The Enterra Insights blog has moved. It can now be accessed at at http://www.enterrasolutions.com/enterra-insights.
The Enterra Insights blog has moved. It can now be accessed at at http://www.enterrasolutions.com/enterra-insights.
In a post entitled Fostering Genius, I discussed a number of research and academic organizations in and around the Princeton, NJ, area. The organization to which I devoted most of the post was The Institute for Advanced Study, a research center most famous for once having counted Albert Einstein among its members. He isn't the only genius that has called the Institute home. Over the years some 33 Nobel laureates have worked there and, since 1936, its members have claimed the majority of math's top prize — the Fields Medal. One of the things that distinguishes the Institute is that its focus is basic research rather than applied research. Its members are trying to understand the fundamental principles that make the universe tick. The Institute's current Director, Dutch mathematical physicist Robbert Dijkgraaf, told reporter Eliza told Gray that seeking to expand the boundaries of science "may be a luxury that America can no longer afford — or at least appreciate the importance of." ["The Original Genius Bar," Time, 22 July 2013]
As evidence that scientific research no longer holds a cherished place in contemporary America, Gray notes that the Institute's "influence in Washington has fallen, as has Washington's interest in science." She goes on to report:
"Over the past 25 years, the U.S. government's spending on physical-science research has dropped by half. Sequestration — the $1.2 trillion in spending cuts in the discretionary and defense budgets over the next decade — has accelerated that, slicing budgets for agencies that support science research, like the National Science Foundation and the National Institutes of Health."
Even without sequestration, Congress' interest in science was waning. Gideon Rachman traces the growing lack of interest in science back to Ronald Reagan. He explains:
"Traditional conservatives disdain populism and respect knowledge. They believe in balancing the government's books. And they are pragmatists who are suspicious of ideology. Reagan debased all these ideas – and modern American conservatism is still suffering the consequences. The most damaging idea propagated by the Reagan myth is the cult of the idiot-savant (the wise fool)." ["How Reagan ruined conservatism," Financial Times, 1 March 2010]
To continue reading this post, click on the link to the new Enterra Insights site.
Judy Bayer, Director of Strategic Analytics for Teradata International, and Marie Taillard, a professor of marketing and Director of the Creativity Marketing Centre at the ESCP Europe Business School in London, wrote a very interesting article in which they stated that they no longer believe in segmentation. ["A New Framework for Customer Segmentation," HBR Blog Network, 12 June 2013] Obviously, the headline for their article (which they may not have personally selected) undercuts that statement; nevertheless, their arguments are both interesting and persuasive. They believe that segmentation (like dividing consumers by gender, ethnicity, geography, religion, etc.) promotes a "rigid methodology that carves out the market" in unnatural ways. They accept the notion that you "can't be all things to all people," and they believe that rigid segmentation defies that concept. They continue:
"To resolve these contradictions, we had begun pleading with students and clients to look for 'jobs to be done.' The approach echoes Ted Levitt’s famous comment about selling ¼ inch holes rather than ¼ inch electric drills, and advocates a mindset shift away from selling products to 'doing jobs' that solve customers’ problems. In Clay Christensen’s words, customers 'hire' products or other solutions because they have a specific job to fulfil, not because they belong to a certain segment."
To continue reading, click on the link to the new Enterra Insights site.
In Part 1 of this two-part series, I indicated that I divided the facts presented in an interesting SAP slideshow entitled "99 Facts on the Future of Business" into thirteen separate categories. In that post, I discussed the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I'll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category. SAP introduced the presentation by explaining:
"Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses."
As noted in Part 1, I placed these facts into thirteen categories to help paint a more coherent picture of the future as seen by the analysts at SAP. In the first post, I included the first five categories: Big Data; Business Leadership; Customer Service/Experience; and Education. In this post, I'll discuss the remaining eight categories, namely: Emerging Markets; Innovate or Perish; the Internet of Things; Risk Management; the Supply Chain; Targeted Marketing; Urban Growth; and a Miscellaneous category.
To continue reading this post, click on this link to the new Enterra Insights site.
