How much are technical debt, process debt, and people debt costing your organization? CEOs and Boards are increasingly looking to digital technology as the primary source of new business growth and profitability. Increased corporate profits are directly related to a company’s ability to leverage digital capabilities and have resulted in margin and profit growth that is 2 to 3 times faster than industry averages.
Historically, companies had the belief that owning and controlling their assets was the key to creating sustainable competitive advantage and building high barriers to entry into their markets and industries. However, in the new world of ever constant digital disruption, companies no longer…
Are your best people working on things they are most passionate about? According to an earlier Korn Ferry survey, 33% of those changing jobs cited boredom and the need for new challenges as the top reason why they left.
As the old adage says, what gets measured gets done. So, if you are measuring the wrong things then the wrong things are getting done. Less than 30% of companies have a process in place to measure the return on investment of their digital technology projects.
When Steve Balmer became CEO of Microsoft in 2000, the stock was trading at $40.00 a share. When he stepped down as CEO in 2014, the stock was trading at $40.00 a share. During his entire 14 year tenure as CEO of Microsoft, the stock never traded above $40.00 a share.
As the old adage says, what gets measured gets done. So, if you are measuring the wrong things then the wrong things are getting done. Less than 30% of companies have a process in place to measure the return on investment of their digital technology projects.
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:
The study identified a number of brands that have been successful in appealing to these new values including:
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
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
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:
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
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
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
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.
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.
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:
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.
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:
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
