“The biggest threat to innovation is internal politics and an organizational culture which doesn’t accept failure, doesn’t accept ideas from outside, [or] cannot change.”This failing is pervasive across industries, causing a slump in profits as organizations struggle to employ digital solutions while shying away from complete adoption of a data-centric culture. MIT research scientist George Westerman described the problem:
“While a lot of companies are doing digital, very few are doing it well yet.”He went on to explain that the difference between these groups is that the successful companies have a heavy emphasis on transformation rather than technology for technology’s sake. They use tailored solutions for specific problems rather than jumping from trend to trend.
“[D]riving transformation requires someone to lead it,” Westerman continued. “For all the talk of ‘bottom-up innovation’, the companies I call ‘digital masters’ take a top-down approach, without exception.”Leadership, then, is the primary force in driving digital transformation. Without the support of the entire C-suite, innovation can’t thrive. Progress will continue at an inconsistent, jerky pace littered with setbacks and failed projects. CxOs must work together to create a digitally optimized workplace that serves the needs of the company.
The CxO FamilyOne of the biggest changes evolving technology has affected across industries is the growth of the CxO branch. It’s no longer possible- or even sensible- to expect the CEO to be an expert in all areas of their company. Instead, they learn enough to choose and manage CxOs with the experience needed to tackle new challenges. Not every CxO is focused on processing new technology. While everyone benefits from increased efficiency and productivity, some members of the CxO family bear a greater share of the responsibility for guiding their organization through the digital transformation. A 2016 study by The Economist Intelligence Unit reveals that the three individuals most likely to be concerned with this are:
- CIOs/CTOs (37%)
- CEOs (20%)
- COOs (15%)
“Information technology and business are becoming inextricably interwoven. I don't think anybody can talk meaningfully about one without the talking about the other.”Though some companies separate these titles into internal and customer-facing roles respectively, for most the CIO and CTO are different names for the same position. Their duties revolve around identifying useful new technology and integrating it into a company’s existing workflows. As the curators of an organization’s information strategy, CIOs and CTOs should be the champions of innovation. They need to be constantly on the lookout for advancements in web development and data science that can potentially improve business processes and smooth over pain points. The direction of inspiration is important. Innovation should address inefficient or broken processes, or arise in response to unmet needs. If technology is brought in without first asking what benefit it serves, it will add a layer of unnecessary complexity. CEOs Because the trend towards digital transformation is relatively new, the CEO is often involved in its implementation. The benefit of a high-level advocate is that directives from the CEO are taken more seriously by subordinate managers. This speeds the proliferation of new systems considerably. It also invigorates COOs and CIOs to know they have support for innovative ideas. It’s as true today as it was a hundred years ago, though: no one likes to be the bearer of bad news. Much of the information that reaches the CEO has passed through several layers of people who try to spin it in the best possible light. It can be hard for a CEO to discern how well a new program is working. CEOs are incredibly busy, too. They can’t spend the same amount of time a CIO has to really investigate the technology needs of their company. Small problems tend to be overlooked until they grow to disruptive heights. COOs The COO takes the technologies suggested by the CIOs and CTOs and fits them into the overall business strategy devised by the CEO. To put it another way, they are the “how” to the CEO’s “why” and the CIO’s “what”. When it comes to technology, the COO’s role is massive. They’re responsible for the logistics of implementing changes suggested by the CIO and approved by the CEO. That includes everything from helping source vendors to planning space requirements for new offices and equipment. Additionally, COOs must hire employees as needed to support the developing strategy or retrain existing employees to fulfill those roles.
