It is an intriguing world that we live in where everyone is anticipating What’s the Future for businesses across verticals. Both digital native and even traditional companies are disrupting the way business is done and this has fast resulted in a new trend in Digital Transformation.
It all began with the hype that perhaps started with the likes of Google, Amazon and Facebook, and became a reality when existing business models of hotels, cab services, retailers etc. started getting visibly disrupted (think AirBnB, Uber, Flipkart). Other industries such as Pharmaceuticals, Manufacturing etc. which were relatively untouched by the Digital Tsunami, anticipated disruption in the future and started transforming, slowly but steadily. A few others thought of digital as the fashion statement and got along. Consulting firms – incumbents & boutique alike – saw an opportunity to “advise” on what Digital means to these companies and how can they undergo such transformations. This was followed by the scary complicated slides and a flurry of “Digital Transformation” frameworks floating around in the market!
All said & done, the default clearly is DIGITAL and a number of enterprises are figuring this out in their own ways. A few progressive ones are touted as “masters” and a few others are evolving from the “beginners” or “challengers” tag. As a company, we have had the opportunity to speak to a number of digitally transforming companies in the US, Singapore, Germany, India and many other markets. One thing that stands out is the fact that each company has defined Digital in their own way (read Digital 1.0). However, the “Digital Strategy” is continuing to evolve and to truly transform to the next Digital level – Digital 2.0 – it is vital to take notice of the following add-ons.
Digital Forces Go Beyond SMAC
Social, Mobile, Analytics & Cloud (a.k.a. SMAC) technology adoption has been on the rise in the last 10 years. So much so that a number of companies who adopted either of these technologies started calling themselves “Digital”. However, merely running an application system on cloud, or creating a mobile app, or creating a Facebook page or running analytics on relational data only covers a part of the digital transformation that these organisations are aspiring for. A number of newer technologies such as Robotics, Machine Learning, & Artificial Intelligence as well as converged technologies such as IOT, 3D Printing etc. are coming off age in unleashing newer & unimagined scenarios and help enterprises in driving a comprehensive digital strategy.
Large tech companies and start-ups are designing their products keeping such new technologies at the centre. Pepper, for e.g. Is a humanoid social robot created by Aldebaran Robotics for SoftBank Mobile and is designed with the ability to read emotions and to make people happy. Microsoft is using Cortana, its Personal Digital Assistant on top of its analytics suite to make insights more interactive for its users. HP & Autodesk are partnering together to unleash the potential of additive manufacturing while Microsoft Windows 10 promises to offer native support for 3D printing.
Digital is People First
Quite a few experts believe that Digital Transformation is about People first & technology later and they may not be completely off track here. The success of Digital Transformation depends – not merely on the scale of technology investments – but on Digital Agility which in turn depends upon the degree with which the people are empowered to embrace the change for growth & innovation. A number of surveys have indicated that lack of agility is the biggest roadblock for digital transformation as traditional & hierarchical structures are not suited to manage agility in the ever changing business environment.
We already see examples of firms incorporating Digital Agility into their culture. 3M, for E.g., has a “15% Culture” which mandates employees to spend 15% of their time on developing new products which are not aligned to their routine work. This is augmented by Genesis Grants to fund ~10 new innovative ideas on an annual basis. GE is another such example, which follows the “FastWorks Agile” approach where small teams act like lean start-ups and crowd-source innovative ideas.
CEO as the Propeller of Unified Digital Vision
Some of the most successful digital companies such as Burberry, Novartis, GE, Tesla and as recent as Alphabet started with a digital vision and focused on breaking the digital silos to drive the digital agenda together, as a company. And in all cases, the mandate came in from the CEOs themselves and rightly so as the CEOs are in the best position to have a foresight on how digital will disrupt their business. Hence, it is imperative that the CEO be in the driver’s seat for the Digital Vision which has to then percolate or seep down across the entire organization. Once the “license to change” comes from the top, it becomes easier for the existing CXOs (such as CIO, CMO, CFO etc.) as well as new CXOs (such as CDO) to work together on the digital agenda without causing internal friction and threatening each other’s job roles.
This would also fundamentally change how companies look for new CEOs in this period of biggest transformation of their lives. The digital age CEOs will be required to have transformative digital ambitions, ability to give clear directions to the organisation and empower employees to be successful in the digital journey. A number of companies continue to favour hiring CEOs from within but with a revived focus on digital. For e.g. when Art Peck was named as the CEO of Gap Inc. in October 2014, he was already serving as the president of the company’s Growth, Innovation & Digital (GID) division since 2012 and was driving the digital strategy for the $2Bn+ e-commerce business across 80 countries. Art and his team were responsible for developing industry leading omni-channel platform for consumers to bridge the digital & physical gap. Art also added responsibility for the Gap Inc. technology division, working closely with the company’s chief information officer to optimize innovative and business solutions.
Digital Excellence Thrives on Co-Innovation with Ecosystem
Once the Digital Vision is created, innovation in people, process, technology and business models becomes imperative and if this innovation is driven along with visionary customers and partners, it opens the doors to new opportunities which in turn pave the way for a successful business. Most successful digitally transformed companies leverage the ecosystem comprising of customers, partners, universities and start-ups together to ideate, prioritise and execute on the roadmap to achieving digital excellence.
