Winning with Digital Confidence
The right
mix of talent, innovation, and experience will help your company master
emerging technology.
Today, if there’s a problem with the heat or hot water in your
hotel room, you call the front desk and wait for maintenance to arrive. At some
chains, you have the option of reporting the issue using a mobile device. But
in the near future, many hotel rooms will be wired with connected devices that
report potential breakdowns to maintenance and may even automatically fix them.
Smart-building technology will turn the heat up when your app’s locator notices
you are on the way back to your room.
Of course, such developments have significant implications for
hotel staff. George Corbin thinks about them from a scientific perspective. As
the senior vice president of digital at Marriott, Corbin oversees Marriott.com
and Marriott mobile, and is responsible for about US$13 billion of the
company’s annual revenue. He notes that the “skills half-life” of a hotel industry
worker is about 12 years, at least for those working in conventional areas such
as sales, operations, and finance. In other words, if people leave jobs in
these functions, they could come back in 12 years and half their skills would
still be relevant. But on the digital side, the skills half-life shrinks to a
mere 18 months, according to Corbin.
Virtually every other industry faces similar dynamics.
Digital competency is practically mandatory in many sectors; if you don’t get
on board, you’ll fall behind competitors that do. And yet the knowledge
required for widespread digital competency is often in short supply, and the
related skills in agility and collaboration are often difficult to achieve in
large companies. In a few years, an 18-month skills half-life may seem like a
luxury. As a result, many executives’ confidence in their organization’s
“Digital IQ” — their ability to harness digital-driven change to unlock value —
is at an all-time low.
That’s one of the main
findings from the 2017 edition of PwC’s Digital
IQ survey. We interviewed more than 2,200 executives from 53 countries
whose companies had annual revenues of at least $500 million, and found that
executive confidence had dropped a stunning 15 percentage points from the year
before. These company leaders said that they are no better equipped to handle
the changes coming their way today than they were in 2007, when we first
conducted this survey.
Back in 2007, being a
digital company was often seen as synonymous with using information technology.
Today, digital has come to mean having an organizational
mind-set that embraces constant innovation, flat decision making, and the
integration of technology into all phases of the business. This is a laudable
change; however, in many companies, workforce skills and organizational
capabilities have not kept pace. As the definition of digital has grown more
expansive, company leaders have recognized that there exists a gap between the
digital ideal and their digital reality.
The ideal is an organization in which everyone has bought into the
digital agenda, and is capable of supporting it. What does this look like? It’s
a company in which the workforce is tech fluent, with a culture that encourages
the kind of collaboration that supports the adoption of digital initiatives.
The organizational structure and systems enable leaders to make discerning
choices about where to invest in new technologies. The company applies its talent
and capabilities to create the best possible user experiences for all of its
customers and employees.
Simply upgrading your IT won’t get you there. Instead of spending
indiscriminately, start by identifying a tangible business goal that addresses
a problem that cannot be addressed with existing technology or past techniques
and then develop the talent, digital innovation capabilities, and user
experience to solve it. These three areas are where the new demands of digital
competence are most evident. They are all equally important; choosing to focus
on just one or two won’t be enough.
Our findings from 10 years of survey data suggest that the
organizations that can best unite talent, digital innovation capabilities, and
user experience into a seamless, integrated whole have a higher Digital IQ, and
are generally further along in their transformation. Our data also shows that
the companies that use cross-functional teams and agile approaches, prioritize
innovation with dedicated resources, and better understand human experience,
among other practices, have financial performance superior to that of their
peers. It’s time for company leaders to build their digital confidence and
their digital acumen; they can’t afford to wait.
Getting Tech Savvy
“We are now moving into a world with this innovation explosion,
where we need full-stack businesspeople,” says Vijay Sondhi, senior vice
president of innovation and strategic partnerships at Visa, drawing an analogy
to the so-called full-stack engineers who know technology at every level. “We
need people who understand tech, who understand business, who understand
strategy. Innovation is so broad-based and so well stitched together now that
we’re being forced to become much better at multiple skill sets. That’s the
only way we’re going to survive and thrive.”
In the past, digital talent could lie within the realm of
specialists. Today, having a baseline of tech and design skills is a
requirement for every employee. Yet overall digital skill levels have declined
even further since our last report, published in 2015. Then, survey respondents
said that skills in their organization were insufficient across a range of
important areas, including cybersecurity and privacy, business development of
new technologies, and user experience and human-centered design. In fact,
lack of properly skilled teams was cited this year as the number one
hurdle to achieving expected results from digital technology investments; 61
percent of respondents named it as an existing or emerging barrier. And 25
percent of respondents said they used external resources even when they had
skilled workers in-house, because it was too difficult or too slow to work with
internal teams.
The skills gap is significant, and closing it will require senior
leaders to commit to widespread training. They need to teach employees the
skills to harness technology, which may include, for example, a new customer
platform or an artificial intelligence–supported initiative. They will also
need to cross-train workers to be conversant in disciplines outside their own,
as well as in skills that can support innovation and collaboration, such as
agile approaches or design thinking. Digital change, says Marriott’s Corbin, is
driven by using technology in ways that empower human moments. “Rather than
replace [human interactions], we are actually finding it’s improving them. We
need the human touch to be powered by digital.”
