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The hottest thing out there is digital, and a lot of projects are being spun up in an attempt to start moving companies into digital. The problem is that many of these initiatives quickly lose momentum, then lose funding, and end up with less work for the service providers than they anticipated. Hence, the term “digital trough.” So what is a service provider to do?
First of all, it’s crucial to recognize the customer’s need. Digital is not just about technology; it’s about changing the fundamental business to be digital. If you’re a service provider wanting to avoid the digital trough or seeking a way through the trough you’re in, you must ensure the customer actually gets value from your services in moving a customer’s business into digital.
Five key steps to ensure value
These five aspects involve significant change, but they address the nature of the digital services challenge and will help your company move beyond the digital trough to provide the value your customers expect.
This topic will be the focus of the session, Beware the Digital Trough!, that I’m leading this week at the NASSCOM India Leadership Forum. If you are there, please find me to discuss overcoming the challenges associated with making digital initiatives successful in detail. Read more.
The “technology disruption” euphoria is everywhere. Though cynics say the technology industry comes up with something every five years and something big every ten, this time it could be different. Not everyone, however, buys the concept of dramatic disruptive change and supports “incremental innovation.”
The incremental innovation supporters say that many things “appear” similar to what they were ages back. But, when you peel back the onion, you see lots of changes…think today’s cars, compared to those in Henry Ford’s time. Their take is that because incremental innovation doesn’t grab headlines, it’s considered boring. On the flip side, supporters of disruptive changes point out that Edison could never have made the light bulb by incrementally innovating the lamp.
Irrespective of which camp you are in, it’s clear that things in the broader technology world are increasingly resembling what they wanted to compete against. For example, check out Amazon now planning to open brick and mortar stores.
Here’s a look at three major technology evolutions from the recent past and how they are taking us back in history.
Of course, we can argue that irrespective of how these technologies are delivered or consumed, they assist in doing new and better things in a different way. However, does this mean that true innovation, whether incremental or disruptive, is not possible in the technology industry? Consider that there have been multiple articles on how corporations are buying back their shares to improve earnings per share (and the linked executive compensation), rather than focusing on R&D. The thesis here is that many organizations are realizing they get greater benefit from returning cash to their shareholders than they do from the risks of innovation. Innovation skeptics also point out that many companies that were the first to innovate never got their returns.
So, is the technology industry destined to just repackage what existed earlier, or will we see something that is fundamentally different? Are we destined to oscillate between different technology models every few years? The bigger question is, should the pursuit to be innovative be for its own sake, or to create some meaningful value? I firmly believe that regardless of whether the value comes from incremental or disruptive innovation, the value needs to be the key driver.
How can technology companies (which these days implies every organization) innovate yet manage the risk in these times of rapid change? How can they jettison their age old planning cycles and be more agile and nimble?
The industry needs to answer these questions to ensure the pipeline of innovation does not dry up. The future of technology is right here, right now, and all stakeholders need to shape it to ensure it neither goes back in history nor becomes a prisoner of old habits that die hard.
What do you think?
Epic Systems, Cerner, AllScripts, McKesson, and AthenaHealth…if you have heard these names, you likely know what EHR stands for. I don’t mean the non-acronym form, Electronic Health Records, but what it actually stands for – oligopoly, sunk billion dollar investments, platforms that don’t speak to each other, and that look on physicians’ faces when their shift “ends” and coding starts.
When President Obama famously daydreamed the US$80 billion a year savings from the EHR nudge, many were cynical that it would ever come to fruition. Six years later, while EHR in the U.S. is an over US$5 billion-a-year industry, the savings are nowhere in sight, and the cynics are sniggering, “we told you so.” Sadly, while the doomsday predictors are having a field day gloating over the sorry state of affairs, the folks on the technology and policy sides are ruing a great opportunity lost.
The issue was never with the business case for EHR – a standard system of record aiding providers and physicians in medical decision support. What could possibly be wrong with that vision? Billions of dollars of sunken investments and a multiplicity of protected standards later, sitting on the books of large providers are bloated monsters who scare away any attempt at efficiency, data intuitiveness, and interoperability.
Frankly, the current debate on interoperability is as farcical as it can get – the same bunch of folks who created the virus are now trying to invent a vaccine for it. Who paid for the virus? Subsidy did. Who will pay for the vaccine? Irrelevant. If the debate continues the way it is going, what you think will be a vaccine will actually be an upgraded, non-resistant version of the virus. With the federal committee on interoperability largely staffed by big EHR vendors, we have a situation akin to employing a cat to guard the milk.
My suggestion? Let’s not fight the cats here. The cacophony will be way too unbearable. Instead, here is a solution (and warning… radical suggestion alert!)
Reality check here…what I have just suggested will kill an industry and open the government to multiple litigations by the large EHR vendors. I never suggested this would be easy. But, could it be done by force of political will and legislation? The answer is a resounding, “Yes.”
I’ve blogged before about the trap for service providers that listen to their salespeople and where that purchasing-oriented perspective takes a provider – to undifferentiated offerings, lower pricing, lower margins, standard offerings and low value. But there is a significant part of the market that is dictated by procurement/purchasing departments and, as a provider, you can’t ignore that part of the market. Providers ask us at Everest Group how to up their win rate in these situations.
I’ll answer this question using an illustration of IT infrastructure services demanding greater levels of automation. The provider expects to charge a premium for the increased automation demands, but the client expects increased automation to lead to lower cost. Clients believe high-quality services come from machines or a software-defined world, so fewer mistakes occur and the work requires fewer FTEs – and both drive costs down.
You also need to understand that in an RFP process, your automation story looks exactly the same as other providers’ presentations. You can easily take any provider’s presentation, remove the logos and background color graphics, substitute other companies’ logos and background color, and they will be indistinguishable. Everyone’s pitch around automation and infrastructure looks and sounds exactly like everybody else’s. And the facts that are offered as proof also sound reasonable. So it is very difficult for a procurement organization or a client organization to differentiate between the presentations or even the demonstrations that they see. So how can a provider create differentiation?
We at Everest Group have studied this phenomenon and conclude that if you’re a provider offering services based on automation, you need to come out of the gate with a low price – and ideally lower than the rest of the market. By doing so, you challenge the market or your competitors to meet your price. Your low price is supported by your story of automation – you can get to this low price because you have a greater degree of automation than the other providers. If you try to get to that price by saying you pay your people less, that raises quality issues in the mind of the customer. But if your thesis is you can get to the low price because you have a greater degree of automation, your price is consistent with your automation promise.
Other providers will spend their time trying to come down to your price. That will result in the client feeling increasingly more comfortable with the company that sets the low price and spends time showing how they meet that price instead of the company that is constantly redoing its bid in an effort to beat the lower price.
So the successful approach where automation is a key component is to be the price challenger, not just the automation expert. Then support how you get to that price with your automation strategy.