still more hope than reality at most companies — and therefore should represent a significant opportunity for CIOs to take a leadership role. (More on the should-part below.)
Here are some of the McKinsey data points to ponder.
- Nearly three-quarters of C-level executives (71%) believe digital initiatives will add top-line revenue to the business.
- Nearly two-thirds (64%) say digital activities will result in bigger profits.
- However, less than one-third said their companies’ business activities are digital.
- Nearly half of respondents said their companies are capturing just 20% or less of the potential value that digital activities could bring to the business
- Nearly half (46%) said their CEOs are personally involved in the companies’ digital agendas, up from 23% in 2012.
- CIOs were ranked as the second-most digitally-involved exec at 35%, compared to 32% of CMOs and 23% of business unit heads. (CIO digital clout slipped from 40% in 2014 as CEO involvement rose.)
Biggest challenges to going digital
- Lack of internal leadership or talent, both functional and technical, topped the list of the most significant challenges to realizing digital objectives at 31%, followed by:
- lack of data and understanding of how digital trends affect industry and company competition;
- inability to keep pace with faster speed of business of under digital;
- inability to adopt an “experiment mind-set.”
Process automation climbs digital agenda, activities vary by industry
How the push to digital actually plays out at companies is pretty interesting. Most executives said their digital programs are focused on strengthening and growing the existing business, not aimed at new businesses or geographies — in line with what they said a year ago.
However — in a survey result especially germane to CIOs — digital activities within the enterprise are changing.
While “digital engagement with customers” remains the top corporate priority (as it was in the last three surveys), “automation and/or improvement of business process” has climbed the digital agenda: Just over half of respondents cited it as a top-three priority, right after “digital innovation of products, services, business or operating models.”
Priorities differ by industry: “Big data and advanced analytics” is a much bigger digital priority for healthcare than in other sectors, while business process improvement is of most concern to manufacturers. “Digital customer life-cycle management” is of low concern for all industries surveyed, suggesting that this is an area, in addition to business process improvement, where CIOs can step in and take charge.
Inside track from digital high performers
Of the 987 executives surveyed, 71 or a mere 7% identified themselves as high-performing digital companies. Here are the areas where they differed most significantly from their less digitally-enabled peers:
- Reviewed portfolio more frequently for digital-related opportunities and threats (53% vs. 35%)
- Made significant changes to risk profile and time horizon of business portfolio (51% vs. 21%)
- Reallocated of larger share of resources between businesses in the portfolio (46% vs. 29%)
Speed is critical: 43% of high performers say their companies take digital initiatives from idea to implementation in less than six months vs. 17% of all other respondents.
Time to get going!
( Click here for the full report).
For last week’s Searchlight column, I approached SearchCIO expert and former Citigroup CIO Harvey Koeppel to get his take on HP’s layoff of 30,000 jobs in its Enterprise Services business as it prepares to separate into two companies in November. Koeppel applauded the decision, saying the company has long needed to do something to make itself relevant to enterprises once again in today’s digital age. But he also said HP is going to have to change its cost-savings-driven rhetoric if the two offspring companies are to succeed.
Unfortunately, this culture of executing transactions as opposed to focusing on customers’ business needs and building relationships is rampant among many big companies today, not just HP, said Koeppel.
“It’s just outrageous when you listen to the internal talk about not just the lack of understanding of who the customers are, but actual disdain for what idiots the customers are,” Koeppel said. Companies that share this view, he believes, are destined to fail. “It is just so 1950s,” he added.
Part of the problem, as Koeppel mentioned in Searchlight, is that many companies’ technology sales and marketing strategies are managed quarter by quarter. But this approach isn’t conducive to building customer relationships.
“Relationships aren’t built in timeframes measured in quarters; relationships are built in timeframes measured in years,” he said.
He’s speaking from personal experience. As CIO at Citigroup’s Global Consumer Group, Koeppel awarded a $100 million contract to a company because its marketing representative spent three years establishing a relationship with him.
“I knew him and he knew me, but more importantly he had a total understanding of what Citi’s issues were and was willing to bear all the resources that were needed to solve specific problems, as opposed to executing a transaction and making numbers look good for this quarter,” Koeppel said.
