Digital transformation: Will you be a predator or prey?

Forrester's Tim Sheedy: 50 per cent of organisations are adopting 'bolt-on' digital strategies

Digital technologies are transforming just about every industry on the planet. And organisations that don’t rapidly develop digital capabilities and leave old-world business models behind are at risk of being overtaken by new and more agile competitors.

IT chiefs gathered for breakfast at The Westin in Sydney to hear from industry leaders about how organisations in Australia are using digital technologies to transform their operations to drive real competitive advantage. The event was sponsored by IBM.

Forrester’s principal analyst serving CIOs, Tim Sheedy, opened proceedings by highlighting that customers want to interact with digital platforms in stores, on the phone, and face-to-face. He says that digital technologies have become part of every customer touch point.

“It [digital becomes] part of not just the sale but the way we service the customer, how they get information about us before they buy our products and services, and the way we continue to bring them back into that customer journey,” he told attendees.

Digital leaders, particularly in sectors like financial services, are using technology to improve the customer experience. But in terms of increasing operational agility, changing business processes and culture, there’s more work to be done, he says.

Is IT holding digital back?

Sheedy told attendees that some organisations are adopting a ‘digital bolt-on' strategy where they hire a chief digital officer who has nothing to do with IT. Half of organisations surveyed by Forrester had adopted this strategy.

Sheedy says he met with a large health insurer in Australia that had rolled out a digital bolt on strategy. But he wasn’t critical of the strategy because the organisation felt it was being held back by the IT group when it came to deploying a digital program.

“But as a long-term strategy it’s not great because they are going to build a whole new silo of technology and at some stage, one silo will need to speak to another and suddenly there will be a big integration mess.

“Many banks went through this, the ones that built up their own internet banking separate from IT and at some stage they needed to integrate the two. One of the banks spent over $1 billion trying to integrate their internet banking backend,” he says.

Today, leading banks are putting digital into every touchpoint. For example, they are starting to look at how a mobile app can provide the customer with a different experience when they are at a branch, at an ATM, or on the phone with a call centre operator.

“Wouldn’t it be great if you had a mobile app that made it easier to navigate through an Ikea store?” he asked. “An app that would let you know where stock is, take you to that stock and you could just scan the item and walk out of the store.

“And that is where a lot of the focus is on digital – that selling component. But for me, the power of that mobile app would be when I get home … I’d like my mobile app to scan the Ikea box and show me a video of how to put it together,” says Sheedy.

“If there’s a piece missing from the box, I click on that and it automatically knows where I am and they send it out by courier that day. This is the idea of putting digital in every touch point because this is where I live – on my smartphone.

Sheedy says that 35 per cent of Australians have a ‘mobile mindset’ – when they want to interact with a brand, they will go to their smartphone first. If you are not there, you are not in their mind, it’s that simple,” he says.

Digital’s influence

By 2020, about half of the executives surveyed by Forrester say that the use of digital technologies will influence half of their sales. The B2B sector will experience significant growth between now and 2020.

“How digital will transform B2B sales is going to be massive. We’ve got data that shows that B2B professionals want to buy online. They don’t want to deal with these high paid account managers anymore. There is a change in thinking in B2B,” says Sheedy.

“Yet we haven’t seen many businesses change their sales model, their account models, and their customer interaction models for this new digital world yet.”

This is also reflected in the relatively low numbers of CEOs who are driving digital. According to Forrester’s numbers, only 26 per cent are setting a clear vision for digital for their employees with only 25 per cent indicating that they understand the potential for digital technologies to change how their companies create and deliver value to customers.

Further, only 21 per cent have the right culture and the same number have the right people defining digital strategy.

“The move from ‘inside out' thinking to 'outside in' is happening,” says Sheedy. “Organisations doing customer journey mapping are starting to look at their businesses from a customer’s not their own perspective.”

For example, the Australian Tax Office (ATO) is leading the charge at federal government level, hiring a group of CX specialists who are trying to reinvent the way the ATO delivers services to customers.

