In the digital world, IT is an investment not a cost

Most of you reading this blog are now fully immersed in your company’s annual planning and budgeting process for 2019. Unfortunately, many IT shops still go into this exercise with a defensive mindset that tries to avoid budget reductions rather than an offensive mindset that makes a compelling business case for new technology investments.

In the digital world, sometimes less is more

Most if not all organizations no longer have the capacity to meet the accelerating demand from their customers, employees, supply chain partners and other key stakeholders for faster, friction free ways to engage and connect. From product development to marketing to sales to customer service and IT, teams with limited resources and budgets are stretched to the breaking point to try and keep up with unprecedented increases in demand.

In the new digital world, is your brand well past its sell by date?

Picture2

This October, Prophet, a global brand consultancy, released the results of its third Brand Relevant Index survey. They surveyed 13,500 U.S. consumers about more than 275 brands across 27 industries around four brand relevance measures: customer obsession, ruthless pragmatism, pervasive innovation and distinctive inspiration.

The top ten most relevant brands are: Apple, Google, Amazon, Netflix, Pinterest, Android, Spotify, Pixar, Disney and Samsung. The most obvious conclusion these results show is that all ten of these brands are “driven by technology.” As Scott Davis, Chief Growth Officer at Prophet said, “consumers live, work and play in a connected, digital world, so brands that deliver useful, easily accessible and enjoyable experiences are going to be the most relevant to their lives.”

By contrast some very big-name brands like Comcast, McDonalds, Ralph Lauren, Staples and United showed significant declines in the brand relevancy survey results.

Are you investing to drive your brand value and relevance?

A recent Gartner survey of 353 marketing executives in North America and the UK found that they had spent 22% of their marketing budgets on technology this year down from 27% last year. The report also found that marketing budgets have stalled in 2017 after three years of growth. As a percent of revenue, marketing budgets declined from 12.1% in 2016 to 11.3% this year. One third of CMOs surveyed said they expected their budgets to be flat or reduced again in 2018.

While many companies are investing in online and other digital tools, most have not developed a comprehensive omnichannel strategy to deliver great customer experiences over multiple customer touch points. Legacy marketing mindsets, just like legacy IT mindsets undermine the ability of companies to explore and experiment with all whole new range of digitally enabled customer engagement tools.

This speaks volumes to the necessity for CMOs and CIOs to breakdown the silos between their departments and work together to interconnect customer facing systems of engagement and systems of intelligence with the company’s internal systems of record. This triumvirate of systems should now become the top investment priority to drive brand value and relevance.

Millennials are re-defining brand loyalty


A recent study by Deloitte of over 1000 millennials in the US, UK, Italy and China found that 36% of them said they buy what they like regardless of brand. They are more willing to pay attention to brands that are more aligned with their personal values and the values of their social circle.

Brands that represent these new values should be:

  • Inclusive rather than exclusive
  • Individualized and personalized not generic
  • Self-expressive not self-absorbed or narcissistic
  • Democratic not elitist
  • Authentic and functional not pretentious and frivolous

The study identified a number of brands that have been successful in appealing to these new values including:

  • Interior Define – home furnishings
  • Knot Standard – men’s fashion
  • LVMH’s TAG Heuer – watches and jewelry
  • Shinola – watches
  • Canada Goose – men’s and women’s jackets

While millennials represent only one market segment, I think their attitudes, behaviors and actions are a strong future indicator of what brands have to do to deliver value and relevance in a digitally mediated customer engagement world.

How do you market your brand to an algorithm?

Adobe Systems recently announced the launch its global “Experience Business” cross-media campaign which will be solely implemented through a programmatic buying platform. The campaign highlights Adobe’s belief that artificial intelligence and machine learning will be fundamental to creating compelling customers experiences that help brands stand out in the new digital world. Participating brands include Princess Cruises, Franke Group, Pandora, UBS and T-Mobile.

Alex Amado, Adobe’s VP of Experience Marketing said “today’s most successful brands focus their energy on delivering a consistent, unified experience through many different channels. By using this all-programmatic approach, we can now effectively target customers by analyzing their behaviors and actions online to deliver a more relevant and personalized experience across every touchpoint.”

This now begs the question how do brands have a relationship with customers if they have outsourced multiple touch points to a series of digital algorithms and tools like software bots? While you can’t advertise directly to those digital intermediaries, you may be able to “persuade” the algorithm to give your brand more weight in the recommendations it generates. Either way, the old brand marketing rules are being turned upside down in the new digital world.

