A few days ago, at an event hosted by Continental, Deutsche Telekom AG, Fraunhofer ESK, and Nokia Networks, I came across an interesting example of an emerging mobile Internet-of-Things (IoT) solution: the initiative to “connect the Autobahn” in Germany. The goal of the Digitales Testfeld Autobahn initiative is to develop a platform that allows a wide range of players to access a common platform for digital services in the context of Germany’s road infrastructure. The event also included a test drive to highlight how driving “assistants” in connected cars could communicate with a latency of about 15 milliseconds. Discussions at the event underlined several insights that CIOs should consider when devising mobile IoT solutions:
Ecosystem partnerships create more value for IoT solutions than standalone approaches. At the event, Deutsche Telekom’s CEO, Continental’s Head of Interior Electronic Solutions, Nokia’s VP of Strategy, Fraunhofer-Institute’s Head of Embedded Systems, and Germany’s Minister for Transport all pointed to the necessity for close cooperation to make the “digital Autobahn” platform work. Proprietary OEM technologies will not boost the connected road infrastructure. Continental told us that open IoT systems create more value than closed systems for the company and its customers. To uncover its true potential, the “digital Autobahn” platform will also need to be open to third parties like weather forecasters, retailers, and entertainment companies. This means that CIOs need to support open APIs.
It’s that time of year! The time when every prognosticator comes up with their predictions for the next year. And this year my colleague Pascal and I took the lead in developing our 2016 predictions for the CIO role.
Rather than call out banal and obvious trends I wanted to make a stronger call on the CIO role in particular. In part this is because so many people gleefully post blogs predicting the demise of the CIO. And in part simply because it sometimes feels like I see the role of the CIO differently to many; as first and foremost a business leader.
So will 2016 be the end of the CIO role as we know it?
“No" is my simple answer. In 2016 the Age Of The Customer will further accelerate the role of technology in creating new sources of customer value to drive revenue. As a result we’ll see more and more CEOs expecting their CIOs to help lead their firm toward a clear digital future.
CEOs realize that, increasingly, future growth is tied to their ability to continuously deliver new digital services that create value for customers – across both B2C and B2B business environments. But failure to meet evolving customer expectations will result in losing customers and ultimately lower revenue growth. Without a technology team focused on building the digital platforms of tomorrow, companies cannot hope to keep up with their evolving customer expectations. 2016 will be a pivotal year for CIOs and CEOs – one that will see a significant change in leadership thinking when it comes to a company’s technology capabilities and digital assets.
When it comes to digital, we are at a pivot point. Digitizing your business isn’t about technology: it’s about customer obsession - and in 2016, it will be among your ten critical business success factors helping position your firm for success in the Age of the Customer. In fact, next year will be a year of consequence: those firms that “get digital” will begin to pull ahead, and those firms that don’t will begin to look increasingly archaic, facing the risk of extinction.
The preliminary results from our recent digital business survey are telling. An increasing number of firms are reporting that they have a coherent and comprehensive digital strategy. While this is good news, these firms are still the minority. The vast majority of firms report that their approach to digital is limited at best, and non-existent at worst. But the consistently bleak picture is that most executives think the wrong people are in charge of their digital activities and few (very few) think they have the capabilities to deliver.
But there are some shining lights.
Leading firms like John Deere are pathing the path to digital mastery, demonstrating revenue and share price growth that outpaces less digitally savvy competitors. Executive committees are taking note. Innovation spend is on the rise, digital skills are in hot demand, and a new breed of digitally savvy senior leaders is finally emerging.
For two days this week, I enjoyed Hubspot’s Inbound 2015 conference. Hubspot is an inbound marketing platform targeting small to medium-size businesses and each year the company holds a conference bringing together thought-leaders, customers, and partners. This 3.5-day event has over 250 sessions spanning a myriad of topics. Conferences provide different perspectives on the marketing landscape, customer success stories, product updates, philanthropic awareness, networking opportunities, and — my favorite — kernels that can be developed into themes with broader implications. I was happy to experience all those elements and walked away with more than a few kernels with broader implications. I’d like to share a few resulting from comments by Brian Halligan and Dharmesh Shah, Chris Brogan, and Mitch Joel. Let me forewarn you, these ideas may seem provocative, but they make for a good debate and even better research.
In the past week, I have booked a flight using a travel voucher, questioned a charge on my credit card bill, and bought an electric toothbrush. What do these experiences have in common? In each case, I had a relatively complex question and I received a helpful answer – without talking to anyone in person or by phone. Instead, with a little online research, I was able to identify which blackout dates applied to my travel voucher, clear the charge on my credit card bill, and learn the best settings for my toothbrush.