In an interesting slideshow entitled "99 Facts on the Future of Business," the folks at SAP paint a picture of the future to which businesses should pay attention. The company introduces the presentation by explaining: "Business Innovation is the key ingredient for growth in the future of business. Changes in technology, new customer expectations, a re-defined contract between employees and employers, strained resources, and business and social networks are requiring businesses to become insight-driven businesses. In this presentation, we have gathered 99 facts that represent the changes taking place in the world today. Each fact represents a key insight and suggests where we need to focus and change to become viable, sustainable and growing future businesses." I've placed these facts into thirteen categories to help paint a more coherent picture of the future as seen by the analysts at SAP. In this post, I'll include the first five categories in this post. They are: Big Data; Business Leadership; Customer Service/Experience; and Education. The remaining eight categories will be provided in the next post.
To continue reading this post, click on this link to the new Enterra Insights site.
As of today, I'm transitioning the Enterra Insights blog to a new platform that will be hosted on Enterra Solutions' rebranded website (www.enterrasolutions.com). The new website was launched to coincide with this week's Consumer Goods Business & Technology Leadership Conference that Enterra helped sponsor. For the next couple of weeks, I will continue to provide links to new blog posts to facilitate a smooth transition to the new platform.
To continue reading today's post, please click the following link: Enterra Insights.
A year ago, Dan Gilmore, Editor in Chief of Supply Chain Digest, wrote, "In case you haven't noticed, e-commerce is growing at a breakneck pace, putting a near panic in traditional brick and mortar retailers, and of course driving many of them to invest heavily in their own dot com sites and business units – even if most of them are losing money at it for now." ["Multi-Channel Commerce and the Supply Chain," 9 November 2012] As we approach what hopefully will be a good holiday season for retailers, order fulfillment is rising quickly to the top of concerns for many retailers — especially omnichannel order fulfillment. I previously addressed this topic in a post entitled The Impact of Omnichannel Operations on the Supply Chain, but with the holiday season upon us, I thought it might be a good time to discuss it some more. Gilmore continues:
"E-commerce ... is now part of the whole 'multi-channel commerce' phenomenon. Multiple paths of purchase and delivery. Buy anywhere, pick up anywhere. More sales and delivery channels are coming too: your television…vending machines…what else? A senior supply chain executive from one of the country's largest retailers told me at a dinner ... that 'multi-channel is going to create big winners and losers' in the retail sector, depending on the decisions and investments each merchant makes. One of the weird things here is how technology driven this all is. ... Of course, this is not only a retailer phenomenon. Manufacturers and wholesalers of all sorts are dealing with many of the same e-commerce/multi-channel supply chain challenges and questions. How aggressive do we go? Will we tick off our channels? Do we insource or outsource e-fulfillment operations? If we insource it, do we use an existing DC, or a separate fulfillment operation? Etc."
Gilmore's questions point out why omnichannel operations are so difficult to get right. He goes on to discuss three of the biggest questions involved in omnichannel operations: How do you best fulfill orders? How do you manage shipping costs? And, how do you manage inventories.
Omnichannel Order Fulfillment
Jason Denmon, a supply chain management consultant, writes, "Fulfillment can get complex as customers expect a seamless experience across all channels. One of the key decision points is whether to manage fulfillment of each channel in shared or separate distribution centers." ["Aligning fulfillment operations with a changing channel mix," Modern Materials Handling, 29 June 2012] Jim Barnes of enVista told Gilmore:
"We like the idea of combining the dot com and retail distribution operation if and only if the retailer has the ability to consolidate reserve inventory but logically keep it separated using a Distributed Order Management (DOM) or what I like to refer as enterprise commerce flow (ECF). In principle we like them combined, but many retailers don't know how to do it, therefore you see a lot of physical or virtual fences separating dot com from retail order distribution. ... The bigger question is regarding service and this is why there is a strong argument against combining retail and B2C. I believe to keep up with Amazon retailers are going to be required to establish more satellite or spoke locations in larger demographic areas that allow the retailers to service customer same day, at worst case next day."