Getting Started: Some ideas on how you can build your brand’s value and relevance

    1. Use an outside-in approach not an inside-out approach. While it’s always valuable to document and understand your brand’s current state value and relevance, you can’t change its future state value and relevance by just making incremental tweaks to what you have now. The outside in approach begins by addressing three fundamental questions:
      1. What are the key moments of customer engagement that define and deliver your brand promise and value?
      2. Who or what system represents your brand promise and customer experience at that moment of engagement?
      3. How could you strategically intervene with a new system of engagement or system of intelligence to make that moment of engagement more compelling and enduring?
    2. Align your brand’s values with your customers’ values. A recent study by The Global Strategy Group found that Americans are 8.1% more likely to purchase from a company that shares their opinions and values and 8.4% less likely to purchase from a company that doesn’t. This clearly suggests that a strong alignment in views between your customer and your brand can directly influence desired purchase behaviors.
    3. Create “friction-free” customer experiences. To achieve friction-free customer experiences requires that organizations embrace an operating process of rapid iteration that constantly develops and tests new customer engagement ideas and tools. Companies like Amazon, Google, Facebook and Tesla are constantly providing product and software updates that give them real-time feedback and knowledge about their customer experience impact and value. This approach is becoming table stakes to delivering brand value and relevance in the new digital world.
    4. Harness the power of data analytics. Learning faster than your competition about what motivates consumer engagement/purchase behavior is a competitive imperative in the new digital world. To increase your brand’s value and relevance in this digitally mediated environment you will need to fully understand and leverage data analytics tools like A.I. and Machine Learning. Tech savvy individuals are leaving their customer experience footprints across multiple channels both physical and digital. Capturing and interpreting those footprints quickly and efficiently is best achieved by a close partnership between the pattern recognition skills of machine learning with the interpretive skills of insightful human brand stewards.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In the new digital world, data is the new competitive currency

A recent study conducted by MIT Technology Review and Google found that 60% of the companies surveyed are using big data analytics and machine learning to gain competitive advantage. These companies are looking for multiple competitive advantage returns as shown on the chart below:

Looking forward instead of backwards

Until recently most companies have searched through historical data stored in their systems of record to see if they can better understand and predict future behavior based on past behaviors and actions. This data is typically organized by products and their performance (sales, margins and profits) not by customer segments and their performance (adoption, utilization, and evangelization) and therefore not useful at predicting future behaviors and actions.

The emergence of systems of engagement through mobile applications and omni-channel distribution options is redefining the customer experience and becoming a new source of real time customer data. These new sources of both structured and unstructured data (from social media websites and online search/purchase log files) can now be mined to provide forward looking insights into customer preference, market trends and user adoption. See the recent blog from my brother Geoffrey Moore Digital Systems Maturity Model for a more detailed description of these changing events: https://www.linkedin.com/pulse/digital-systems-maturity-model-geoffrey-moore/

Expanding the data business applications footprint

Not only are the sources of data expanding but the scope and breadth of their different business applications is expanding as well. Simply put, if your company is not using data based analytics to improve its operating performance, its customer engagement skills, its employee productivity capabilities and its supply chain management processes you are at a distinct competitive disadvantage.

The ability to integrate massive, granular data sets with in-database analytics is enabling a whole new generation of business applications as shown from this EMC report below:

  • Multi-Channel Attribution Analysis – attribute credit for sale across multiple marketing channels such as display ads, websites and key word searches.
  • Customer Churn – predict the probability of customers’ attrition based on usage activities, support requests, payment patterns and the social impact of friends.
  • Product Maintenance – predict equipment failures from embedded data devices based upon product usage, maintenance service records and product performance history.
  • Clinical Trial Performance – model different drug outcomes based on clinical trials to understand treatment effectiveness.
  • Yield Management, Merchandising Markdown Management and Price Optimization – build time-sensitive models to understand when and how much to increase or decrease prices given real time demand and supply conditions.  

Some current big data analytics use case examples:

Smart routing traffic data: By 2020 more than 70% of mobile phones will have GPS capability up from 20% in 2010. Current estimates for time and fuel savings from real time smart routing traffic data will be $500 billion by 2020.

Connected vehicle data: A recently completed report from Frost & Sullivan on “Data Monetization in Cars” said that if all the 200 connected car data points were monetized it would generate $33 billion in value. Today the report estimates that only 15% of this data is being monetized.

BMW has partnered with IBM to launch their own data brokering marketplace model called BMW CarData. They have equipped 8.5 million vehicles with built in telematics systems that monitor the car and driver’s habits and performance.

Speech analytics data: Southwest Airlines uses speech analytics tools to gain deeper and more meaningful information from live-recorded interactions between customers and their personnel. This tool has enabled Southwest to anticipate future customer needs and thereby deliver a higher quality customer experience.

Financial markets data:  JP Morgan recently partnered with data analytics startup Mosaic Smart Data to help its fixed-income sales and trading business become more profitable. Their fixed income revenues fell 27% in the three months ended in September and they deployed Mosaic’s smart data technology to help the bank’s fixed income teams “quickly make better informed decisions.”

