Date posted: November 5, 2015
We’ve been writing a lot about business intelligence lately, but the really hot button topic in today’s business is digital transformation. The fact is that most businesses are in the process of becoming digital organizations, and this requires a fundamental change in how they do business.
A recent McKinsey Insight proposes nine questions that organizations should ask to help ensure that digital transformation is done right— a critical task considering the high stakes involved.
The questions are worth revisiting here in brief:
- How well do you know where change is occurring?
Because digital is so ubiquitous and affects so many aspects of customer behavior and company operations, it can be difficult to know where to begin. To demystify the process and bring structure to it, McKinsey suggests leaders review the new frontiers where big changes are happening, the core elements of the business affected by change, and the foundations needed to support the change. Leaders must understand where digital is having the greatest impact.
- Do you know which customer journeys matter?
When it comes to putting together a plan, it is helpful to think about customer journeys—that is, the sum of an individual’s interactions with a brand across all channels to accomplish a task. Focusing on these helps ground the transformation in the practical realities of change by keeping the customer front and center.
- Are your teams collaborating across functions?
A digital transformation can’t succeed simply by creating a separate enclave for digital activities—even if that’s how it begins—because it touches so many functions across a company. McKinsey’s analysis shows that digital leaders place a premium on internal collaboration, creating processes and teams that integrate various functions across the business and developing incentives for sharing. Companies succeed by building a cross-functional team that brings together key people from marketing, sales, product development, and IT for specific projects. To build momentum, cross-functional teams need visible CEO support, a clear mandate to get things done, adequate resources to build out a program, and profit-and-loss responsibility and accountability.
- Do you have a disciplined ‘test and learn’ approach?
Successful companies work on a concept and keep testing it with customers. They iterate until they get it right—not only delivering what customers want but also understanding why they want it so that issues can be addressed and emerging needs factored in. With this approach, companies avoid getting caught up in overly deterministic specifications, market research that misses the point, and long planning cycles that end up producing something customers don’t want.
- Are budgets tied to progress?
Many transformation efforts are hampered by budgetary cycles that aren’t sufficiently responsive to what’s happening in the company. According to McKinsey’s Digital Quotient analysis, less than 15 percent of companies can quantify the return on investment of their digital initiatives. Venture capitalists offer an alternative model. They closely follow their projects’ development and don’t hesitate to either pull the plug if key performance indicators fail to move in the right direction or quickly pump in more funding if performance justifies it. Their investment decisions don’t hinge on a typical three- to five-year “hockey stick” business plan but take into account short-term milestones: not necessarily hard-dollar outcomes but measures such as growth in new-customer sign-ups or customer engagement in a particular product.
- Do you have mechanisms in place to challenge ideas?
Not all ideas are good ideas. To prevent poor or poorly thought-through ideas from squandering resources, some companies set up a “challenger board” that includes people who know the business inside out and digital natives hired from start-ups or tech companies. With their deep digital experience and outsider perspective, these experts can ask tough questions, uncover problems quickly, and spot opportunities for disrupting the business. Another option is to set up a dedicated advisory board to guide a company through its transformation. Introducing external voices to existing governance structures is another way to inject added critical scrutiny into decisionmaking.
- Are people empowered to act?
In large organizations, there are always reasons not to do something new. Fear of cannibalization—or simply fear of change—can paralyze new projects. Turf battles can kill a digital transformation. That’s why effective teams need real business responsibility, the authority to break through functional silos, and a willingness to lead.
- Is your IT operating at two speeds?
It is hard—perhaps impossible—to undergo a digital transformation with a legacy IT architecture. While the integrity of transaction-focused systems with sensitive data must be protected, IT needs to build out a separate system that can provide nimble customer-facing capabilities. New apps and databases can then be added as needed without touching the underlying systems that run the rest of the business. This second high-speed system supports agile development and prototyping, with weekly or even daily releases and an experimental “fail faster” mindset.
- Are you coordinating a portfolio of initiatives?
A digital transformation isn’t a single effort but rather a portfolio of initiatives that combine to scale the change. Having a “let a hundred flowers bloom” approach, where each initiative works independently in a spirit of experimentation, can yield interesting results, but it is not a formula for scaling a digital transformation across a business. While each initiative is executed by a small cross-functional team and draws on broader support for operations and implementation, success ultimately depends on how management coordinates initiatives as they run in parallel. Executives need to map out each initiative, ensuring it is clearly aligned with the broad business strategy. They then must prioritize the initiatives, determine the dependencies between them, and coordinate resourcing and budgeting. Leading digital companies manage a portfolio of hundreds—if not thousands—of initiatives in parallel. They also automate repetitive tasks wherever possible, freeing management to spend more time on strategic change and growth projects.
The McKinsey authors conclude, “Becoming a digital enterprise requires fundamentally changing the way you run your business. Answering these nine questions can help you understand how to break through the inevitable barriers, increasing your company’s odds of achieving a successful digital transformation.”
Date posted: November 3, 2015
IBM’s recent commercials featuring Watson— with Bob Dylan and Ken Jennings— are bringing artificial intelligence (AI) to a broader general audience than the subject has reached before. A column on business.com uses these as a take off point to consider the impact AI is having on business.
AI technologies can not only sort data, but also ‘think’ about what the data means and act upon to achieve best outcomes. As an article in ZDNet notes, “AI has often been popularly envisaged in super-smart humanoid robot form. In fact, it’s more commonly implemented as behind-the-scenes algorithms that can process ‘big’ data to accomplish a range of relatively mundane tasks far more efficiently than humans can.” What’s driving AI is the rise in raw computer processing power enabled by highly affordable and increasingly small IC chip sizes— used in networks to analyze vast amounts of data in parallel.
Gartner looked at the business implications of AI in its Top 10 Strategic Predictions for 2015 and Beyond: Digital Business Is Driving ‘Big Change’ report. Their AI predictions fall into three principal areas:
- Machines are taking a more active role in enhancing human endeavors
- Digitalized things are making assisted economic decisions
- Renovating the customer experience is a digital priority
Among the predictions:
- 2016— More than $2 billion in online shopping will be performed exclusively by mobile digital assistants
- 2017— A significant and disruptive digital business will be launched that was conceived by a computer
- 2018— Digital businesses will require 50% fewer business process workers and 500% more key digital business jobs, compared with traditional models
- 2018— The total cost of ownership for business operations will be reduced by 30% through smart machines and industrialized services
- 2020— Developed world life expectancy will increase by a half-year, due to the widespread adoption of wireless health monitoring technology
ZDNet cites five sectors where IBM’s Watson is already having an impact: healthcare, finance, legal, retail, and entertainment (specifically, fantasy sports).
While some fear that the advance of AI will cost jobs, Deloitte contends that new technology historically creates more jobs than it eliminates and that current trends in the application of AI will save workers from dull, repetitive tasks and replace them with more engaging work.
One thing is for sure— the times, they are a changin’— and AI will clearly be a part of that change in the business world.