January 28th was the anniversary of the Space Shuttle Challenger disaster. The Rogers Commission detailed the official account of the disaster, laying bare all of the failures that lead to the loss of a shuttle and its crew. Officially known as The Report of the Presidential Commission on the Space Shuttle Challenger Accident - The Tragedy of Mission 51, the report is five volumes long and covers every possible angle starting with how NASA chose its vendor, to the psychological traps that plagued the decision making that lead to that fateful morning. There are many lessons to be learned in those five volumes and now, I am going to share the ones that made a great impact on my approach to risk management. The first is the lesson of overconfidence.
In the late 1970’s, NASA was assessing the likelihood and risk associated with the catastrophic loss of their new, reusable, orbiter. NASA commissioned a study where research showed that based on NASA’s prior launches there was the chance for a catastrophic failure approximately once every 24 launches. NASA, who was planning on using several shuttles with payloads to help pay for the program, decided that the number was too conservative. They then asked the United States Air Force (USAF) to re-perform the study. The USAF concluded that the likelihood was once every 52 launches.
In the end, NASA believed that because of the lessons they learned since the moon missions and the advances in technology, the true likelihood of an event was 1 in 100,000 launches. Think about that; it would be over 4100 years before there would be a catastrophic event. In the end, Challenger flew 10 missions before it’s catastrophic event and Colombia flew 28 missions before its catastrophic event, during reentry, after the loss of heat tiles during take off. During the life of a program that lasted 30 years, they lost two of five shuttles.
Many companies tie rewards to a rise in either Net Promoter Scores (NPS) or customer satisfaction scores. Unfortunately, that's exactly the kind of mistake that leads employees and partners to game the system. Porsche discovered that its stellar NPS was the result of dealers offering freebies to customers in exchange for higher scores. Similarly, when it noticed that satisfaction scores and comments didn't match, music retailer Guitar Center had to retool its rewards and recognition system to prevent store associates from massaging customer survey results.
My report describes the process for ensuring your rewards and recognition reinforce customer-centricity, rather than tempting employees to game the system. To avoid common pitfalls, companies must:
Cisco released its 1st quarter financial statement last week, and the numbers weren’t pretty. But this shouldn’t surprise too many, since the company warned the financial community that the revenue growth was going to be below their expectations. Unlike most, I see this as more of an inflection point in an undulation that swings back into a growth mode that comes with a change in strategy than a parabolic upside-down curve. While there are multiple transformations starting to occur in the networking domain, the Cisco Doomsday-ers seem to solely focus on software-defined networking and the creation of cloud infrastructures; they assume the data center of the future will look like Google’s data centers, even though no one truly, outside of Google, knows how it really runs or what the components are.
For argument’s sake, let’s assume every data center (private or XaaS platforms) will be a Google data center full of white-box components and Cisco’s high margin/feature switches will disappear. Does this mean Cisco becomes irrelevant or loses its position as the 800 lb. gorilla in the networking industry? Heck no. What clearly is being missed by most of the world is the incredible transformation starting to materialize outside the data center. And no, it isn’t the presence of mobile devices. That is today’s transformation that changed the consumer. The business will catch up. Tomorrow’s emergence of Internet of Things (IoT) will enable the business to meet its consumers’ desirers, and Cisco sees it already. Cisco could lose every port in the data centers and still be ahead if you look at where the amount of port growth and network revenue will come over the next 10 years.
One of my colleagues, Karen Rubenstrunk, is a principal advisor for our CIO Executive Program. I’ve known Karen for close to 20 years; she is a superior CIO coach. Recently, we found ourselves discussing the challenges CIOs have communicating business value. Here is Karen’s point of view:
If you’ve been around tech management as long as I have, at some point you’ve had the conversation that keeps on giving (like heartburn): how to better communicate the value of technology to the business.
Like me, I’m sure you’ve continued to wonder why we keep having this conversation over and over and over.
At a recent CIO Group Member Meeting, I found myself drawn into this conversation yet again — and being the lone dissenter in the room about what to do about it. While we kept talking about which new technologies or recent economic trends were making the task of communicating value so difficult, I’ve learned that the real problem isn’t technical, it’s personal: CIOs need to focus on perceptions and invest in the power of personal relationships with business peers.
Perceptions Drive Value
Technology’s perceived value to the institution is directly related to the maturity of the relationship between technology management and other functional managers and their teams, and that relationship is built on two fundamental perceptions: 1) the business’ perception of its dependence on technology, and 2) the business’ perception of technology management competence (see figure below).
Everybody at HIMSS, the annual health care IT conference (http://www.himssconference.org/) is telling the same story. Regulations and the need to reduce the burden of healthcare costs on the American economy is driving innovation to more efficient models of care delivery. The engine behind this drive is a changing model of incentives that reward quality and punish uncoordinated poor-quality care.