Operations data: McDonald’s has equipped some of its stores with devices that gather operational data as they track customer interactions, traffic in stores and ordering patterns. They’re using this real-time data to model the impact of variations in menus, restaurant designs, employee training and productivity, as well as, sales.

New business data: A major transport company that plays an intermediary role in its customer’s value chain discovered it was collecting enormous amounts of data and information on global shipments. Sensing an opportunity, it created a new business unit that sells this data to companies who want to improve their business and economic forecasting analysis.

Getting started: Some keys for success

  1. Know what kind of things you’re looking for to help you target the right data streams for analysis. Industry experts say that the biggest reason most companies don’t get the value and insights they want from their data is because they don’t have a clear picture of what they’re looking for. Weather.com hires “people who know how to query their data and tell a complete and accurate story of what the data is saying.” 
  2. Focus on a prioritized set of desired business outcomes. Christina Clark, chief data officers at GE says that “often teams will fail because they are expected to address too many business demands at once, ultimately being stretched too thin to make a meaningful impact.” 
  3. Breakdown data silos. Jeffry Nimeroff, CIO at Zeta Global says “every data silo creates a barrier between interconnections that can yield value. For example, think about a rich user profile either connected or disconnected from website activity data. The more data than can be interconnected the better, as those interconnections are where predictive power can be found.” 
  4. Create good data hygiene. Building data analytical systems and processes that enforce quality is a major factor in extracting the maximum insights and value from your different data sources. Nimeroff says that ensuring repeatability of processes and auditability of results are critical success factors. He also says that deploying data quality tools including profiling, metadata management, cleansing, sourcing help ensure better results and outcomes. 
  5. Recruit executive sponsorship for your analytics initiatives. This will insure that all your analytics initiatives are directly aligned with and in support of the company’s strategic business growth goals and critical business performance metrics.

Increasing the market value and operating performance of your company in the new digital world requires that you harness data analytics as a major contributor to your competitive success. Whether it’s using that data to get faster and better insights into what your customers want, or increasing your speed to market for new products and services; or improving the efficiency of your internal processes success will increasingly be defined by how well your company uses data as a competitive currency.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com 

In the New Digital World, It’s About Asking What’s Possible Not What’s Permissible


To effectively compete as a digital enterprise requires new ways of discovering what’s possible

The scope and speed of disruption from digital technologies (e.g. systems of engagement and systems of intelligence) is not only turning the competitive landscape on its head but it is also forcing companies to discover new ways to engage with their customers, employees, supply chain partners, and even their competitors. In an unusual partnership, Amazon and Microsoft just announced that they will make it possible for their customers to access both of their voice controlled digital assistants, Alexa and Cortana.

Is it possible to get a 10x improvement in neutralizing competitive disruptions?

One of the major implications of the unprecedented level of digital disruption is that companies must find ways to neutralize these disruptions quickly and effectively. The goal is not to exceed, but to match competitive features and benefits as fast as possible. This requires a strong commitment to rapid iterations of minimum viable products and services, and to make changes based on actual customer adoption and utilization metrics. It also requires the need to harness the power of machine learning and A.I. to gain real-time insights into what’s possible and what’s not possible.

Nokia’s response to the launch of the iPhone is an example of what cannot happen. Four years after the launch they still did not have a comparable product for their customers. As a result, they went from the leading smartphone provider in the world to a second-tier competitor in that timeframe.

By contrast, Google got the Android smartphone to market within a year and is now the market share leader in smartphone sales around the world.

Is it possible to get a 10x compression in time to value?

Many companies are still satisfied with incremental improvements to expand their product and service portfolios. Their new product and service development cadence is tied to their annual planning and budgeting process where everyone asks permission for more resources and more dollars.

In order to compete in the age of digital disruption, companies must find ways to create exponential changes in speed to market and time to value. To achieve these changes, many companies have replaced a “permission based” product development process with a “show the customer what’s possible” approach using new processes and tools including Agile, Lean and DevOps. A core element of this approach is to develop and release a minimum viable product (MVP) and then make upgrades and changes to it based on end-user feedback. This can reduce time to value from 6-12 months to 6-12 weeks to 6-12 days, and in some cases 6-12 hours.

For example, Intel’s mobile applications development team increased the number of new apps from 57 in 2013 to 164 in 2014 to 238 in 2015. They increased the speed of their product design and delivery cycle by 30% through optimizing their global server capacity.

Is it possible to change your business model?

Microsoft has embarked on a transformation initiative to change its core business model from on premise, on desktop to cloud first, mobile first. Two years ago, it began to reboot its high margin Office software business to a subscription model and has also seen its Azure Cloud business grow three-fold to over $15 billion and 15% of the company’s overall revenue.