Denmon agrees that "operating out of a shared Distribution Center is most effective when the channels or segments have common order profiles (item type and quantity) that share the same inventory." But, as Barnes notes, that isn't always the case. As a result, Denmon claims, "Fulfillment with each channel in its own distribution center makes sense when the channels have unique requirements." Denmon concludes:
"Choosing what type of fulfillment operation is best for your company starts with a holistic view across the business, channels and segments. Getting stakeholder alignment across channels is a critical first step. Start by asking these questions:
• Where are the synergies and differences between channels?
• Are you struggling to respond quickly to market demand? Or dealing with excessive mark-downs and out of stocks as a result of allocation problems?
• How is the performance of each channel measured?
• What are the tipping points where you are willing to sacrifice the optimization of one channel for the overall benefit of the organization? How wide is your lens?
• What are the impacts of changing business requirements in your channel mix?
• Do you have true business/stakeholder alignment between channels with an overarching strategy that drives one consensus plan?
"With an understanding of the full impact of multiple channels on your fulfillment operation, you can look for synergies and ways to deliver the seamless experience your customers expect."
A lot more retailers are offering free shipping on orders. That makes getting a handle on shipping costs particularly critical. As Gilmore writes, "Discounted/free shipping is sapping the profits out of e-commerce." But, as Bob Trebilcock, Executive Editor of Modern Materials Handling, notes, retailers continue to offer these shipping options because customers expect them. He writes, "Companies] are now operating in a world where cheap or free shipping dominates. Even wholesale businesses are having to guarantee next-day delivery to meet the expectations of business customers that are influenced by consumer expectations." ["Four trends driving automation," 22 May 2012] Jones Lang LaSalle, a global real estate services firm, asserts that the cost of new warehouses designed for omnichannel operations is significantly higher than the cost of traditional warehouses and distribution centers. "Traditional warehouses that support stores require less investment and machinery and fewer staff," they write. "The new e-commerce distribution centers, which involves direct order fulfillment, can cost three times as much and involve three times as many employees." ["Growing E-Commerce Forces Transformation in Distribution Networks, Report Finds," SupplyChainBrain, 25 May 2012] All of that new cost must be absorbed or passed on. Last December, Supply Chain Digest published the following graphic to show "what a number of leading retailers and service providers are doing relative to multi-channel fulfillment strategies."
As you can see, with so many fulfillment strategies in play, keeping shipping costs in check is no easy matter.
Gilmore doesn't believe than anyone has been able to master omnichannel inventory management, but, he writes, "Some of the Distributed Order Management solutions are getting close." Kris Bjorson, head of Jones Lang LaSalle's Retail/e-commerce Distribution Group, told the SupplyChainBrain staff, "Traditional retailers must support the delivery of merchandise and manage both in-store and online inventories and shipments at a frenetic pace against the backdrop of intense competition from pure e-commerce rivals." Stephen Gerrard, Vice President of Marketing & Strategic Planning at Voxware, Inc., notes, "Warehouses are now on the front line of customer satisfaction, but enterprises are still downsizing the supply chain as much as possible. Logistics has to do more with less." ["Warehouses: The New Front Line of Online Customer Satisfaction," Supply Chain Digest, 10 May 2012] It is ironic that at a time when the supply chain is playing an increasingly important role that many executives still only see it as an area to cut costs rather than as an area that will differentiate them from their competitors. Supply chain professionals are fond of saying: The supply chain doesn't support the business the supply chain is the business.