Essentially, I sought answers immediately by turning to digital channels first. In this regard, I’m not the only one. For the first time in the history of our research, more US online adults report using company websites than speaking with agents by phone when resolving customer service needs. Forrester’s Consumer Technographics® data shows that 76% of consumers turn to FAQ pages, and usage across other digital channels is growing notably:
The fact that technology is disrupting the way in which customers seek information is not merely a trend – it’s at a tipping point. In the age of the customer, consumers expect accurate answers with greater speed and less friction than before; as companies offer them detailed online content with increasingly effective navigation strategies, consumers will embrace self-service digital channels at the expense of offline communication.
CIOs will be orchestrators of digital ecosystems to boost innovation, production, and go-to-market capabilities. In the age of the customer, every business needs to put the customer at the center of marketing, sales, service, and delivery in order to support the brand promise.
Business ecosystems comprise many market players, including suppliers, distributors, customers, competitors, and government agencies. People, processes, and technology are the fundamental building blocks of business ecosystems. They evolve as a form of collaboration between these market players as part of the process of developing and delivering products or services. Now business ecosystems are going digital.
The digital transformation is a huge challenge and opportunity for each individual business. Business processes are changing significantly as a result of real-time information exchange, the mobile mind shift, always connected and mobile devices, and the opportunity to collect and monitor structured and unstructured data. As a business enabler, no CIO can ignore the digital transformation. Digital ecosystem management is much more than a sourcing project: According to Capgemini, businesses with the digital maturity to build digital innovations and to drive enterprise-wide transformation are 26% more profitable than their average industry competitors on a range of measures including EBIT margin and net profit margin. The CIO must actively help the organization to deliver value in the emerging digital ecosystems.
Empowering a central team to set digital strategy, provide common platforms, and provide specialist resources can help business units develop their digital maturity by embracing a set of common standards while still tailoring their customer experience to their specific market needs. Yet many central teams run into difficulty. They fail to clearly communicate their purpose and remit, they struggle to navigate the realities of corporate politics, and they forget to demonstrate their successes through clear metrics. CIOs looking to accelerate their firm's digital journey by building a digital acceleration team should first assess their organization's readiness and appetite (see Figure).
In the age of the customer, your company must exploit digital assets in order to deliver world-class customer experiences and compete effectively. But moving the business from its traditional roots toward digital mastery requires the executive team to paint a compelling digital business vision.
1. Illustrate what customers will value in the future. The way your customers derive value from your products and services today will not be the same in the future. Your business will need to use digital technology to create new sources of value. Instead of simply designing a physical product or service to be used by a customer to satisfy a need, your firm must reimagine your products and services as digital services enhanced by physical products and people. Customer perceptions of value will be shaped by the digital experiences you create to help them achieve their desires. Your digital vision must help employees understand this shift.
American and Canadian insurers are facing some big challenges in 2015. Customer experience expectations, their willingness to consider a growing array of new options to buy insurance, and new competitors creeping into the business of insurance are pushing traditional insurers into new digital strategies. It’s no longer a question of digital channels or “other” when it comes to the customer journey; they’re now intertwined. Digital-dependent customers are eyeing new and more digitally savvy market entrants, while demanding more control over the experience and how their personal information is used. This year, digital insurance teams are crafting agendas that satisfy their firm’s hunger for increase market share and revenue balanced with changing demographics, adaptations in response to extreme weather, and regulation that has lagged the changing realities of digital. One thing’s for sure: Insurance eBusiness teams can’t afford to wait around, but they also can’t afford to make the wrong digital decisions.
Just what are the factors propelling North American insurer agendas this year? For starters, it’s about:
Uneven economic growth in North America. The 2008 financial crisis? It’s a distant memory in much of the US, but not for all. By most measures, the US economy is thriving, driven by rising consumer demand for homes, cars, and consumer goods, and, by extension, insurance. And in oil-producing Canada the decline in gasoline prices isn’t good news: Canada is threatened with recession.
Over the past year, there has certainly been plenty of press coverage surrounding the emergence of the new “Chief Digital Officer” (CDO). And the research we published in 2013 on the CDO role does identify how some firms can potentially benefit from a CDO role working alongside the CMO and CIO. But I’m beginning to see more business-savvy CIOs follow Starbucks' ex-CIO Stephen Gillett’s example and step up to lead digital strategy and digital initiatives.
In fact, CIOs with experience in marketing and/or business-unit leadership — especially eBusiness — are well equipped to lead the future digital transformation journey in many companies. They understand business strategy; they can relate to the outside-in customer view; and they already have an enterprise perspective.
OK, so there are not many CIOs out there today with this kind of experience (my estimate is around 20%) — but this is exactly the kind of CIO that CEOs need to hire in the future.
So let’s not get too hung up on titles — what really matters is the ability to combine a deep understanding of the customer with an understanding of how digital technology will drive new sources of customer value.
That’s the focus of a new series of reports we’ve just published (see below). The reports help digital-savvy CIOs work with business leaders to create a clear vision for what it means to be a digital business and start down the path toward digital business transformation.