Koeppel did acknowledge that it’s difficult not to strategize on a quarterly basis, “when that’s what the CEO’s job really is, is keeping shareholders happy, keeping Wall Street happy.”
There’s one aspect of HP’s culture the company has to tackle if its new endeavors are to succeed, and that’s improving staff morale, particularly post-layoff, according to Koeppel.
Big companies typically “lose the best and keep the rest after the cut,” Koeppel said. The people who remain tend to become demoralized — and if leadership doesn’t pay attention to the culture and the “people that matter,” a vacuum gets created inside the organization, he said.
“Smart people will go find other jobs, and [the company ends up] keeping the people who are too insecure to go find other jobs,” he said.
But Koeppel believes Meg Whitman and her leadership team are capable of tackling these issues.
“I have a lot of respect for Meg Whitman,” he said of HP’s CEO, whose career he has been following since her stint at eBay. “I think she’s got the brights, the smarts and the moxie to make something like this happen.”
Bangalore, Delhi, Manila, Cebu City, Shanghai. CIOs have traveled far afield in search of cheap labor for business process outsourcing (BPO). But according to a recent report from Cliff Justice, principal, Shared Services and Outsourcing Advisory at KPMG LLP, there’s no place like home for the best deals on BPO projects.
That’s provided home can take advantage of advances in robotic process automation (RPA). Not to be confused with the robots in metal pants, software-based RPA uses artificial intelligence (AI) and machine learning capabilities “to handle high-volume, repeatable tasks that previously required a human to perform,” writes Justice.
According to “Bots in the Back Office: Business Process Outsourcing (BPO) Withers as Robotic Process Automation (RPA) Grows Up,” software will trump geography for labor arbitrage: “Rising global labor costs are causing BPO to become unsustainable at the same time as technologies are advancing and converging in such a way that they can not only augment work, but replace workers.”
New class of ‘digital labor’
As traditional business process automation — one of IT’s principal jobs in the enterprise — is combined with machine learning, data analytics and “cognitive inventions,” a new class of digital labor will arise that can do the work of humans — faster, better and cheaper — no matter where those humans reside, the report states.
The cost benefits of BPO labor arbitrage, typically between 15% to 30%, will be outmatched by the 40% to 75% cost reduction that can be delivered by labor automation, according to KPMG. That’s a lot of money and potentially a lot of jobs: The global BPO sector is a $300 billion industry, employing more than 3 million people.
Who is in the crosshairs? The millions of call center workers employed globally, for starters. But any human job that involves “largely transactional, low-end, repeatable tasks” is fair game for RPA, says Justice. And as RPA matures, higher-level jobs are also subject to being done better and faster by software robots.
As my colleague Sue Troy reports in her story, “Cognitive robotic process automation poised to disrupt knowledge worker market,” over the next 10 years, “the work of 110 million to 140 million knowledge workers around the globe may be handled by cognitive robotic process automation systems.” But Justice, who cited the figures at the recent World BPO/ITO Forum’s Global Sourcing & Cloud Summit in New York, cautions that displacement doesn’t equate with 140 million jobs lost. The economy and demand for knowledge workers will continue to grow, he said, and a portion of the displaced workforce will be freed up from doing repetitive clerical and administrative tasks to focus on higher pursuits, including innovation.
KPMG: 5 factors that spell doom for BPO
What’s not up for debate is that the appetite for offshore outsourcing is changing, as companies elect to do smaller deals and fewer of them. Citing KPMG research and market trend data published in The Wall Street Journal, Justice points to what’s happened at companies in India — still the leaders in offshore outsourcing — where the value of deals worldwide shrank to $120.4 billion in 2014 from $206.8 billion in 2010. The number of deals decreased 61% between 2010 and 2014, to 1144 from 1805.
The report pulls out five factors that spell doom for BPO:
- Shrinking talent pool due to global demographic trends
- Escalating labor costs in emerging markets
- Expanding capabilities of robotic technologies
- Internet of Things making devices smarter and reducing need for human intervention
- Increasing influence of platform-centric cloud service providers
Justice reports that traditional service providers are embracing the new operating models introduced by RPA. Let us know what you are doing with RPA.