Supply chain analyst Bob Ferrari writes, "Many in the industry believe that there is no single formula for success in this new evolving multi-channel commerce world and each retailer will have to continue to 'tune-in' to customer needs and requirements and provide appropriate, differentiated capabilities that can best balance all physical and online assets." ["Bricks and Clicks - The New Business Model and Supply Chain Capability for Retail Industry," Supply Chain Management, 28 March 2012] Bill McBeath of ChainLink Research concludes, "The rising emphasis on omni-channel has reached a pitched crescendo this year, with no signs of abating. One of the reasons it is 'taking so long' is there are so many dimensions to really doing omni-channel well. It touches everything. Even though e-commerce has been around for well over a decade, we are really just getting started on the journey of putting in place the various dimensions of the foundation for wide spread true omni-channel integration. In reality there are currently centers of gravity—unifying the front-end (the shopper experience) vs. unifying the back-end (fulfillment). For now that is probably the enterprise’s best approach, since, especially the front-end mobile game is just discovering itself." ["Reading the Pulse of Retail at NRF 2013: Omni-Channel Still the Big Thing," 22 January 2013]
"The individualization of customer relation," writes Bertrand Duperrin, Consulting Director at Nextmodernity, "is the new concern of marketing departments." ["The individualization of customer relationship: why and how?" Bertrand Duperrin's Notepad, 24 June 2013] Tresilian Segal, head of Adobe's Digital Marketing across Northern Europe, agrees that "a commitment to personalisation seems a relative no-brainer." However, she asks, "Is the case for personalisation is well understood?" ["Maximise your personalisation process with these 8 tips," Fourth Source, 14 June 2013] A February 2013 survey conducted by inContact helps make the case. According to the survey, "Consumers are making less of their buying decisions based on brand loyalty, but rather on which companies can match their desired experience." ["Consumers Value Personalized Service Over Brand Loyalty," Progressive Grocer, 25 March 2013] The article continues:
"According to the findings, 56 percent of U.S. adults would be at least somewhat likely to switch to another brand or company if it offered more options and channels than their current provider. Additionally, younger consumers aged 18 to 44 (64 percent) indicated this was true significantly more than their counterparts aged 55 or older (45 percent), showing a major shift among the younger consumer base in terms of decision making. Based on the findings, the younger generation of consumers — who are used to an influx of information and a variety of choices — showed a desire for options that allow for a tailored experience in their interaction with brands. To that end, younger consumers demand more options and availability to handle these interactions, while companies are at risk of losing customers if they neglect to accommodate preferences or adopt evolving channels of communication in providing service. 'The survey results are clear: consumers expect more choices and more ways to interact with business today,' said Paul Jarman, CEO of inContact. 'The smartest companies are quickly adapting to changing consumer behaviors and needs, extending customer service beyond just phone and email to mobile apps, text messaging, chat and social media.' Survey respondents showed overall that they not only prefer, but expect, companies to offer options for a variety of channels and devices."
In previous posts, I have discussed the fact that consumers are increasingly looking for an "experience" as they shop (be it online or in store). Lauren Hertler insists, "At the end of the day, creating an optimal experience for a customer is determined by the ability to deliver personalized communications." ["Driving Performance through Personalization," ExactTarget Blog, 30 September 2013] Although most pundits concern themselves with online experiences associated with multi-channel retailing, Gavin O'Malley believes that personalization is just as important when a consumer is in a brick-and-mortar store. "Consumers are craving more personalized, less siloed shopping experiences," he writes, "and [they] could be convinced to stop 'showrooming' and actually make in-store purchases." ["Consumers Desperate For More Personalization During Purchase," Online Media Daily, 26 September 2013] The one thing that all of these analysts agree upon is that there is a case (they believe a strong case) to be made for understanding and engaging in retail personalization.
Natasha Hritzuk, senior director of consumer insights at Microsoft, told O'Malley, “Consumers are absolutely desperate for more personalization during their purchase journey. The idea of personalization isn't new, but [the industry as a whole] is still not delivering on its promise." O'Malley continues:
"The retail industry is also failing to appreciate consumers' desire for a more seamless shopping experience, according to Hritzuk. Consumers don't want to encounter gaps between a brand's online, mobile, and in-store presence, she said. 'They want to operate seamlessly.' Along with breaking down the barriers between digital and physical-store experiences, retailers can also use ecommerce learnings to increase in-store purchases, according to Hritzuk. 'We need to understand why people showroom,' she said, referring to the increasingly popular consumer practice of testing products in-store, but preferring to buy them online. For one, 'It’s easier to buy [products] online,' said Hritzuk. 'You can [buy something] online in 3 to 4 minutes compared to the 20 minutes it can take to buy [a product] in stores,' she said. 'We need to take that friction free purchase transaction, and [implement] it in stores.'"