In 2013, Adobe Systems began a business model transformation from a product/license sales model to a cloud based subscription model. While revenues initially shrank 8% the first year and remained flat the second year, revenues reached nearly $6 billion in 2016 (up from $4 billion in 2013).

Three years ago, Starbucks CEO Howard Schultz, announced the company was 100% committed to “all things digital.” From the company that was known for creating alluring physical spaces to enjoy coffee and conversation, today over 25% of their orders are placed and paid for digitally. Their digital ordering app has also helped them attract over 13 million members to their virtual loyalty program.

Is it possible to outperform hierarchies with networks?

Conventional business thinking has always believed that hierarchically structured, vertically integrated businesses will outperform alternative business structures. Recent evidence suggests that in the new hyper-connected digital world, horizontal, cross-enterprise networks outperform hierarchies.

By example Foldit, an online video game, was developed by the University of Washington to enlist a network of players worldwide to solve difficult molecular problems. There are no special requirements to join Foldit and many of the 250,000 players have little or no background in biochemistry.

Recently this collaborative network was asked to figure out a detailed molecular structure of a protein-cutting enzyme from an AIDs-like virus found in monkeys to arrest this medical malady. A solution to this challenge had evaded the world’s best individual scientists for ten years but was amazingly solved by the collective intelligence of a diverse group of online gamers in ten days.

Another example is Nest which started as a one-product thermostat company and has now morphed into a multiple-Internet of Things ecosystem with diverse partners including Mercedes Benz. This ecosystem approach has enabled them to expand their product portfolio from smart thermostats to smart security cameras and smart smoke/CO detectors.

It’s easier to get forgiveness than permission, so just do it

better_oops
In the new digital world, if you are still waiting for permission, it’s likely that you are losing market share and diluting rather than enhancing your customer experience. Customer expectations for real-time access to information, products and services mandate that companies reimagine what’s possible to meet these new expectations.

The good news is that customers are increasingly comfortable with MVP’s and are more than willing to help you make them better. They also like to share ideas and information with each other so if you can facilitate those conversations, it will be to your benefit as well.

As the old saying goes, it’s easier to get forgiveness than permission, so just do it.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.

In the New Digital World, What Are the Metrics That Matter?

Realigning metrics to measure the new work of IT

Less than 30% of companies have a process in place to measure the return on investment of their emerging technology projects according to a recent survey of 150 CIOs and CTOs. Too many companies still measure the performance and business value they get from IT based on the old work of IT rather than the new work of IT as shown in the chart below:

 While still important, traditional metrics like uptime, service availability, and meeting project deadlines and budgets don’t accurately reflect the new business value IT must bring to the table. For example, instead of just measuring the reduction of technical debt, it’s time to measure the amount of trapped value recovered and redeployed toward higher value activities.

How you can use the 4 Zones Model to segment the new metrics that matter

In my earlier work with several CIOs, we have found it very helpful to segment the new metrics into the four zones as shown on the chart below:

Productivity Zone metrics include:

On average 80% of most IT budgets is spent on running the business with 20% spent on changing the business. This presents a great opportunity to identify and redeploy resources (trapped value) from maintaining systems of record to creating and deploying systems of engagement and systems of intelligence.

  • Set a target percentage shift for each year and report out results on a quarterly basis.
  • Identify and quantify the savings from automating the maintenance of systems of record and other employee tasks.
    • AIG recently deployed five “virtual engineers” inside its infrastructure to collect and analyze system performance data. A typical network device outage would go into a queue and take engineers 3.5 hours to address. Using virtual assistants most outages are fixed in 10 minutes. To date, this new automated process has resolved more than 145,000 incidents and returned 23,000 hours of productivity back to the employees.        
    • Fannie Mae is using machine learning to analyze terms and conditions in mortgage contracts and experimenting with image recognition technology to help estimate the value of a home. Early results have shown major improvements in the speed and accuracy of these tasks.
    • At SpaceX, CIO Ken Venner measures the signal-to-noise ratio for every new application they provide to ensure that it accelerates the manufacturing process and increases employee productivity. The goal is to achieve a 9 to 1 ratio.

