In my last post I outlined the research we just finished on digital transformation. Today I'd like to highlight the key takeaways for CIOs.
CIOs are destined to play a pivotal leadership role in the transformation of business to a digital business. The nature of business is changing and, in turn, the technology investment priorities of the past must change. The report - Unleash Your Digital Business - describes the dynamic ecosystems of value that drive customer behaviors and transform the linear value chain into a dynamic network supported by open APIs. CIOs must partner with CMOs to drive the business transformation needed to become a digital business. To survive, your business will need to embrace digital customer experiences within ecosystems of value, and digital operational excellence to drive the agility and innovation required to survive and thrive in the age of the customer.
Digital Is More Than A Bolt-on Strategy
Bolt-on digital is like painting go-fast stripes on a car; it doesn’t change the underlying business. To become a digital business requires fundamental enterprise transformation; something CIOs are accustomed to leading and shaping. The partnership with the CMO must be extended to create operational excellence through digital technology, augmenting customer value with digital products and services and driving rapid innovation across the business.
Dynamic Ecosystems Of Value Drive The Ability To Win Serve and Retain Customers
Your company is likely to face an extinction event in the next 10 years. And while you may see it coming, you may not have enough time to save your company.
Business leaders don't think of digital as central to their business because in the past, it hasn't been. But now your customers, your products, your business operations, and your competitors are fundamentally digital. While 74% of business executives say their company has a digital strategy, only 15% believe that their company has the skills and capabilities to execute on that strategy (see figure). These are just some of the findings from our latest research (Forrester clients click here).
For the past few years, companies have been bolting “digital” onto their existing business like teens paint go-fast stripes onto their cars. “Look, we’re digital” is the message CEOs want to send to investors. But the piecemeal strategy of bolting digital channels or methods onto the business is no longer sufficient. Instead, you must think of your company as part of a dynamic ecosystem of value that connects digital resources inside and outside the company to create value for customers. To do this, you must fully harness digital technologies, both to deliver a superior customer experience and to drive the agility and operational efficiency you need to stay competitive.
Over the past few months I have spoken with a lot of CIOs, customer experience professionals, marketing professionals, and BT strategists in both the public and private sectors in Australia about their organization’s or department’s mobile strategy. This culminated in a number of meetings in Canberra last week, where I got a great feel for how mobile strategies are playing out within the Australian federal government.
While there is a broad spectrum of maturity when it comes to embracing the mobile mind shift, the good news is that everyone I spoke with recognized not only how important mobility is to existing business processes, but also that mobile will transform their customer base and their organization.
It was interesting to note that the conversations I’ve been having with private-sector organizations about mobility usually involve both someone from the CIO’s department and someone from marketing (sometimes CX, sometimes management, sometimes channels). Mobile initiatives are generally partnerships; while the business side leads these initiatives, they also involve the technology department. In contrast, in the public sector the mobile initiative is often led by the technology department — and often by the CIO herself.
These devices are starting to find their way into the hands of consumers, but much of the retail channel has yet to catch up. Smart locks, smart wearables, and smart fitness devices are all generally being sold through the traditional online and offline channels for electronics and devices; sports stores, clothing retailers, and home hardware stores have been slow on the uptake. In the US, we have already seen some electronics retailers (such as Best Buy) significantly expand their “smart wearables” section from a small pod to an entire aisle or even a dedicated corner or section of the store. At the same time, many sports stores have not even started carrying the latest fitness tracking devices — something that should be in their sweet spot.
Way back in September, I promised a series of blogs addressing this subject. I had high hopes of delivering a post a week for five weeks on the topic. Needless to say . . . life interjected!
So here, a little later than planned, is the second post in the series.
Step 1 - Change where you work
If I had a thousand bucks for each time I’ve heard someone in technology management say “IT and the business,” I’d have retired long ago. And it’s not just something we hear in technology circles either. The plain truth is technology professionals have been using isolationist language for decades. I say isolationist because any time we refer to "IT and the business” as if they were two different entities, we are creating an artificial divide. As a department of the business, IT is very much part of “the business.”
When technology leaders create this divide between the technology group and the rest of the business, it separates their actions from the purpose of the business. Technology professionals start to see themselves as some sort of technology service provider to the business. But the truth is that the technology team should be integral to delivering value to the customer. If “the business” wanted a technology service provider, the leadership team would outsource IT. Unfortunately, one consequence of managing IT like a vendor is that it becomes much easier for the leadership team to make that outsourcing decision.
Over the past nine months I've been interviewing chief digital officers and senior digital leaders across a variety of industries to gain insight into the emerging role of digital leadership. My colleague Martin Gill and I wanted to discover why firms hire chief digital officers and what they are responsible for — more importantly I was looking to discover what CEOs should be doing to set up their businesses for success in a digital world.