Eric Tobias, Vice President of Web Products at ExactTarget, told Hertler that "personalization can be achieved using four main building blocks." They are:
- Collection and identification of data
- Data aggregation
- Taking action on the data
- Providing continuity to the customer by nurturing the 1-1 relationship
Tobias continued, "The primary goal, of course, is to deliver the right experience at the right time using the right channel." He then offered four tips "to help all marketers get more personal":
Segal agrees that good personalization begins with the data. She explains, "Let the data do the hard work and decide what the most relevant content and offers are to serve the customer at the detailed level." She also agrees that content should be personalized. "Get rid of 'spray and pray' emails," she writes. She also agrees that gathering and analyzing data is essential to capture and analyze the customer's digital journey. "Identifying key points along your customer's virtual path is important," she writes, "as it allows you to decipher where conversion is highest." Nevertheless, she cautions, "While personalisation may often rely heavily on data and analytics, it is important not to completely surrender all control of customer experience management to machines. There is still a role for behavioural targeting, as long as you test against it regularly. A blend of data-led and intuitive marketing often works the best."
"'Big data' promises to be the solution to getting a 360 degree view of your customer and make more intelligent personalization decisions," writes Linda Bustos. ["Using Big Data for Big Personalization," GetElastic, 11 July 2013] Bustos' article included the following "infographic from Monetate [that] covers the big data problem, the segmentation opportunity, and 3 keys for data and segmentation success."
Alicia Fiorletta concludes, "As shoppers continue to leverage digital tools and channels to research, browse and buy products, they also are beginning to demand more relevant products and offers. With these heightened expectations, personalization is becoming an integral component of retailers' cross-channel marketing strategies." ["Retailers Across Verticals Personalize With Digital Solutions," Retail TouchPoints, 6 May 2013] Duperrin adds, "When business treat groups and not individuals, [i.e.,] trying to please everyone at the same time, [that strategy] often leads to pleas[ing] no one since the lowest common denominator is never satisfying for each person taken individually." The requirement for retail channels to become even more personalized is likely to continue. I agree with Duperrin who insists that the technology used to get know customers better must be complemented by knowledgeable and caring people who can really put the finishing touches on personalization.
Eliza Gray tells the fascinating story of The Institute for Advanced Study in an article published in Time. ["The Original Genius Bar," 22 July 2013] She describes the Institute as "a place to work unhindered by the pesky objectives required by traditional research centers or obligations to pimply students at universities. If research were measured on a spectrum from the practical (like making a laptop slimmer) to the theoretical (like studying the way matter moves in space), the institute is as 'close to the frontier as possible,' says its new director, Dutch mathematical physicist Robbert Dijkgraaf." Since opening its doors in 1930, Gray reports that "33 Nobel laureates have stopped through along with more than two-thirds of the winners of the Fields Medal, math's top honor since 1936."
According to the article, the Institute was founded "by Abraham Flexner, an educational theorist, and siblings Louis Bamberger and Caroline Bamberger Fuld, department-store moguls who provided the initial endowment of $5 million." Gray indicates that their motivation for founding the Institute was "to counteract a trend in the U.S. toward applied science." There is certainly nothing wrong with applied science; but, seeking to expand basic scientific knowledge (i.e., "pursuing questions for which the value of the answers isn't obvious") taps something deep in soul of scientific and mathematical geniuses.
Gray concludes her article on the Institute by describing some of the work currently ongoing there, including work on machine learning, cancer, human migration patterns, and star explosions. No one is sure where all of the research will lead, but as one researcher told Gray, "Use your imagination." To put an exclamation point on the fact that the Institute remains relevant and important, it was recently announced that theoretical physicists from the Institute "a jewel-like geometric object that dramatically simplifies calculations of particle interactions and challenges the notion that space and time are fundamental components of reality." ["A Jewel at the Heart of Quantum Physics," by Natalie Wolchover, Quanta Magazine, 17 September 2013] To learn more about that, read my post entitled Are Space and Time Real?