For more information on how RPA is poised to shake up the ITO/BPO marketplace, see my interview with Carnegie Mellon’s Andy Wasser.
Boston was selected to participate in a unique challenge known as 30in30in30: That’s 30 pitch events in 30 cities in 30 days. Who’s doing the pitching? Startups, many of them with a technology bent, that are building products and services for aging adults.
The Boston winner, a startup in Cambridge, Mass. called CareAcademy that specializes in online education for in-home care providers, took home $1,000 and moved on to the virtual semi-finals round where the pitching continues — this time to folks affiliated with Aging2.0, a “global innovation platform for aging and senior care” and the event’s organizer.
Before the festivities got underway, Joseph F. Coughlin, director of the MIT AgeLab, took to the podium to talk about how to build useful, usable technology for seniors, but it wasn’t a stretch to see how Coughlin’s advice could be relevant to CIOs.
For example, Coughlin encouraged attendees not to design for seniors, but to design for themselves first. “Aging is the one class that, with any luck, you get to be part of. So, as you think about innovation, ask yourself: How do you want to live?” he said. The same goes for CIOs: Building enterprise tools you would find useful or easy use in your personal life will go much further with the business than something that’s cumbersome and non-intuitive.
Technology that’s built for older adults who don’t get how to use it can’t be blamed on the customer’s age. “There is still a dominant stereotype, especially amongst designers and amongst engineers, that if you don’t understand my mental model of how technology works,” that’s your problem, Coughlin said. The real problem, however, isn’t the customer, it’s the “bad technology,” he said.
Coughlin also said venture capitalists are interested in investing in products and services geared toward older adults, but, based on research he’s done, they aren’t. Why? “They didn’t see management teams that understood the population — people who had the intimacy of understanding the marketplace,” he said. In other words, before designing, know your audience. That’s certainly a thought that should resonate with most CIOs.
What do startup go-getters think the aging would enjoy? Here’s a rundown of some of the pitches heard at the 30in30in30 event:
The startup: The History Project
The presenter: Niles Lichtenstein, co-founder, CEO
The idea: A digital toolkit where users can build, essentially, time capsule of family history. Users can marry old family photographs with more modern digital images, tell stories through voice or print, include important family recipes and so on. Sounding a lot like Facebook? Said Lichtenstein: “Too often I hear people say they can’t capture their story or the stories of someone they love because the process feels complex and overwhelming.”
The startup: CareAcademy
The presenter: Helen Adeosun, co-founder, CEO
The idea: An online education, which includes a certification component, to help caregivers, who access the material via mobile device, develop the skills they need. Courses are taught by experts from the field. “By 2050, 27 million aging adults will depend on an in-home caregiver,” Adeosun said.
The startup: Forever Fit
The presenter: Chris Parchmann, founder
The idea: To provide an easily accessible exercise program for older adults. (This was one of the few low-tech presenters at the event.) “We bring exercise to location as opposed to seniors having to go to the facility, which can be difficult for them,” Parchmann said.
Startup: Triple Aim Technologies
Presenter: Ken Accardi, co-founder, interim CEO
Idea: A system that makes managing chronic disease via telehealth affordable and scalable for patients with chronic conditions. “Disease management is this concept that if you teach people everything they need to know about their disease, they can manage it. Triple Aim said, ‘How can we make this scalable and simple,'” Accardi said.
Presenter: Sombit Mishra, CEO, founder
Idea: A medical alert service that “intelligently” routes calls to an appropriate in-network care provider as opposed to always sending patients to the emergency room. “Think of us as the OnStar for care management,” Mishra said.
If CIOs and IT leaders want an Internet of Things (IoT) initiative to be successful, they’re going to need to work with the business. But expect the relationship between the business and IT to wax and wane as the project develops.
“[IT-led] ideation efforts are good to bootstrap an IoT initiative initially,” Fred Hillebrandt, infrastructure architect at the Monsanto Company, said during his presentation at the recent Gartner Catalyst event. “But, at some point, you want the business to take the reins.”