Performance Zone metrics include:

Traditional IT investments in systems of record were funded out of the company’s capital budget and depreciated over a multi-year time period. New investments in systems of engagement and systems of intelligence must be funded out of operating budgets and be held accountable to near-term business outcome deliverables. The core question to ask is what can IT do to effectively help business units increase revenues, margins and profits? For example:

  • At a large state government agency, a $650 million innovation project is returning $4.7 billion to the state in additional tax revenue – a 7:1 return on investment – by enabling self-service access on the web and becoming more adept at using taxpayer data.
  • At Microsoft, the IT team now gets measured on whether they increased the volume and quality of leads along with the incremental revenue those leads produced.
  • At Intel, former CIO, Kim Stevenson, issued an annual report that documented IT’s performance over the previous 12 months. The 2015 report documented these results among others:
    • Increased revenue by $185 million through personalized campaigns
    • Forecasted the right product mix and demand to drive $265 million in revenue uplift over previous two years
    • Customized the reseller customer engagement process to deliver 2500 new customers and $200 million in incremental revenue

Incubation Zone metrics include:

As I said in an earlier blog, one of the major implications of the unprecedented level of digital disruption is that companies must find ways to get a 10x compression in their product/application development release cycles. Simply put, how can they go from 6 to 12 months to 6 to 12 weeks to 6 to 12 days. The rewards are high as today SaaS is growing at 30-40% per year while traditional perpetual software licenses are growing at 3-4% a year.

  • At Intel, the mobile applications development team increased the number of new apps from 57 in 2013 to 164 in 2014 to 238 in 2015.
    • They increased the speed of their product design cycle by 25-30% by optimizing their global server capacity
  • Some companies are experimenting with crowdcoding which takes large-scale IT projects and breaks them down into microtasks that can be accomplished by many individuals in a short period of time.
  • At ICANN, CIO Ash Rangan and his senior leadership team have embarked on an initiative to get a 10x improvement in their time to value on critical technology projects. To achieve that goal, they have:
    • Redefined roles and responsibilities between product management and engineering
    • Developed a series of demand management/capacity planning metrics
    • Streamlined the project approval governance process
    • Limited product development timelines to 90 days or less

Transformation Zone metrics include:

Transformation initiatives require the total alignment and commitment from the C-Suite, Board and key implementation stakeholders to have any chance for success. The core challenge is does the company have the resolve and persistence to redeploy critical resources away from current businesses that are delivering quarterly returns to a new venture that may not yield any measurable returns for 18 – 36 months.

The initial metrics to decide whether to make this commitment include:

  • The new business will scale to generate a 10% or greater increase in the current revenue and profits of the company.
  • There can only be one transformation initiative done at a time.
  • 50% of the discretionary compensation of all critical stakeholders is solely based on the success of this effort.

Measuring the business value of IT

Early adopters of the 4 Zones model have found it very helpful to start the process by identifying and implementing a new set of metrics that better demonstrate the impact and value of the new work of IT. That work can have measurable impact on the company’s infrastructure model, operating model, and business model as shown on the slide below:

If you have developed and implemented any new metrics to measure the performance and impact of the work of your IT team, I would be very interested to see them to build a more robust portfolio of examples than the ones I’ve used above. Please send them to me at the email address below.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com 

In the New Digital World, it’s Time to Write a New IT Charter

Finding the right balance between operational excellence and business innovation

The CiO.com 2017 State of the CIO survey found that 72% of respondents said they were struggling to strike the right balance between operational excellence and business innovation. 87% of respondents also said that “juggling transformational and functional responsibilities has become a permanent job requirement, not a short-term challenge.”

To effectively manage this multifaceted workload will require CIOs and their leadership teams to think very differently about how the IT function is organized; how their project prioritization process can accommodate ever-increasing demand; and how they can recruit, develop and retain the relevant skills and capabilities needed to carry out the new work of IT. As Phil Potloff said when Edmunds.com put him in the CIO role several years ago, “one of the reasons they asked me to be CIO was to bring new thinking, new processes and new ways to get work done.”

Rethinking the IT organization model

Traditional IT is organized around the functions it carries out and the services it provides instead of the constituencies it serves and the business capabilities it enables. What would your organization look like if you structured it around the 4 Zones Model to serve multiple constituents and enable a multitude of business capabilities that deliver a variety of desired outcomes, as shown on the slide below.

The 4 Zones Model is designed to provide and new organizational framework that helps CIOs and their leadership teams find the right balance between:

  • A need for innovative approaches to enable their organizations to deploy five disruptive technologies: Cloud, Mobile, Social, Data Science and Internet of Things.
  • A need to evolve from lengthy waterfall-based technology implementations to the more rapid agile development approach. The Plan, Build, Run model will be displaced by a Co-Develop, Assemble, Consume model.
  • A need to embed a trapped value assessment process to identify opportunities to shift resources and funds from maintaining legacy systems of record to developing new systems of engagement and systems of intelligence.
  • A need to utilize new methodologies and tools to recruit, develop and retain the relevant new skills and capabilities necessary to lead and manage a digital enterprise.

It is also designed to better enable IT to enhance the critical business capabilities needed to effectively operate in each zone. For example, in the performance zone, this outcome-based approach with internal business partners starts with the question: How can technology better enable the customer engagement or revenue-generating capabilities of your business? The answers to that question help to align future IT investment priorities with critical business outcomes.