As you read Gray's article, you can sense the excitement she felt as she interviewed those involved with the Institute. It is that sense of excitement and inquisitiveness that a new non-profit organization, called The Project for STEM Competitiveness – which I helped found and currently serve as chairman of – wants to instill in young students. The first project being sponsored by The Project for STEM Competitiveness is a pilot program in Newtown, PA, at the Newtown Friends School called "Liftoff to Mars." To read more about this program, read my post entitled Teaching STEM Subjects Using a Mission to Mars and the following articles: "Newtown Friends to pilot STEM education program," by Crissa Shoemaker DeBree, phillyBurbs.com, 24 September 2013; "STEM pilot program lifts off at Newtown Friends School," by Regina Young, Bucks County Herald, 3 October 2013; and "Newtown Friends School, Lockheed Martin, US Dept. of Energy thinking about life on Mars," by Cary Beavers, The Advance, 3 October 2013.
You might be asking: What does the Institute for Advanced Study have to do with a science, technology, engineering, and mathematics (STEM) education initiative at a Newtown, PA, middle school? The primary connection is geographic. The Institute, along with several other world-class academic and research organizations, lies within a ten-mile radius of Newtown – which also happens to be the headquarters of my company Enterra Solutions, LLC. It is our intention to sponsor field trips to these world-class organizations so that students can feel for themselves the excitement that research can engender.
Princeton Plasma Physics Laboratory. It was during a visit with Dr. Andrew Zwicker, Head of Science Education at PPPL, that I first discussed establishing The Project for STEM Competitiveness. As explained by its website, "The U.S. Department of Energy's Princeton Plasma Physics Laboratory (PPPL) is a collaborative national center for fusion energy research. The Laboratory advances the coupled fields of fusion energy and plasma physics research, and, with collaborators, is developing the scientific understanding and key innovations needed to realize fusion as an energy source for the world. An associated mission is providing the highest quality of scientific education."
Another such organization is the SRI International, which began life as the David Sarnoff Research Center, a research and development organization specializing in vision, video and semiconductor technology. Named for David Sarnoff, the former visionary leader of RCA and NBC, the organization has been involved in several historic developments that will grab students' attention, notably color television, CMOS integrated circuit technology, liquid crystal displays, and electron microscopy. The organization invented the now ubiquitous computer mouse, was one of the first four sites of ARPANET, the predecessor to the Internet, developed the SIRI personal assistant that iPhone users are familiar with, and it even helped Walt Disney select a location for his first theme park.
Another nearby organization is Bell Laboratories (also known as Bell Labs and formerly known as AT&T Bell Laboratories and Bell Telephone Laboratories). It is currently the research and development subsidiary of the French-owned company Alcatel-Lucent. According to Wikipedia, "researchers working at Bell Labs are credited with the development of radio astronomy, the transistor, the laser, the charge-coupled device (CCD), information theory, the UNIX operating system, the C programming language, S programming language and the C++ programming language. Seven Nobel Prizes have been awarded for work completed at Bell Laboratories."
And, of course, there is Princeton University. As its website explains, "Chartered in 1746, Princeton is the fourth-oldest college in the United States. Princeton is an independent, coeducational, nondenominational institution that provides undergraduate and graduate instruction in the humanities, social sciences, natural sciences and engineering. As a world-renowned research university, Princeton seeks to achieve the highest levels of distinction in the discovery and transmission of knowledge and understanding. At the same time, Princeton is distinctive among research universities in its commitment to undergraduate teaching."
With all of these wonderful organizations with such rich histories residing in our own backyard, it seemed natural to me to reach out to them for assistance in helping make STEM subjects for interesting for young students. If researchers at these institutions can get young students excited about STEM subjects, I'm not sure what will. However, I'm optimistic that field trips and visits by guest lecturers from these organizations will help stimulate students and, with luck, foster a genius or two among them.
Michael Fitzgerald, Nina Kruschwitz, Didier Bonnet, and Michael Welch, report, "A study by MIT Sloan Management Review and Capgemini Consulting finds that companies now face a digital imperative: adopt new technologies effectively or face competitive obsolescence." ["Embracing Digital Technology," MIT Sloan Management Review, October 2013] The term "digital technology" is pretty broad and, by itself, is probably not very useful. The authors define it as "social media, mobile, analytics or embedded devices" that "enable major business improvements (such as enhancing customer experience, streamlining operations or creating new business models)." The authors obviously believe that companies that fail to adopt these technologies and transform their operations will fail or, like old soldiers, just fade away. They report that the key findings from the survey are:
According to previous research, "digital transformation will require companies to draw from a core set of four digital capabilities: a unified digital platform; solution delivery; analytics capabilities; and business and IT integration." ["The Digital Capabilities Your Company Needs," by George Westerman, Didier Bonnet, and Andrew McAfee, MIT Sloan Management Review, 29 October 2012] Despite the fact that so many executives believe that achieving digital transformation for their companies is critical, the authors report that "many companies struggle to gain transformational effects from new digital technologies." This is problematic since the authors conclude: "Almost no organization is sheltered from the competitive disruption wrought by the widespread adoption of digital technologies."