Mark Bertolini, CEO of Aetna (HIMSS keynote speaker)
Customer analytics takes center stage in the age of the customer for firms trying to understand and predict customer behavior. From descriptive to predictive methods, customer insights (CI) professionals can apply a wide array of analytics methods to behavioral customer data. CI professionals have a lot to consider when deciding on the right portfolio of methods to drive customer understanding – what dependencies exist between analytics methods, what investment levels are required, where to get help and what business value do these methods drive.
To make it easier, we identified 15 key customer analytics methods that help firms win, serve and retain their customers. In our latest report, “TechRadar™: Customer Analytics Methods, Q1 2014” (subscription required), we evaluate each of these methods in detail taking into consideration their current adoption as well future potential. These methods, ranging from behavioral customer segmentation, lifetime value analysis, next-best offer analysis to recommendation analysis, allow firms to analyze customer data and use the analytical insight to drive acquisition, retention, cross-sell/upsell, loyalty, personalization and contextual marketing.
Our analysis shows that:
Methods that drive contextual insights are in early stages. Emerging methods such as sentiment analysis, location analysis, and device usage analysis are in early stages of development, but they have the potential to provide valuable context around behavior and other customer analytics methods.
In our research, we’ve talked about some of the trends that mark early-stage eCommerce markets. This year I’ve been to a few events to talk about how different eCommerce markets are evolving – today we see that:
Retailers’ ownership of logistics networks is now widespread. The model of online retailers owning and operating logistics networks in emerging markets is well established. While there used to be a handful of examples to point to, it’s becoming increasingly common for a number of the top eCommerce players to operate their own logistics networks - Amazon in India is just one recent headline-maker in this area. Indeed, in the BRIC countries today, only Brazil does not currently see many of the leading online retailers operating their own networks.
Last week I hosted Media Corp’s CIO Leaders Summit in Sydney. In addition to my emcee duties, I also moderated two panels, both of which inspired significant discussion among the more than 50 senior IT decision-makers present. Highlights included:
Peter Bourke, CIO of Westfield, helped drive a lively discussion on the changing role of the CIO and strategies for leading innovation within the organization versus simply responding to business needs.
Andrew Wiles, CIO of Vodafone, addressed the importance of talent management and the skills that IT professionals require to succeed in a fast-paced business environment.
The CTOs of Avaya and Cisco provided excellent insight from the vendor perspective, while David Gee, CIO of Credit Union Australia, wrapped up the event with a vision of the future — the “microtrends and megatrends” likely to affect our lives, both professionally and personally.
Instead of launching their new flagship device at a separate event like last year, Samsung decided to leverage Mobile World Congress to cast a shadow on some other devices’ announcements. Expectations have been high in the past two weeks about what Samsung could announce. And while the atmosphere was not as crazy and irrational as for an Apple announcement, you could still feel today in Barcelona that expectations have been raised for the new smartphone sales leader.
As I pointed out in my post two weeks ago on what to expect at MWC, the Barcelona trade show is strongly biased on hardware specs. No exception to the rule here. The Samsung Galaxy S5 looks very promising on that front: faster, thinner, better battery and camera, etc. What’s more differentiating here is the positioning of the S5 as a fitness phone. It comes with a growing range of smart wearables, such as the Gear Fit – a fitness wristband with a curved screen – with a nice design. This is a way for Samsung to better engage users, especially when used in conjunction with new services like the enhanced S Health 3.0. It offers more tools to help people stay fit and well – providing a comprehensive personal fitness tracker to help users monitor and manage their behavior, along with additional tools including a pedometer, diet and exercise records, and a new, built-in heart rate monitor. Galaxy S5 users can further customize their experience with an enriched third-party app ecosystem and the ability to pair with next-generation Gear products for real-time fitness coaching.
Together with Nokia X announcement this morning and Samsung Galaxy S5 later today, one of the most expected events of Day 1 at Mobile World Congress was Mark Zuckerberg’s keynote. He did not announce anything new and mostly shared his vision of the Internet.org coalition. Facebook wants to connect up to 3 billion people in the next five years.
Facebook already has numerous agreements with telecom operators worldwide – especially in emerging countries where the social media giant can be used to generate acquisitions of new customers. On the contrary, operators are a key distribution platform to help Facebook acquire its next billion customers.
This morning at MWC, WhatsApp’s CEO announced that the messaging app will enable voice within its app starting from Q2 2014. Services like WhatsApp are already cannibalizing SMS among smartphone owners as highlighted here by colleague Dan Bieler. What if WhatsApp does the same thing, further cannibalizing operators’ core voice revenues? This will for sure force operators to reinvent their business models and to embrace agile innovation and partnerships with OTT players. For example, Reliance in India and Mobily in Saudi Arabia have existing partnerships with WhatsApp.
However, Facebook’s CEO first keynote at MWC goes beyond the love-hate relationship with telcos.