As reported in SearchCIO’s most recent IoT story, successful IoT initiatives also require good preparation, planning and executive business support. Here is Hillebrandt’s list of five recommendations for getting an IoT initiative off the ground:
1. Find your influencers. Hillebrandt recommended pulling that team together in 30 days or less, depending on how far along the IoT initiative is.
2. Keep it small. Hillebrandt said he initially wanted to ask more than 20 people to join the group but soon realized his plan was not realistic simply due to logistical issues like calendar conflicts.
3. Schedule an end-data for deliverables. When building an IoT proof of concept, agility will be key, Hillebrandt said. He recommended CIOs and IT leaders aim for an end-date of four to eight weeks.
4. Start ideation sessions. IoT projects tend to start in the business and ideation sessions should of course include the business, but CIOs and IT leaders shouldn’t rely on the business to run ideation sessions. Hillebrandt suggested IT departments pull together a list of use cases or initial ideas rather than walking into the room with a blank slate. “Try to fill some of it out to spur ideation,” he said.
5. Partner with vendors to initiate proof of concept. Vendors are going to bring the infrastructure, sensors and networks, and partnering with them can help move along the process of building a proof of concept. “In our case, we’ve not had to come up with any money, it’s just been our investment of time,” Hillebrandt said.
Last week, the Apple-Cisco deal barely got a rise out of the analysts I spoke to. This is the partnership between Apple and Cisco aimed at assuring enterprise IT professionals that both companies are serious about making sure employees using iOS devices for work purposes will be fully supported on corporate networks. The industry experts I spoke with for last week’s Searchlight column were decidedly lukewarm about the deal, citing the announcement’s glaring lack of specifics, particularly where customer benefits were concerned.
Any mention of user benefits the announcement did contain, according to Forrester’s Andrew Bartels, was little more than “marketing hype” — a predictable move by Apple to fuel enterprise demand for its devices.
While Bartels and other analysts were unconvinced of the enterprise benefits of the deal — at least until more details are released — some of the CIOs I contacted on Twitter see the pair-up as a big step forward for iOS use in the enterprise.
Paul Kerekfy, CIO at King Sigismund Business School in Budapest, believes that the Apple-Cisco partnership will address the misperception that Apple devices don’t play well with corporate networks:
@Fran_S_TT It will help debunk the myth that Apple technology isn’t enterprise-ready. I know this for a few years when I first touched iPad
— Pál Kerékfy (@PalKerekfy) September 3, 2015
He added that this myth-busting couldn’t come at a better time, considering the popularity of iOS devices among business workers:
@Fran_S_TT People love iPhones and iPads, so this will be welcome
— Pál Kerékfy (@PalKerekfy) September 3, 2015
David Chou, CIO at University of Mississippi Medical Center, couldn’t agree more:
@Fran_S_TT it is a great thing to recognize the most popular consumer devices in the enterprise world. We can write a blog on my thoughts
— David Chou (@dchou1107) September 3, 2015
Teresa Devine, CIO at Serta-Simmons Bedding Co. in Atlanta, was excited about the possibilities around payments:
@Fran_S_TT I think this further enables Apple to run iOS & secure payments on the most secure network platform. I see new offerings coming.
— Teresa Devine (@teresa_devine) September 6, 2015
Bartels himself granted that if there was one specific benefit to be gleaned from the Apple-Cisco announcement, it’s that both companies do plan to improve Cisco products that already support Apple devices.
“There already is a WebEx for iPads or iPhones; they’ll probably work out to enhance that so it is easier to use [and] make it simpler. … Cisco Spark and TelePresence are areas they’re probably working on, too,” he told me.
Check out the Searchlight column to learn more about the Apple-Cisco partnership.
CIOs taking the big data, cloud, analytics, digitization, [fill in the blank] plunge are often given this piece of advice: Start small.
But new research jointly conducted by MIT Sloan Management Review and Deloitte Digital found that businesses focused on “discrete problems” are at the digitally immature end of the spectrum while those on the digitally mature end (or, according to the researchers, “maturing” since businesses are still in the thick of this stuff) are focused on the big picture.
Here’s the exact language, from the report’s executive summary:
MIT Sloan Management Review and Deloitte’s 2015 global study of digital business found that maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.