The challenge, of course, is that every business is unique in some way. That means that no single path to digital transformation is going to work for everyone. The path to digital transformation begins with understanding your business. The first case study that the authors present involves Starbucks. Although some coffee drinkers simply want to buy a cup of java on their way to work, many others want to sit and enjoy that cup of Joe. For consumers who want to enjoy their purchases on site, Starbucks offers "free Wi-Fi in Starbucks stores, along with a digital landing page with a variety of digital media choices, including free content from publications like The Economist." For those consumers who want to rush off to work (or elsewhere), Starbucks has managed to "cut 10 seconds from every card or mobile phone transaction, reducing time-in-line by 900,000 hours. Starbucks is adding mobile payment processing to its stores, and is processing 3 million mobile payments per week. Soon, customers will order directly from their mobile phones." Fitzgerald, Kruschwitz, Bonnet, and Welch continue:
"The world is going through a kind of digital transformation as everything — customers and equipment alike — becomes connected. The connected world creates a digital imperative for companies. They must succeed in creating transformation through technology, or they'll face destruction at the hands of their competitors that do."
There are likely going to be two networks at play: one that connects customers and the other that connects everything else. This second network is often referred to as the Internet of Things (IoT) or the Industrial Internet. To learn more about the IoT, read my posts entitled The Internet of Things Looks Like Big Business and Fellow Travelers: Big Data and the Internet of Things. Although the authors insist that undergoing a digital transformation is an imperative for companies, they don't pretend that such an effort will be easy. "Even in a connected world," they write, "it takes time, effort and willpower to get major transformative effects from new technology." The authors write with a sense of urgency on this subject. George Westerman, a research scientist at MIT's Center for Digital Business, told them, "The big thing is, technology change is happening so rapidly that every industry is being affected by this." The rapid pace of change is probably the main reason that companies are struggling to transform.
During the dot.com era, many companies were quick to purchase and employ IT systems that later proved unsustainable. Having been burnt in the past, they are hesitant to jump in again during a time of rapid change. Hesitancy, however, is not a winning strategy. The authors report that "previous research by Capgemini Consulting and MIT's Center for Digital Business found that companies that invest in important new technologies and manage them well are more profitable than their industry peers." The obvious answer to this conundrum is investing in technologies that are adaptable and easily updatable. This is much easier to do than in the past thanks to cloud computing and software-as-a-service offerings. The authors promise, "Business leaders who embrace the digital imperative will see boosts in their operations, customer relations and business models."
With the digital path to purchase becoming an increasingly important channel for commerce, it comes as no surprise that the study found that "customer experiences reflect the clearest impact of digital transformation. The survey found that improving customer relationships was the area where companies were having the most success with digital technology. Most prominent was improving the overall customer experience, followed closely by enhancing products and services in customer-friendly ways." To learn more about why enhancing customer experience is important read my post entitled Analytics 2.0: Big Data, Big Testing, and Big Experiences -- Part 2.
The authors admit that "there is no one factor that impedes digital transformation," but they do acknowledge that some companies "lack both the management temperament and relevant experience to know how to effectively drive transformation through technology." They conclude their article by offering "nine specific hurdles in the broad areas of leadership, institutional obstacles and execution that companies need to overcome to achieve digital transformation." They are:
If I were asked to prioritize those obstacles to transformation, lack of vision and legacy technologies would be high on my list followed closely by corporate politics. If you had any doubt about whether the industrial age is over and the information age has arrived, this survey should put your doubts to rest. If your company has yet to join the digital age in a meaningful way (i.e., aligned itself utilizing a unified digital platform), then it might just be a candidate for history's dustbin.