Common Enterprise Challenges[caption id="attachment_441" align="aligncenter" width="700"] Source: Image via The Economist Intelligence Unit[/caption] Many senior CxOs can remember a time when they had to pick up the phone if they wanted to talk to someone in another country about a time-sensitive issue, and now multinational video conferences are a daily occurrence. Running a business is entirely different now than 50 even 20 years ago. As technology has raced ahead, new problems have arisen. Leaders face issues more complex than any they’ve dealt with before. Here are some of the hurdles experts are predicting for 2017: The Virtual Workplace Increased communications technology has opened the door to a wider range of physical vs. virtual office configurations. Business leverage talent all over the globe through the creative use of satellite offices and telecommuting. It’s seen as a way to lower overhead and offer employees more flexible work schedules, which often translates to less sick days and greater productivity. Telecommuting options also help retain desirable talent who might otherwise take their skills elsewhere. While there are many advantages to this trend, it presents unique challenges. Virtual workplaces are only as good as the software used to set it up. Sometimes three or four separate programs are used to supplement an insufficient collaboration suite. Information can fall through the cracks between these programs. Also, it’s hard to supervise employees who are only seen once or twice a week (if that). Rising Cybersecurity Threats European Consumer Commissioner Meglena Kuneva called data the “new currency of the digital world." The description is accurate; every day people trade small bits of information about themselves for coupons, free email services, and more. On a broader scale, chunks of data are vital in data science. The more data a deep learning algorithm has to train itself on, the more accurate insights it can offer. Even something as banal as how a consumer interacts with a web page can be valuable in the right context. Growing interest in stores of data mean growing cybersecurity threats. To make things more difficult, the nature of a digital workplace means that cybersecurity threats aren’t limited to “traditional” hackers anymore. There’s also the threats posed by employees who compromise data sources through unauthorized third-party apps or poor security on their personal devices. Often CxOs don’t realize the extent of a risk until they’ve been burned by it. If you missed our blog post, Learn How to Ensure Data Integrity for Enterprise Systems, it's a good read. Consumer Expectations “The customer experience is the next competitive battleground.” Those words, spoken by Dell CIO Jerry Gregoire, have never been more true than they are now. The rise in online shopping has resulted in a market where e-commerce sites must contend with international competitors as well as domestic ones. When people can buy from all over the world, price becomes markedly less of a factor when choosing vendors. It might seem logical to guess that quality would differentiate products, but that’s proven not to be the case. As long as product quality is of an acceptable level there’s not much connection between it and sales. A paltry 13% of online shoppers report that quality was the determining factor in switching from one brand to another. The real impact comes from the quality of customer experience. 88% say they choose companies based on who is easiest to deal with rather than who has the cheapest or newest product. Consumers want to know they’ll have resources if their item doesn’t arrive as expected, or if they need help placing an order. 86% of online consumers are willing to pay more if it means a better customer experience- but only 1% think they’re getting that superior experience from any of their current vendors. That’s a significant problem when 69% of shoppers said poor customer service (both actual and perceived) will make them abandon a brand entirely. Public Image Customer service isn’t the only component of customer experience. Public image is a passive yet vital part of providing a positive experience. Consumers want to feel that they’re supporting an ethical company, and they’re willing to recommend companies based on positive perceptions. 83% of consumers who believe in a brand will promote it on their personal social media accounts. Combine that with the fact that 74% base their buying decisions at least partly on social media and it’s obvious how important it is to provide a satisfying experience every time. It’s impossible to be perfect every day, though, and the internet makes it nearly impossible to hide mistakes. Customers who were happy to rave about a good experience are just as ready to post negative reviews or criticize high-profile failures.
The Value of Digital TransformationDigital transformation encompasses the strategic overhaul of an organization’s structure and operational models in order to position it to more readily leverage evolving digital technologies as they arise. It involves every part of the company, from organizational goals to the apps used by interns. (Because of this some prefer to use “business transformation”, though it’s a less widely-known term.) Transformation isn’t a choice- it’s a necessity. Companies who are unable to adapt to the increasingly data-centric business world are falling behind. To demonstrate this, one need only to look at the S&P 500. [caption id="attachment_438" align="aligncenter" width="700"] Source: Image via MarketWatch[/caption] In 1958 companies remained on the index for an average of 61 years. Today, companies are replaced by more agile competitors approximately every two weeks. The benefits of digital transformation stand in stark opposition to the consequences of failing to make the change. A survey of early adopters shows striking results. MIT reports this group achieved a 9% or higher increase in revenue, a 26% rise in profitability, and a 12% increase in market valuation since beginning their transformation. With such a gap between the outcomes of companies who do and do not embrace digital transformation, there can be little debate over its value. Digital transformation is about more than statistics, though. It’s about the concrete ways companies are benefiting from adopting new technology and refining processes, and it doesn’t always involve science fiction levels of technology. More often it relies on reimagining current processes to better align them with innovation. The following are brief examples of businesses using technology to solve those new-world problems discussed earlier.
Digital Transformation In ActionDominos Pizza The pizza delivery market is highly competitive, but Dominos has managed to stand out. Its shares have risen more than 500% in three years just in Australia. How is it maintaining this growth? Much of its success has to do with its innovative AnyWhere Platform. Customers can place orders through smartphones, computers, Smart TVs, and even by texting emojis. It’s a custom programming solution that has captured the hearts of consumers (and set a high bar for competitors). Walgreens Walgreens CIO Abhi Dhar has focused his digital transformation efforts on customers, redesigning their app to provide an impressive array of services. Customers can track their medication regimes, schedule refills, print photographs, earn points accessible through the app or Apple Pay, and even sync the app with their Apple Watches. The app is used by one million consumers every day. Condé Nast Global media company Condé Nast was having difficulties managing reporting among its 20 outlets. They frequently received duplicate requests from editors and marketing staff and had a noticeable lag in coverage. Condé Nast turned to an analytics solution based on Microsoft Power BI to track current reporting and compare that to customer demand. Reporters were now able to see what stories needed to be covered in near-real time. In addition, duplicate requests are estimated to have dropped 30%.
