How Systems of Engagement Will Change the Role of Big Data From a Validation Tool to a Discovery Tool

Many companies today have already jumped on the “Big Data Bandwagon” and have allocated substantial budgets and multiple teams to figure out how they can better utilize the data they have to improve their customer relationships and increase their competitive advantage in the markets they serve. At the heart of these efforts, is the utilization of data analytics to lower the costs, improve the efficiency and gain increased value from the company’s existing systems of record.

Systems of Record: The center point for an SOR is a data base that supports a core asset of the company such as a Supply Chain, HR, Financial or CRM system. It must be accurate, up to date and secure. As such, from a corporate governance point of view, both ingress and egress must be tightly controlled by the company.

Most companies have assigned their IT group to lead this effort and have funded new investments in IT tools and hired an army of “data scientists” to search for and document critical and relevant customer insights. The problem is that all major IT projects have historically taken a very conventional approach to data analysis that utilizes large installed systems eg: CRM to mine these mountains of data and more often than not validate pre-existing assumptions or beliefs about customer needs and behaviors. This inside out use of data analytics re-enforces a culture of validation rather than a culture of discovery.

By contrast, if a company starts with an outside in approach to data analytics then it opens up a vast new potential to use Big Data as a discovery tool that facilitates the creation and implementation of new systems of engagement. Rather than starting with the data they have, it enables employees to re-think how they use data analytics to identify and address the emerging needs and issues their customers are trying to resolve at their key moments of engagement with the company.

Systems of Engagement: The center point for an SOE is a moment of engagement with an end user or a customer where the goal is to enable and enhance a value adding experience. Such systems must be friction free, immediately accessible and emotionally as well as intellectually dimensional. Ingress and egress are basically unrestricted and controlled by the end user.

Part of what is driving the Big Data Bandwagon is that organizations have come to the realization that learning faster than their competition is the only sustainable competitive advantage they have left. As such, this now puts a premium on how they use data analytics to get that learning advantage. To date, most of the evidence suggests that companies are utilizing their current systems of record to more cost efficiently mine their existing storehouses of data to gain validation of the changing needs of their customers and the marketplace.

IBM’s Institute for Business Value Study – IBM recently conducted a study that looked at the potential for collaborative relationships between CIOs and CMOs and presented the following key finding from its research:

“While Marketing has always been responsible for knowing the customer, now they are required to understand and respond to customers as individuals. Marketing can only do this if they can manage vast amounts of unstructured data, make sense of it with analytics, and generate insights that are predictive, not just historical – all on a massive scale.

To connect with individual customers at every touch point effectively, they need a system of engagement that maximizes value with each interaction. And they need each touch point to marry the culture of the organization with the brand to create authentic experiences that consistently deliver the brand promise. The way to achieve this unprecedented transformation is through technology.”

This key finding from their study not only validates the core tenets of the evolution of enterprise IT from systems of record to systems of engagement framework but it also highlights the need for Big Data to move from a validation tool to a discovery tool.

There is some early evidence of forward thinking companies that are starting to use data analytics to create new hypotheses and discover new ways of engaging their customers.

Ford Focus Electric Car

Ford Focus Electric Car

The Ford Focus Electric Car – Their new electric car produces large quantities of data while it’s being driven and also when it’s parked. When it’s being driven, it provides the driver with information on the car’s acceleration, braking, battery charge and current location. While this is useful to the driver, the data is also sent back to Ford engineers who can learn about the owner’s driving and re-charging habits. This real time information enables Ford engineers to better understand what their electric car customers need and want so they can develop and deliver product improvements based on analyzing this real time data. Additionally, third-party vendors can use this cumulative driver data to figure out where to put additional charging stations.

Pharmaceutical companies – Many pharmaceutical companies are in the early stages of using patient information monitoring techniques to lower the cost and improve the quality of their drug trials. In the past, doctors monitored trial participants by seeing them periodically in their offices. Today, a patient can have a sensor placed on their body which captures round-the-clock real time data about their adherence to the treatment regime and the positive or negative effects of the drug. With the advent of “outcome based medicine” where insurance companies only want to pay for drugs that deliver the results they are supposed to, it is critical that drug companies have a more timely way to assess the actual impact of the drug versus its desired impact.

While the overall debate on the value and contribution Big Data can make to organizations continues to escalate, I think there is a different and more powerful discussion to be had. How can companies use data analytics as a discovery tool that will allow them to learn faster than their competition? For IT leaders to put this question on the table, they have to change their mindset away from using data analytics to improve the efficiency of their systems of record and transform it into helping them create and deliver new systems of engagement.

Are the Sands Beginning to Shift in the Software Business?

Just before Christmas, Oracle announced its second quarter earnings which showed that revenue rose 2% against an internal forecast of between 5% and 9%. The company attributed the results to their customers delaying both software and hardware purchases. As one analyst said, “we haven’t seen a miss like this out of these guys in years.” The company’s stock price fell 9% and caused a selloff in other enterprise technology vendors such as SAP and IBM. Many speculated that this was the beginning of a category wide downturn.

Ah but wait, SAP announced their fourth quarter earnings last Friday the 13th which showed a 12% increase in revenues from software and related services. Not only did they outperform their traditional rival but their results clearly challenged the assumptions of a category wide downturn. So what’s up?

While it’s true that one quarter’s results do not make a long term trend, are we perhaps beginning to see the initial impact of what my brother, Geoffrey Moore, calls the evolution of enterprise IT from systems of record (SOR) to systems of engagement (SOE).   Here is a link [ ] to a talk he gave last year on this subject.  Some have called this the consumerization of enterprise IT but he likes to call it the “enterprization of consumer IT.” By the way, SAP has adopted this framework as its core go forward technology and product development strategy.

At the heart of this evolution is the fundamental shift from the old vertically integrated, hierarchically organized business model to the new horizontally structured, business network model driven by an increased demand for communication, coordination and collaboration. Systems of record, SOR,  were well suited to support the old vertically integrated model, but now must incorporate systems of engagement, SOE, to support the new horizontal business network model.  As this transition is still in its early stages, companies like Oracle are still almost exclusively focused on delivering software and hardware solutions that support SOR’s not SOE’s.

The emerging reality is that every dollar invested in SOR supported software produces a diluted return to a company in terms of competitive differentiation as the life time value of these investments are in the latter stages of the product life cycle adoption curve. By contrast, every dollar invested in SOE supported software offer a much higher future revenue and profit stream potential because it is in the early stage of the product adoption life cycle curve.

We are still in the very early stages of this evolution and upcoming earnings results may rebound but it just might be possible that we are seeing the start of the shifting sands in the software business. Stay tuned.

What are your observations?  Can large companies quickly embrace this shift in the market?

Peter Moore