Shell Global and Volkwagen AG in co-innovation with SAP recently announced their pilot foundation of a range of connected services including an integrated system for connected fuelling. In another example, “Works with Nest” is a unique program being leveraged by Nest to build an ecosystem to create a self-sustaining marketplace and convert Nest into a Smart Home hub. Nest has already forged partnerships with the likes of LG appliances, Whirlpool, Philips Hue Lights, Pebble Smartwatch among others. Cisco partnered with IMD, a top ranked business school, to create a global centre for digital business transformation in Switzerland with a focus to create disruptive business models for the digital age.
Not All Data is Good Data
There are 1.5 million Facebook posts, and 300,000 tweets being generated every single minute! And companies tend to get overwhelmed with such a massive amount of digital content. Data is surely touted to be the new currency, but not all data necessarily is good data in the context of a particular business. Hence, it becomes imperative to separate out the Quality information which can provide useful insights, from just mere data. On top of it, collecting and managing data is an expensive activity (even in the cloud) and without having the right tools to organise data, companies fail to derive predictive as well as prescriptive insights to gain business benefits. This is the core of why many enterprise “Big Data” initiatives fail as companies fail to ensure quality data collection and focus on data centric use cases.
Companies need to flip the model and focus on use cases to collect (or even generate) the most important data points they need – and this may come from the internal private data as well as from contextual public data (such as that of social media platforms, government portals or even listing services). Marrying these data sets together can deliver incredible amount of insights to organisations and can help derive significant business value. For e.g. Oscar Health, a New York based insurance start-up uses historic claims data to provide estimates for out the out-of-pocket expenses for customers and has also partnered with wearable device manufacturer “Misfit Wearables” to track customers’ fitness data and improve their insurance buying experience. The company was valued at $1.5 Bn within 2 years of its launch.
Paving the way for CAO – Chief Analytics Officer
When confusion loomed on whether the CIO would be the steward of digital strategy for enterprises, a new C-level role in CDO (Chief Data Officer) was created. The job of the CDO was to collect, store & manage data and was restricted at creating a sophisticated data infrastructure. However, the need of the hour now is to go beyond data and mine useful information from the plethora of data that is available. Consequently, a CDO has now paved the way for a new C-level role being hailed as the CAO – Chief Analytics Officer. While the CAO role is still not mainstream, but the momentum is building and looks like this is going to be the ultimate data strategy job at large enterprises.
Companies such as Caesars Entertainment and KeyBank have opted for the CAO positions in their C-suite. Both these companies decided to bring analytics out of the individual departments and centralise it under a CAO function. These companies are increasingly focusing on data backed decision making and use analytics to force discipline in how they think of business growth while keeping customer experience a priority.
IT Vendors vis-à-vis Digital Partners: May the Best Man Win!
Digital Agenda would force almost 75% CIOs to re-think their IT outsourcing relationships in the next 3 years, as per a research report by Gartner. And service providers who are able to use new digital technologies, and bring in process efficiency & customer engagement approaches are the one who are likely to get favoured in the digital world. This re-imagination of relationship in the context of digital is putting in tremendous pressure on existing IT outsourcing vendors and also creating opportunities for Specialist Digital Vendors – incumbents with specific digital skills.
A number of existing large service providers such as Accenture, Wipro etc. have created dedicated Digital practices to address the emerging needs of the customers. However, Specialist product engineering vendors such as Persistent are coming in with a product centric approach to address the digital needs of customers. It is likely that the vendor sourcing in the context of digital transformation will go through fundamental changes in its approach. While a number of companies went through a vendor consolidation journey in the last several years, Digital needs may force them to (once again) look for specialist vendors who can help these companies in the transformation. This will be a key space to watch out for in the next few quarters.
Data Science Skills Vital to Unlock Digital Success
Digital Transformation is clearly the biggest transformation of its time. However, the absence of skilled Digital Talent – for E.g. Data Scientists – is emerging as a major impediment to Digital Transformation. The problem gets further aggravated as the impact of missing skills is not just felt by IT departments, but also by the business itself. To address this gap in skills, companies are either up-skilling their existing employees, or indulging in a war of sorts with their peers to hire the best digital talent from outside. Recruitment teams & HR are under tremendous pressure owing this sudden spike in demand for such talent force, propelling the emergence of newer & unique up-skilling and hiring techniques (such as acqui-hire).
For e.g., P&G and Google entered into an industry first employee-swapping program in a bid to re-skill their existing talent, esp. with the P&G employees garnering greater exposure to online models. Companies such as Walmart have been making strategic technology acquisitions in mobile and social to fill the gap. Goldman Sachs employs more programmers and engineers working on tech matters – even more than Facebook! Setting up technology accelerators and partnering with start-ups is an approach followed by EMC, Nike, PayPal etc.
Phygital it is…
Phygital is the newest phenomenon being created due to the blurring boundaries between physical and digital world, being driven largely by the customers’ demand for a seamless experience across both physical and digital media. To cater to this, companies are taking an omni-channel readiness to enhance the customer experience significantly.
Companies like Burberry, McDonald’s are using technology to bridge the digital and physical world to bring interactive experiences to consumers. Axis Bank, a leading Indian bank is using physical bank presence (real bank) to acquire first time customers and then provide a digital experience over mobile to give them seamless experience in both the worlds. Lowe’s for e.g. experimented with in-store robots to not only identify and locate merchandise, but also speak to customers in their own language. TVS, which operates car dealerships for Mahindra, Renault and Ashok Leyland, is focusing on building car dealership minus the cars. Customers requiring test drive will need to register and the demo car will be sent to the prospective customer’s residence at an appointed time.
These Add-ons are the vital Cogs in the Digital Transformation Wheel, and the entire Digital Bandwagon may be exposed to the risk of capsizing even if a single one of these is left unnoticed.