Redefining RolesThese solutions can’t be implemented by one C-level executive acting alone; they require coordination across roles to succeed. CxOs must interact more closely than before, both with those above and below them in the chain of leadership. The CIO's/CTO's New Role In the past, CIOs tended to have a very narrow focus. They dealt with technical projects: keeping the IT systems running, managing ERP software, and serving as the “voice of technology” in the boardroom. They were generally found in their offices reconciling reports and managing their subordinate IT departments. That’s no longer the case. Technology has become an integral part of how a company operates at all levels. CEOs and COOs are turning to their CIOs for solutions to the problems caused by rapidly growing technology. In response, CIOs are shifting from “functional” to “transformational” mindsets to reflect their greater involvement in the organization’s overall digital strategy. CIOs are spending more time outside their office learning what other departments need, what types of technology work for them and which programs aren’t meeting their needs. Companies with transformational CIOs involve them in department-specific technology purchases as much as 71% of the time. Having this oversight goes a long way to avoiding redundancy, unintentional data exposure, and other problems caused by Shadow IT. One caution for transformational CIOs is this: they need to remember that it’s impossible to know everything. Trying to keep abreast of every single technological advancement on the market results in missing potentially useful programs because they get lost in the noise. Instead, start with problems and look for solutions that address those problems. If you're a CIO, here are the top 10 technology priorities you should be focusing on this year. Take on this new role and read What is the CIO's Role in Becoming a Transformational Leader. The CEO's New Role The real challenge for CEOs isn’t sourcing new technology; that would be a duplication of their CIO/CTO’s efforts. CEOs should focus on finding ways to deploy innovative ideas quickly in a fiscally conscious manner. This means setting priorities for improvement based on what has the potential to cause the most disruption. They might choose to address an existing problem, such as streamlining a cumbersome internal reporting system, or look forward towards issues that haven’t yet impacted operations. On top of that, CEOs need to work with other CxOs to create a unified digital strategy. Leadership is essential. Without guidance on how to solve technological roadblocks the increasingly tech-savvy workforce will their own ways around. Some of these solutions will be brilliant, others will waste time, and still more may actively hurt the company. The resultant tangle of software, protocols, and equipment makes it hard to tell which are working and which should be eliminated. A sound digital strategy will empower department managers to make changes within a guided framework that allows for monitoring and limits possible negative effects on other departments. Dive deeper into this role and read What is the CEO's Role in Measure Digital Transformation Success. The COO's New Role No matter how solid a digital strategy seems, it will fail if employees don’t embrace it. The amount of enthusiasm shown for the strategy will depend almost entirely upon how much of a disturbance it imposes on their daily business. After all, it’s hard to appreciate how much time a program will save if it takes a week to learn how to update it. The COO must create a path to universal adoption that minimizes the disturbance while also assuring a smooth integration of new technology and processes. This is exactly as hard as it sounds, but it’s critical. Data science initiatives in particular are sensitive to size; if enough people don’t use them it’s hard to realize substantial ROI. Gaining universal adoption is actually more important than perfecting the system; 300 workers doing something that’s 80% effective achieves more than 30 workers working at 95%. Reducing the stress of transition doesn’t have to mean lowering expectations for digital transformation. Some COOs choose to divide the process into discrete phases, where any slack from one department while they get up to speed can be picked up by another. Others periodically enact small changes company-wide until everyone arrives at the same level of integration at the same time. There is no one right way, only the way that works. Andy Haywood, COO of N Brown Group, agrees.
“The most important thing is that it’s consistent and everyone is using it. So we’ve got departmental plans, technology plans, people plans, change plans, process plans. They all roll up into a master-plan, where consistency and timing are absolutely crucial.”Thoughtful integration plans reduce the stress on employees, which also helps with retention. To learn more about this role, read What is the COO's Role During the Shift in Digital Transformation.
ConclusionDigital transformation isn’t easy. Even when all CxOs are on the same page, there will be missteps and failures along the path to success. The benefits, however are worth the hardships. As IBM CEO Ginni Rometty says,
“Growth and comfort don’t co-exist.”CEOs will have to make a decision: do they want to be comfortable, or do they want to grow? Stick around. In the next few weeks, we will dive deeper into the roles CEOs, CIOs, and COOs have on digital transformation.
Wondering where to start on your digital transformation? Contact Concepta to discuss our digital services including web development, mobile app development, and data science solutions.