One way that companies can
accomplish these goals is by creating a cross-discipline group of specialists
located in close proximity (we refer to this as a sandbox),
whether physically or virtually, so each can observe how the others work. Such
teams encourage interaction, collaboration, freedom, and safety among a diverse
group of individuals. Rather than working in isolation or only with peer groups, members develop a common
working language that allows for the seamless
collaboration and increased efficiency vital to moving at the speed of
technology. And this approach avoids the typical workplace dysfunction that
comes with breaking down silos: Because business issues are no longer isolated
within one discipline, but rather intertwined across many, colleagues from
disparate parts of the organization are able to better understand one another
and collaborate to come up with creative solutions.
Part product development, part project management, the sandbox
approach enables your workforce to visualize the journey from conception to
prototype to revelation in one continuous image, helping spread innovation
throughout the organization. The culture of collaboration can speed adoption of
emerging technologies.
For example, this approach enabled the Make-A-Wish Foundation to
bring employees together from across the organization, including some
whose role in developing a new tech-based feature may not have been obvious,
such as a tax expert and a lawyer. In just three months, using this approach,
the foundation created and operationalized a crowdfunding platform to benefit
sick children.
Investing in the Future
At GE Healthcare, engineers are experimenting with augmented
reality and assistant avatars. “Part of my job is to help pull in [great
innovations] and apply them through a smart architecture,” says Jon
Zimmerman, GE Healthcare’s general manager of value-based care solutions. “The
innovations must be mobile native, because…our job is to be able to serve
people wherever they are. And that is going to include more and more sensors on
bodies and, if you will, digital streaming, so people can be monitored just as
well as a jet engine can be monitored.”
Amid an increasingly crowded field of emerging technologies,
companies need strong digital innovation capabilities to guide their decision
making. Yet this achievement often proves challenging as a result of
organizational and financial constraints. Our survey revealed that fewer
companies today have a team dedicated to exploring emerging technologies than
was the case in years past. Many are relying on ad hoc teams or outsourcing.
Moreover, 49 percent of companies surveyed said they still determine their
adoption of new technologies by evaluating the latest available tools, rather
than by evaluating how the technology can meet a specific human or business
need.
Equally troubling, spending on emerging technologies is not much
greater today, relative to overall digital technology budgets, than it was a
decade ago. In 2007, the average investment in emerging technology was roughly
17 percent of technology budgets, a surprisingly robust figure at the time.
Fast-forward 10 years, and that rate has grown to only about 18 percent, which
may well be inadequate.
It’s time to change these trends. You’ve identified a problem that
existing technology cannot solve, but you shouldn’t just throw money at every
shiny new thing. A digital innovation capability must become a central feature
of any transformation effort. This approach goes beyond simply evaluating what
to buy or where to invest, to include how best to organize internal and
external resources to find the emerging technologies that most closely match
the direction and goals of the business.
Nearly every company is experimenting with what we call the
“essential eight” new technologies: the Internet of Things (IoT), artificial
intelligence (AI), robotics, drones, 3D printing, augmented reality (AR),
virtual reality (VR), and blockchain. The key is to have a dedicated in-house
team with an accountable, systematic approach to determining which of these
technologies is critical to evolving the business digitally and which
ultimately will end up as distractions that provide little value to the overall
operation. This approach should include establishing a formal listening
framework, learning the true impact of bleeding-edge technologies, sharing
results from pilots, and quickly scaling throughout the enterprise.
Perhaps most important, organizations need to have a certain
tolerance for risk and failure when evaluating emerging technologies. Digital
transformation requires organizations to be much more limber and rapid in their
decision making. Says GE Healthcare’s Zimmerman, “One of our cultural pillars
is to embrace constructive conflict. That means that when an organization
transitions or transforms, things are going to be different tomorrow than they
were yesterday. You must get comfortable with change and be open to the
differing thoughts and diverse mind-sets that drive it.”
In a promising development,
signs indicate that companies are starting to focus on bringing digital innovation capabilities in-house. According to the New
York Times, investments by
non-technology companies in technology startups grew to $125 billion in 2016,
from just $20 billion five years ago. The Times, citing
Bloomberg data, also noted that the number of technology companies sold to
non-technology companies in 2016 surpassed intra-industry acquisitions for the
first time since the Internet era began. Walmart, General Motors, Unilever, and
others are among the non-technology
giants that made startup acquisitions last
year. General Electric, whose new tagline is “The digital company. That’s also
an industrial company,” spent
$1.4 billion in September 2016 buying two 3D
printing businesses in Europe.
Other companies are engaging in innovative partnerships. In
January 2017, at the annual Consumer Electronics Show, Visa, Honda, and IPS
Group — a developer of Internet-enabled smart parking meters — teamed up to
unveil a digital technology that lets drivers pay their parking meter tab via
an app in the car’s dashboard. By “tokenizing” the car, or allowing it to
provision and manage its own credit card credential, they essentially make it
an IoT device on wheels. “The car becomes a payment device,” explains Visa’s
Sondhi. “And taking it even further, we can turn it into a smart asset by
publishing information that’s related to the car onto the blockchain. This can
enable a whole host of tasks to be simplified and served up to the driver, such
as pushing competitive insurance rates or automatically paying annual
registration fees.”
