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).
Over the past 12 months, we have witnessed the acquisition of 28 software or software-as-a-service (SaaS) firms globally, compared with only 13 IT services or BPO firms (see the figure below). The Forrsights Budgets and Priorities Survey, Q4 2012 indicated that 67% of business decision-makers in India planned to increase their department’s spending on SaaS and other as-a-service offerings in 2013 through the IT organization. Anticipating the market’s growing shift to the cloud, large enterprise software players like Oracle and SAP are acquiring SaaS-based products and solutions (Taleo, Ariba, SuccessFactors, etc.) to help them shift their business model to meet the growing market preference for SaaS subscription software over traditional licensed software products.
CIOs in India must capitalize on this gradual global shift in M&A — away from pure IT services and toward cloud-based services — in order to fundamentally shift the way IT is delivered in their organizations. CIOs should adopt a three-pronged strategy to gain full advantage of global technology M&A trends:
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).
As part of the research for my upcoming report on midmarket IT budgets in India, we collected responses on big data adoption trends and maturity levels from 430 midmarket businesses (those with 400 to 2,500 employees) in the country. Our research shows that around 35% of Indian midmarket firms plan to invest in big data technologies and solutions in the coming one to two years, but we also found that many of them focus on reducing costs (30%) or optimizing asset utilization (25%) as the business outcomes expected. Moreover, only 8% of midmarket CIOs who plan to invest in big data have a projected or proven ROI for their big data investments — showing that many Indian organizations are getting caught up in big data hype.
India’s weakening economic conditions have put tremendous pressure on businesses to be more competitive and drive growth. As competition in the midmarket increases, business leaders will expect new IT capabilities to respond to customer needs better, faster, and cheaper. The pressure is now firmly on CIOs to deliver clear business outcomes on their big data investments. Our survey and my discussions with Indian CIOs have led me to the following recommendations for midmarket CIOs investing in big data:
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:
I recently analyzed 60 companies in India to understand the CIO reporting structure and the key projects that these organizations are focused on. Some interesting findings from this exercise:
Currently, 40% of Indian CIOs or top IT executives report to CEOs or the senior-most person (president, managing director, etc.) in their organization. Among the other 60%, most report to CFOs (35%), followed by COOs, group CIOs, and chief sales officers.
CIOs who report to CEOs tend to have a 30% higher IT budget than CIOs who report to CFOs, COOs, or group CIOs.
Projects led by CIOs not reporting directly to the CEO focus primarily on reducing IT costs and aligning IT to the business; these projects are typically measured in terms of cost savings.
Projects led by CIOs reporting directly to the CEO are more likely to focus on customer acquisition and retention and measured more in terms of business outcomes for the organization.
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.
These positive attitudes toward the IT department's performance stand in stark contrast to the views of employees who aren't achieving these outcomes. For example, while 65% of employee advocates are satisfied with the service they receive from the IT department, just 27% of employees not fully advocating for the company share a similar opinion. So what creates this chasm in opinion? We find clues when we look at some of the attitudes employee advocates have about what their organizations allow them to do:
Employee engagement is a hot topic in many C-suites today. There's a growing body of research that says engaged employees are productive employees, contributing positively to the bottom line. Forrester's own workforce research shows those who feel supported by managers, respected for their efforts, and encouraged to be creative are more inclined to recommend the company as a workplace or a vendor. So, we see a debate within the upper echelons of organizations on how best to create engaging workforce experiences which give an employee's contributions meaning, provide the flexibility they require to be successful, and continuously develop the skills they need to serve customers. It's critical that the CIO is at the table during these conversations. Why? Regardless of the talent retention and management strategy, technology will be necessary to help unlock the potential within the workforce.
The CIO at a large software vendor with a reputation for great employee engagement said it best: "Technology is expected, but [business leaders] do not think about how it enables people." Technology is an ambient part of the workspace. Businesses outfit their workforces with a range of gadgets and give them access to numerous systems which facilitate interactions, manage orders, track projects, store data, and more. Of course, deficiencies in these corporate toolkits lead employees to find and embrace things like iPhones, Galaxy Tabs, Dropbox, and Evernote on their own. But has anyone given serious consideration to how these disparate tools come together to help engage employees so they can properly support the customer?