Rethinking the IT project prioritization process

In most traditional IT organizations, the project prioritization process is tied to the annual planning and budgeting process. It is driven primarily by resource capacity and funding constraints that ultimately determine which projects make the cut and which don’t. This results in a high level of frustration for those internal customers who can’t get what they need and want for their businesses or support functions.

By contrast, early adopters of the 4 Zones framework and tools as shown in the chart below have started the prioritization process by segmenting potential new projects in the following way:

  • Are they sustaining innovations or disruptive innovations?
  • Are they enabling systems productivity and cost optimization?
  • Are they increasing business unit performance and revenue growth?
  • Are they enabling business model transformation?

Each project has its own time-to-value cadence and metrics but all of them require IT to be fast, adaptable and bring an enterprise-wide perspective to the priority-setting process.

In addition, rather than using resource capacity and budgeting constraints to make project prioritization decisions, IT Executives and their internal partners should start their prioritization discussions by asking three key questions:

  1. Should we do it? Does it align with and support critical business outcomes?
  2. Can we do it? Do we have the relevant skills, capabilities and tools to achieve the outcome?
  3. Did we do it? Do we have the right metrics to measure the achieved outcome vs. the desired outcome?

This new approach moves project prioritization from a budget exercise to a business value creation exercise.

A new charter for the new work of IT

IT’s current charter is primarily built around the old work of IT as shown in the left-hand column of the chart below. While much of this operational excellence work must continue to be done, it does not reflect the new technology-enabled innovation work shown in the right-hand column that companies increasingly expect IT to deliver.

The new work of IT also calls for a complete reassessment of the relevant skills and capabilities the IT team needs to manage this multifaceted workload. For example, the skills needed to deploy an inside-out user interface design approach are very different from the skills needed to deploy an outside-in user experience design approach. As the CIO.com survey validated, finding the right balance between operational excellence and business innovation is now a permanent job requirement for IT.

As such, I think it’s time to write a new charter for IT. A charter that properly reflects the new and expanded role that IT brings to any organization. A charter that:

  • At the strategic level, defines IT’s role in enabling the transformation of a company into a digital enterprise
  • At the operating level, defines IT’s role in co-developing the business and functional capabilities with its internal partners to enable a company to successfully compete as a digital enterprise
  • At the functional level, defines IT’s role in recruiting, developing and retaining the new skills and capabilities needed to support a digital enterprise

Unfortunately, left to my own devices a task of this magnitude is well beyond my reach. Therefore, I am looking for any brave souls who would like to embark on a collaborative venture to achieve this goal. If you are one of those people, please let me know.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In The New Digital World, You Have to Win the “Technology-Enabled” Business Innovation Game

image03

The connected customer wants a different customer journey

Technology-enabled innovation is not only disrupting the competitive landscape, it is redefining the user experience value proposition across a multitude of industries. It is also putting companies on notice that if you can’t successfully engage your customers in this new digitally mediated world you are on your way to being Uberized.

The five waves of digital disruption (social, mobile, cloud, data analytics and connected devices) are completely altering how people connect, communicate and discover information. What these individuals are looking for are “friction-free” user experiences that delight and inspire them. These new tools affect how customers make decisions which affect their entire customer journey which ultimately affects their customer lifetime value. Simply put, it defines the differences between the traditional customer and the new connected customer.

A Framework for Organizing and Implementing Technology-Enabled Business Innovations

image00

In his book Escape Velocity – Free Your Company’s Future From The Pull Of the Past, my brother, Geoffrey Moore, put forth a three-part innovation framework that is designed to significantly increase the ROI on innovation investments. At the core of this framework are three distinct innovation playbooks ( see chart above ) that clearly define the mandate and desired outcome for each one. Here are the key diagnostic questions that clarify those mandates and outcomes:

  • Have we differentiated our offer enough to gain real competitive separation?
    • Have we created a truly unmatchable offer?
  • Have we neutralized offers with enhanced features from our reference competitors in a timely manner?
    • Have we gotten to good enough fast enough?
  • Have we optimized our opportunities for gains in resource utilization and cost reduction?
    • Have we reclaimed unproductive resources and redeployed them against differentiation or neutralization opportunities?

Why do so many companies fail to get the ROI they want from their portfolio of technology investments?

image01

In a recent study on IT innovation, 90% of CIOs said that technology-driven innovation is crucial for achieving competitive advantage. Yet on average, just 14% of IT budgets are earmarked for innovation and only 23% of companies report very positive results from their IT innovation efforts.

The answer to the question above lies in the way companies approach innovation and why they struggle to turn good ideas into sustainable revenue producing products and services. First, they don’t distinguish between the different types of innovations and the outcomes they are designed to deliver. Second they manage all innovations with the same processes and tools which leads to multiple sources of waste and failed initiatives as the chart above highlights.