One aspect of the research I'd like to highlight here is the need to think of digital as more than simply a bolt-on to your business. To create a digital business able to compete in the age of the customer, we need to think of building out a digital business ecosystem. I know what you're thinking — "not another ecosystem" — and yes, it's a very overused term, especially by consultants and analysts. But I simply can't think of a better term to describe the interconnected and codependent relationships needed in a fully digitized business (see diagram).
Let's face it, IT often suffers from a bad reputation. And in many cases it's well deserved. Over the years many IT leaders attempted to change IT's reputation by empowering other departments to dictate what IT should be doing — and in the process they became order-takers. And the portfolio of projects from well-meaning business leaders mushroomed. To cope with the overwhelming demand, IT established rigorous process around governance, forming committees with the power to determine what IT works on. And almost inevitably, many of these committees are bogged down by politics — meaning IT is not always working on the right things — and at the same time slowing down the whole pace of change. No wonder then that many people across the business spectrum view their own IT group as a slow, unresponsive impediment to getting things done.
But CIOs the world over are actively engaged with their leadership teams in changing IT's reputation. The goal for these CIOs is to shift IT from order-taker to business-partner, helping shape future business strategy and using technology to increase the value their organization brings to the end customers of the business.
This transition is not easy. Nor is it guaranteed to work. Sometimes an IT organization's employees are simply unwilling or unable to embrace the change. Sometimes the reputation of IT is so sullied that nothing short of a cold-reboot will work (organizations going down this route will start by outsourcing all of IT, then they gradually hire back key skills needed to derive more effective business outcomes).
In advance of Forrester's Summit for CIOs in Singapore on August 30, I had an opportunity to speak with Paul Cobban about his successful transformations at DBS Bank over the past few years. Based in Singapore, Paul oversees business transformation, operational excellence, customer experience, IT project office, procurement, real eastate, operational risk and business continuity management. I've had a sneak peak at his event presentation and it is excellent. Paul is a progressive CIO at the forefront of BT innovation and business engagement with a lot of valuable insight to share.
1. What do you think IT departments are doing right and wrong these days?
In banking the IT departments have had to change enormously in recent years. On top of the usual relentless advances in technology, security challenges have escalated, the war for talent has accelerated and regulation continues to evolve with the challenges. I believe that IT departments have had to adapt well to these changes.
However, in most companies there is a lack of a truly customer centric design. Although there is some hype in the industry around service-oriented architecture (SOA), I believe that until budgets are allocated around customer processes rather than by functional units, systems will continue to be designed as applications for the department users rather than with the customer in mind. In addition, most companies fail to take usability seriously and have little concept of cross touchpoint consistency.
UPDATED 26th June 2013 As you may be aware Microsoft has finally introduced its Office Suite for the iPhone (launched in the US on Friday 14th June, and now available in much of the rest of the world according to my sources). This is great news — it has been one of the real holes in the iOS application store and in high demand in many businesses we speak to (although will be MUCH more valuable when it's available as a native iPad app). Over the next week or so it is likely that many of your senior executives will read this news — as it has already made the consumer press. Soon they'll be knocking down your door asking how to get access to it.
However, the licensing model that Microsoft has chosen is one to encourage the uptake of the Office 365 Suite. ONLY those users with a MS Office 365 license will be able to activate the apps on their iPhone. This may mean a significant licensing impact for you. If, like many companies, you have not yet made the move to Office 365, your company’s employees will not be able to use the Office apps on their iPhone. There is a big risk here that you will see employees activate the license themselves and charge it back through the traditional expenses channel. And if senior management are doing it, it is hard for them to say no to the more junior ranks.
I reached out to Duncan Jones, one of our resident sourcing pros and Microsoft licensing experts to get his analysis of the situation. Here are his thoughts:
We all hear and read stories of terrible customer experiences; like me, you probably have had your own share of bad experiences. And social media has made it possible for these bad experiences to be shared instantly with millions of people. But in our journey through life, we also experience service that exceeds our expectations. And as we read reviews online, we're more likely to see a mixture of both good and bad experiences. For example, I recently posted a glowing review for a B&B in Bethel, ME, even though a few things about my stay would have typically caused me to deduct points. My five-star review was extremely positive because the proprietor had blown away my expectations on service, delivering an experience way beyond any I've had in a five-star hotel.
But excelling at the personal touch in a small-town B&B is far easier than doing it at scale in a multibillion-dollar business. Yet there are companies that consistently deliver great customer experiences. (My colleagues even wrote a book on them). They aren't perfect all the time, but, on average, they are better than their competitors. At Forrester, we identify these companies through our annual Customer Experience Index (CXi) research. Toward the top of the 2013 index, we find companies like Marshalls, Courtyard by Marriott, USAA, TD Bank, Southwest Airlines, Vanguard, Home Depot, Kohl's, Fidelity Investments, and FedEx.