“The ATO doesn’t have a competitor. They don’t have to delight their customers particularly because everyone has to deal with the ATO. But they realise that they live in this new world where customers expect to be delighted,” says Sheedy.

“Changing your processes from this ‘inside out’ to ‘outside in’ [model] is hard … but we need to do this if we are going to put the customer at the centre of everything we do.”

A perfect storm of technology and culture

Louis Richardson, IBM’s resident storyteller and enthusiast spoke to attendees about four cultural forces in the digital age – chaos, confusion, complexity and crowds.

He told attendees that there is a shift from ‘technology affecting culture’ to culture now impacting technology. “What our customers are expecting and what our employees are anticipating is actually driving culture,” he says.

The first culture force, chaos, is preventing people from getting work done, he says, as interactions with people and a barrage of daily emails interrupts our day.

“To address the chaos we need to give people some clarity,” Richardson says. “We need to put things together to assist them to help them understand what their day is like. Your day is made up of juggling eggs and rubber balls, there are certain things that you cannot miss.”

He highlighted IBM’s Verse cognitive platform as tool to help people overcome chaos and spend more time on higher value work.

The second cultural force – confusion – is about staff not knowing what their job entails and what they are being measured on, he says.

“Chances are these people are not going to do their job. We need to attack this confusion and for some of us, it’s difficult because we know what we are measured on because we’ve been around for a while.”

Overcoming confusion is about connecting people together by sharing information, he says. “We’ve been doing a lot of work in the social area for quite some time to help people share and make them accessible,” he says.

IBM worldwide uses a social system that gives every staff member a profile page – a board where people build their network of knowledge and groups of friends.

“We ask questions of one another in these forums rather than asking questions over email. When we do this sort of thing email drops by 30 per cent across organisations because people tend to talk and respond differently,” he says.

The third culture force is complexity, which is causing people to be unsure of themselves. That is because data they have traditionally looked at is not accessible.

“Studies have shown that about 80 per cent of data that we have is ‘dark data’, it’s unstructured, it’s not in databases or analytic tables. We know that, so we [roll out] document management systems to try and contain that,” he says.

“That number is moving now from 80 per cent to 93 per cent because more information is being passed around the organisation through chat, text, images and video that are not easily recognisable or searchable.”

A high percentage of a company’s collective knowledge never gets into digital form – it’s in the heads of staff and walks out the door every day, he says.

So part of the digital transformation that needs to take place inside organisations is about how people capture, maintain and leverage information, says Richardson. Executives are also only making decisions on the best data they have available, he adds.

“So to face the complexity of what is there, we need to have context. When you use analytics to search for things, when your marketing department is searching data and they are doing a query, they kind of know what the answer is going to be. But we need to look more into the conversation, what is it that we are looking for?”

This is where cognitive computing comes in, he says, looking deeper than simply asking a question and getting an answer.

“We have figured out a way to interpret things like natural language, sentiment and analysis. If you did a Google search today and asked, ‘show me everything that’s not a dog.’ You’d see pictures of dogs because the search doesn’t know ‘not a dog’ – it doesn’t understand what that means.

“We are using systems now to help people organise and understand their data. Our cognitive systems look at your data and understand what’s important to you. But more than that, it’s beginning to look at the sentiment of things – it’s saying, ‘this person is speaking to you and the words they are using in this phrase [indicates] that they are stressed and they are asking you for something so that’s something you should do first today.”

The final cultural force, crowds, is about finding the right people and using their talent effectively.

“To address this crowd concept you need to think about ‘concert’ – how are you going to bring people together in the right role? You need to have them play the right instrument at the right time and in concert with the other people around them,” he says.

Ultimately, the cultural changes that are brought about by digital transformation programs will be driven not by IT leaders but by other c-level executives or the HR department, Richardson says.

"But it is your job to come alongside that person and say, 'you're trying to drive brand awareness, we're acquiring companies that work differently than us and we want them to work like us. How do we go about affecting their lives and culture? You as an IT person can say, 'I can help you solve that problem,'" he concluded.