Two Rules of Thumb

There are two key rules of thumb that can keep you from making the mistakes many companies make and result in most innovation initiatives not achieving their desired goals and outcomes.

  1. Never tie differentiation and neutralization innovation programs to the same release schedule. Differentiation is all about how far while neutralization is all about how fast. Combining the two dumbs you down and slows you down.
  2. Best in class is appropriate for optimization innovations only. It is too low a mark for differentiation ( goal is beyond class ) and too high a mark for neutralization ( goal is good enough ).

A new approach to innovation calls for a new mindset and a new game plan

image02

Regardless if it’s the CEO, The Chief Information Officer or the Chief Innovation Officer who is driving the innovation process, companies must approach things with a very different mindset and a different plan of attack:

  • They need to be very good at neutralizing competitive disruptions quickly and effectively.
  • They need to be relentless in identifying and redeploying trapped value in legacy systems and operating processes that sap the organization’s resources and forward momentum.
  • They need to be Darwinian in their prioritization and allocation of resources against any major disruptive technology business innovation and make sure they only fund one at a time.
  • They need to commit to rapid iterations of minimum viable products and services and make changes based on actual customer adoption and utilization metrics.
  • They need to constantly experiment and be willing to fail fast and learn fast.
  • They need to leverage the new portfolio of digital tools to create compelling and enduring customer experiences. 
  • They need to harness the power of machine learning and A.I. to gain real-time insights into what’s working and what’s not working.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In the new digital world, you have to change the narrative about IT

image02

In far too many companies, IT is still seen as a cost center/support function rather than as a direct contributor to revenue, margin and profit growth. Most of the CIOs I’ve talked with over the past several years admit that their budgets have been reduced or kept flat. This says that for whatever reason, the companies have not seen fit to invest in technology as a competitive differentiator, or if they have done so, they’ve by-passed IT. That legacy mindset and behavior is a death knell for any company which wants to transform itself into a digital enterprise. So how do you get out of that situation?

Start with a new vocabulary

image00

It turns out in the new world of digital disruption that vocabulary is just as important as performance. Simply put, if you can’t effectively communicate the role and business value of IT you are unlikely to get the recognition and credit for the contribution technology is making to the competitive performance of your organization. Some CIOs I’ve worked with have started by changing the name of their group from IT to:

  • Enterprise Technology Solutions
  • Global Technology Services
  • Technology Systems & Services

Here are some examples of how you can use a new vocabulary to communicate what one CIO I know calls the “new style of IT.”

  • Stop talking about the IT cost budget and start talking about the technology investment portfolio
  • Stop talking about uptime and start talking about time to value
  • Stop talking about user interface design and start talking about user experience design
  • Stop talking about technical debt and start talking about releasing and redeploying trapped value
  • Stop talking about systems infrastructure and start talking about how digital disruption will impact your company’s operating and business models

From fact telling to story telling

image01

Many CIOs go to great lengths to tell the IT story with a set of facts. Everything from IT spend as a percentage of revenue to the number of projects delivered in a given period of time. Facts are good at documenting what IT does but they aren’t effective in changing people’s attitudes and mindsets about the value technology brings to the enterprise.

While it may seem crass to some, the CIO and their senior leadership team have to become aggressive marketers of the mission critical necessity for their organizations to embrace digital technology as a competitive weapon.

What does it take to tell a really compelling story? Here are some suggestions from John Bates who has trained hundreds of Tedx speakers:
“Every story needs the 5 C’s – Circumstance, Curiosity, Characters, Conversations and Conflict.”

  • To craft a compelling story, start by laying out the circumstances that will provide the context for the content you want to deliver
  • Use curiosity to keep the listener engaged and wanting to hear more about your story
  • Present real characters and real conversations to give your story reality and credibility
  • Utilize real examples of conflict as the motivation for the stories that resolved them

You can start this storytelling process by asking and answering some core questions:

  • How do you tell the technology business value story in your company today?
  • How well is that story being received?
  • What storytelling tools and processes could improve your ability to tell the business value story?
  • What do you ultimately want the technology brand to stand for in your company?

Some CIOs have already started to tell a new and different story about the role and value of technology within their companies. This story will take many shapes and come in many different story telling formats.

My current plan is to engage with those CIOs who have started down this storytelling path to see if we can assemble a set of practices and tools that have started to change the narrative about IT in their organizations. If you would like to participate in this process, please let me know.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com

In the new digital world, time to value defines competitive advantage

A recent IBM study concluded that “no business can remain relevant by making tweaks. The only way to stay ahead of disruptive change is to embrace it, which means being able to develop and release new products and services within weeks or even days.”