Solving for “X”
At United Airlines, Ravi Simhambhatla, vice president of
commercial technology and corporate systems, views digital innovation as a
way to break free from habits ingrained in his company over nine decades
because they are no longer relevant to its customers and employees. The company
plans to use machine learning to create personalized experiences for its
customers. For example, when someone books a flight to San Francisco, its
algorithm will know if that person is a basketball fan and, if so, offer Golden
State Warriors tickets. “What we have been doing is really looking at our
customer and employee journeys with regard to the travel experience and
figuring out how we can apply design thinking to those journeys,” says
Simhambhatla. “And as we map out these journeys, we are focused on
imagining how, if we had a clean slate, we would build them today.”
With the right digital skills and capabilities comes great
opportunity to improve the experience of both your employees and your
customers. One constant that emerges from 10 years of Digital IQ surveys is
that companies that focus on creating better user experiences report stronger
financial performance. But all too often, user experience is pushed to the back
burner of digital priorities. Just 10 percent of respondents to this year’s
survey ranked creating better customer experiences as their top priority, down
from 25 percent a year ago. This imbalance between respondents’ focus on
experience and its importance to both customers and employees has far-reaching
effects. It creates problems in the marketplace, slows the assimilation of
emerging technologies, and hinders the ability of organizations to anticipate
and adapt to change.
Part of the reason user experience ranks as such a low priority is
the fact that CEOs and CIOs, the executives who most often drive digital
transformation, are much less likely to be responsible for customer-facing
services and applications than for digital strategy investments. As a result,
they place a higher priority on revenue growth and increased profitability than
on customer and employee experiences. However, user experience is also
downgraded because getting it right is extremely difficult. It is expensive,
outcome focused as opposed to deadline driven, and fraught with friction.
However, unlike so many other aspects of technological change, how
organizations shape the human experience is completely within their control.
Companies need to connect the technology they are seeking to deploy and the
behavior change they are looking to create.
And making this connection will only become more critical as
emerging technologies such as the IoT, AI, and VR grow to define the next
decade of digital. These and other technologies that simultaneously embrace
consumers, producers, and suppliers will amplify the impact of the distinct
behaviors and expectations of these groups on an organization’s digital
transformation.
Companies that focus too narrowly on small slivers of the customer
experience will struggle to adapt, but overall experience-and-outcome companies
that seamlessly handle multiple touch points across the customer journey will
succeed. That’s because, when done right, the customer and employee experience
translates great strategy, process, and technology into something that solves a
human or business need. You have the skills and the capabilities; now you need
to think creatively about how to use them to improve the user experience in
practical yet unexpected ways. Says United’s Simhambhatla, “To me, Digital IQ
is all about finding sustainable technology solutions to remove the stress from
an experience. This hinges on timely and contextually relevant information and
being able to use technology to surprise and delight our customers and,
equally, our employees.”
The Human Touch
When talent, innovation, and experience come together, it changes
the way your company operates. Your digital acumen informs what you do, and how
you do it. For example, Visa realized back in 2014 that digital technology was
changing not only its core business but also those of its partners so rapidly
that it needed to bring its innovation capabilities in-house or risk being too
dependent on external sources. It launched its first Innovation Center in 2014;
the company now has eight such centers globally, and more are planned.
Visa’s Innovation Centers are designed as collaborative,
co-creation facilities for the company and its clients. “The idea was that the
pace of change was so fast that we couldn’t develop products and services in a
vertically integrated silo. We want the Innovation Centers to be a place where
our clients could come in, roll up their sleeves, work with us, and build
solutions rapidly within our new, open network,” says Visa’s Sondhi. “The aim
is to match the speed and simplicity of today’s social- and mobile-first worlds
by ideating with clients to quickly deploy new products into the
marketplace in weeks instead of months or quarters.”
Across industries, company leaders have clearly bought into the
importance of digital transformation: Sixty-eight percent of our respondents
said their CEO is a champion for digital, up from just one-third in 2007.
That’s a positive development. But now executives need to move from being
champions to leading a company of champions. Understanding what drives your
customers’ and employees’ success and how your organization can apply
digital technology to facilitate it with a flexible, sustainable approach to
innovation will be the deeper meaning of Digital IQ in the next decade.
“It’s the blend that makes the magic,” says GE Healthcare’s
Zimmerman. “It’s the high-impact technological innovations, plus the customer
opportunities, plus the talent. You have to find a way to blend those things in
a way that the markets can absorb, adopt, and gain value from in order to
create a sustainable virtuous cycle.”
by Chris Curran and Tom Puthiyamadam
https://www.strategy-business.com/article/Winning-with-Digital-Confidence?gko=37c1d&utm_source=itw&utm_medium=20170530&utm_campaign=respA
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