The statement begs the question: Is starting small still good advice? Absolutely, according to Gerald C. Kane, guest editor at the Review and associate professor of information systems at the Boston College Carroll School of Management.
“A lot of these technology efforts are more about culture, are more about changing the business, which is often really hard to do,” Kane said in an interview with SearchCIO. Starting small and proving the value of a new tech endeavor enables CIOs to build in a transition from business as usual to the business of now while generating buy-in from the business.
But it does something else: Because digital transformation won’t look the same from one business to the next (a disconnect between theory and practice, according to Kane), starting small gives CIOs the opportunity to experiment “so you can capitalize on those that take off and kill those that don’t,” Kane said.
That’s what BASF SE, a chemical producer headquartered in Germany, did with social media tools. During last year’s study, Kane and his team researched BASF’s social efforts and discovered that the company started at the project level by asking some employees to use a new social tool in place of email — as an experiment.
“They found the product team increased its efficiency by 25% as a result of that,” Kane said. The results were dramatic and eye-opening and apparently the result of team turnover, although not in the way you’re expecting. With email, “if someone leaves, they take all of their information, knowledge and communication with them,” Kane said. When the same kinds of discourse take place on a social media platform, “there’s a whole digital record of the entire team’s interactions for the new person to get up to speed,” he said.
Turnover, it turns out, was incredibly disruptive, and the social media platform minimized the effects. “But they were never going to [get buy-in] across the whole organization at once,” Kane said.
The experts — Steve Kleynhans of Gartner and David K. Johnson of Forrester — granted that Windows 10 features such as virtual assistant Cortana gathered specific data about users, but only to improve search and recognition capabilities that, after all, will ultimately benefit users. Moreover, users can opt out of these data-collecting features.
One CIO I spoke with concurred with Kleynhans and Johnson’s view that Microsoft isn’t doing anything that a Google or Amazon or Facebook hasn’t been doing for years.
Wayne Sadin, CIO and CDO at marketing firm The Go Solution in Houston, told me he felt that the extent of Windows 10’s data collection is just the next step in the evolution of privacy vs. convenience, and that CIOs and users simply need to be more vigilant.
Not everyone I reached out to, however, felt that Microsoft is acting with the most honorable of intentions.
Robert C. Covington, an information security advisor, said that time will tell if critics will accept Microsoft’s response to their privacy concerns. “But I tend to doubt that most will be satisfied,” he said, adding that the majority of consumers won’t let privacy stand in the way of their use of the new OS. “Enterprises will be more careful,” he said.
Bob Egan, a CIO advisor at Seraphim Group, a research firm, also wasn’t certain that Microsoft’s assurances would appease privacy critics — including pundits, enterprises or ordinary users.
“Overall, employee trust is eroding. Trust itself is down 5% in the last two years, and complete trust is down by even more,” he told me.
It’s also worth noting that since I’ve published my Searchlight column on this topic, it’s already garnered two comments from people who believe the Windows 10 privacy “ruckus” was definitely not overblown: one from a software delivery consultant and the other from a director and producer.
Software delivery consultant Matt Heusser said that by making the “accept default privacy” settings button on the installation screen large, but making the customization button hard to find, Microsoft was making it difficult for users to customize their privacy settings.
Plus, “the default options included a keylogger to send all your keystrokes to Microsoft. Overblown? I think not,” he said of users’ concerns.
Norman Berns, a New York-based creative director, also believes the Windows 10 privacy “ruckus” is justified. He pointed to Microsoft’s daunting terms of service and the complicated installation process.
“After being force-fed a 12,000 tome of legalese (about 40 typed pages’ worth), approve or kill the entire installation, users have to wade through a dozen screens of intrusion approvals,” said Berns.
The fact that users must opt out of Microsoft’s privacy settings, rather than be able to opt in, is problematic, he said — and not only because the opt-outs are carefully hidden from users.
“Most [of the privacy settings] are of zero value to the end user; most simply provide another source of private data for Microsoft sales.
“People maybe have been less bothered if Microsoft hadn’t been quite so sneaky about the implementation,” he added.