Picture1

One of the major implications of the unprecedented level of digital disruption is that companies must find ways to get a 10x compression in their product/application development release cycles. Simply put, how can they go from 6 to 12 months to 6 to 12 weeks to 6 to 12 days. Granted, not all releases have to get churned out in days, but those products and applications that are essential to delivering compelling and enduring customer experiences must find a way to meet this new compressed time standard.

Many companies have begun using different development processes and tools including Agile, Lean or DevOps to increase their time to value. While there have certainly been some improvements, there has also been continued resistance from long term developers who still prefer the more methodical waterfall approach. One would be tempted to “vote them off the island” only to discover that they are the only folks on the IT team who actually know how the systems of record work.

Using frustration as a motivator to change

Many CIOs I’ve talked with have complained at how frequently project priorities are changed in mid-stream leaving their developers angry and frustrated. One CIO who I work with has met this challenge head-on by limiting product development timelines to 90 days or less. He readily acknowledges that he will soon need to reduce it to 60 days and then to 30 days.

A core element of this new approach was to get everyone on his team and their internal end users comfortable with developing a minimum viable product (MVP) in that time frame and then make upgrades and changes based on end user feedback. He also has his developers go out on the shop floor and perform the work of their customers to see firsthand if the product or service is doing what it was designed to do, and, if not, what changes need to be made.

While he initially got some push back from his developers, they soon came to appreciate the fact that by taking this time compressed approach and making a fundamental commitment to rapid iteration, they could actually complete something they started rather than engaging in a series of false starts.

A 10x change requires new ways of imagining what’s possible

Picture2

Most well-established companies have invested tens of millions of dollars in developing, installing and maintaining the systems of record necessary to operate their businesses. In many cases, these investments have served them well and enabled them to sail the competitive seas like the Queen Mary whose three to four-day trip from New York to Liverpool was the standard.

The new digital disruption from systems of engagement and systems of intelligence is not only turning the competitive landscape on its head but it is also forcing companies to reimagine how they engage with their customers, employees, supply chain partners, and other key constituents. Until the Hyperloop was recently conceived of, no one thought it would be possible to go from Los Angeles to San Francisco in 30 minutes.

The best 10x change example I’ve seen recently is the difference between NASA and SpaceX. When NASA launches a rocket into space, they have 450 people in their control room monitoring the flight. When SpaceX launches a rocket, they have 45 on their way to two – a pilot and co-pilot. NASA imagines itself as a space exploration company while SpaceX sees itself as a technology company in the space exploration business.

To compete in this new world of digital disruption, companies across all industries have to start to reimagine who they are, what they do and how they do it.

Organizing and prioritizing for maximum speed and throughput

Picture3

Early adopters of the 4 Zones framework and tools as shown in the chart above have found it helpful to segment their new product and application releases in the following way:

  • Are they sustaining innovations or disruptive innovations?
  • Are they enabling systems productivity and cost optimization?
  • Are they increasing business unit performance and revenue growth?
  • Are they enabling business model transformation?

Each zone has its own time to value cadence and metrics but all of them require IT to be fast, adaptable and bring an enterprise wide perspective to the priority-setting process.

One way to move toward a 10x improvement in time to value is to strip away the multiple levels of decision making governance that bog down most IT project approval processes.

By example, one company I’ve talked with has a three level governance model that includes:

  • IT Governance Board
  • IT Steering Committee
  • Six IT Operational Councils

Contrast that with another company I’m working with that has one Executive Product Prioritization Committee that meets once a quarter and agrees on:

  • What IT will deliver in the next 90 days
  • What are the 3 key strategic business priorities IT needs to support for the next 90 days

Moving at the speed of trust

Another way to get step change improvements in time to value is to breakdown hierarchical, silo-based decision-making processes and convert them into horizontal cross-enterprise decision-making processes. In order for CIOs to facilitate this shift, they need to establish or regain a high level of trust with their internal business partners that IT merits a seat at the business growth discussion table. Once this level of trust is in place, speed to market goes up and costs go down.

Picture4

What does it take to make this new trust based process work? Here are some criteria to consider:

  • An agreement that all the key stakeholders must participate from the beginning to the end of the development cycle
  • A mutual desire to get something done quickly
  • A willingness and desire to learn, grow and change while on the journey to the final outcome
    • Plan Long – Execute Short
  • A common understanding of what needs to be done to deliver the ultimate user experience to customers, employees, supply chain partners or other key constituents
    • Replace inside-out user interface thinking with outside-in user experience thinking
  • A mutually understood vocabulary and taxonomy to discuss and resolve, build, or buy trade-off decisions
  • A series of metrics that align future technology investment priorities with critical business outcomes

Early practitioners of this process have significantly increased their time to value and have greatly reduced the costs of do-overs or extended release schedules driven by unclear or changing requirements. These results suggest that moving at the speed of trust is one way to achieve sustainable competitive advantage in the new digital world.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.