Author: Cecilia Edwards

Digital Reality Episode #13 | Productivity in IT Does Not Come Easy

In this podcast Cecilia Edwards, Jimit Arora and their special guest, Ashwin Venkatesan, take a look at how productivity levels have changed for both the better and the worse over the course of 2020. They discuss a repeatable process IT organizations can use to drive and maintain increased productivity.

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Jimit Arora:

Welcome to the 13th episode of Digital Reality, Everest Group’s monthly podcast that moves beyond theory and beyond technology to discuss the realities of doing business in a digital-first world. I’m Jimit Arora …

Cecilia Edwards:

… and I’m Cecilia Edwards. Each month we bring you a discussion that digs into the details of what it means fundamentally to execute a digital transformation that creates real business results. Today, I’m pleased that we have another guest with us, Ashwin Venkatesan, who also goes by AV. AV leads our IT and digital transformation research program. And we’re really glad to have him join us today. Welcome, AV.

Ashwin Venkatesan:

Hey, Cecilia. Hey, Jimit. Thank you so much. Really excited to be on.

CE:

So today we’re going to talk about productivity. This is an issue that continues to be top of mind for a number of IT leaders, given that we’re still in this kind of remote working timeframe. We’ve been tracking productivity through the pandemic and, not surprisingly, we’ve seen an evolution in terms of how this has panned out. In the early days, we did see a bit of productivity loss when folks were scrambling to get the right infrastructure to enable remote working. Bandwidth and infrastructure were clearly issues, but they were solved fairly quickly.

Once those issues were resolved, we began to see productivity increases. When we polled our user base, across the board we found that productivity went up on average by about 13%. The drivers of those increases were varied. Some of it was attributed to fewer distractions since people had nowhere to go. Some of it was due to less time commuting and some of it might’ve been due to people just working extra hours out of fear of job security.

So now the pendulum is beginning to swing back. We’re seeing a bit of a plateau and even some diminishing productivity, due potentially to fatigue that’s starting to set in or potentially some burnout from the starting intensity levels that people have been maintaining. So today, we want to start a discourse on how organizations are managing productivity – the productivity of their IT teams – and what techniques and strategies we’ve seen be successful in this next new normal. AV, I’d like to start with you. I know you’ve been examining this issue for a number of enterprises. So what’s your take on what’s happening with productivity right now?

AV:

Thanks Cecilia, that was great context. And it seems productivity factors are the flavor of the month. Earlier this week, in fact, JP Morgan was claiming that it has noticed productivity decline amongst employees, potentially because of the work from home lifestyle itself. So yes, structurally dealing with the productivity issue has become very important, and a number of factors are actually contributing to this perfect storm for organizations, especially in an IT context. And at the heart of this is something both you and Jimit were speaking about earlier, which is everything is on the table.

So we are at a point where companies have significantly accelerated their digital agendas. But guess what? There’s an associated conundrum to this. On the one hand, IT budgets are limited, and on the other hand, stakeholder expectations are simply skyrocketing. So consequently, people are actually having to think of this as an and function: If we think of stakeholders for IT, be it end users or our customers, these stakeholders want both speed and cost effectiveness. They want experience and efficiency. So it’s almost a duality that needs to be balanced.

And this is where CIOs are struggling, because they’re not able to make the trade-offs. Because, on one hand they need to survive and show value to the business. But on the other hand, the CIO also needs to run a more efficient IT shop. And this is exactly where the concept of productivity comes. So at a very basic level, productivity is at the heart of what every CIO wants, and it is all about doing more with less. We at Everest Group call this hyper-productivity, by which we mean that it’s about getting an order of magnitude in terms of the outcomes. And this is done by optimizing people, optimizing processes, and making changes to your technology stacks amongst other things.

So that’s kind of setting the context around productivity. And, Jimit, at this point, I would like to bring you into the conversation. So you and I have partnered to help quite a few clients, especially over the last few weeks, on this productivity issue. So what do you see as some of the starting points for enterprises on this productivity journey?

JA:

Sure, AV. I think the first step, thankfully, is a simple one. You want to improve productivity – start measuring it. I know it sounds very basic and very simple, but I think for so long we’ve been thinking about this concept that most enterprises, most IT groups, have made a big deal of this. And they don’t really have a simple measures that allow them to make progress on this. So when you complicate the measurement too much, it becomes a problem. It becomes an impediment. So step one, you need to make sure you start measuring it. And to do that, you need to select metrics that are very simple, and they need to be holistic and capture multiple aspects of impact.

So let me share some examples of what we are seeing, what companies are looking to quantify as they’re looking for their productivity journeys to get ramped up. Most often, it’s starting with what’s the speed or velocity of the output. So, how quickly did I deploy that new code? What’s the quality of output? How many changes are we seeing? So that becomes a good measure of quality indirectly.

Change failure rate is another example of something organizations are measuring and tracking quite effectively. How do you think of business alignment? And this one trips people up quite significantly, but we are seeing some very simple measures around NPS, for example, coming back in. So what’s the employee NPS on the business side? And that becomes something that you want to measure. And as you’ll see, it’s on a velocity metric, which is how we tend to think of productivity, but it is a business impact metric. And then the fourth tends to be cost. And this is where most people have simply fixated.

And as you’ll see, as we’ve expanded this definition of productivity, you want to keep this holistic. So looking at speed, which is what most companies think of. But you’re bundling in quality, you’re bringing in business alignment and cost to operate. Once you start to combine some of these is where you start to see this concept of hyper-productivity kick in. So make them simple, make them complete, and obviously make sure that they are quantitative and can be measured at frequent intervals. And here’s a big secret and in some ways a challenge to conventional thinking that we found, as teams are striving toward greater performance, higher productivity: don’t benchmark it versus the market. Do not seek arbitrary, “Here’s what good looks like in my industry or here’s what Google is doing, therefore that should be my productivity threshold.”

We don’t think there’s a single right answer or a single right industry benchmark in terms of the number of story points an ideal board can deliver in two weeks. Context is what really matters in this productivity journey. Each team and each journey will be different. And I think that’s where most organizations truly trip up. Once you measure what your metric is, you just set the next milestone in a manner that shows progress for yourself, for your team, versus trying at this stage to benchmark it in the industry. Each print or each iteration, you’re trying to drive incremental improvements over the previous baseline, over your previous baseline. And that is the approach that delivers great results. It sounds super simple because in theory it is super simple. Measure it, measure it versus yourself, keep improving.

CE:

Yeah, super simple. That’s what everybody’s looking for. So I know that I’ve been surprised that people come in thinking that there’s some secret sauce to this. Productivity to them means, “Hey, let’s bring in the smartest developers, move to low code development, and deploy a variety of tools.” So, sure, these things might help, but they don’t necessarily create a material or sustainable change in the culture. And I think that when we’re talking about looking at that process that you just mentioned, Jimit, and not thinking about an industry benchmark, but having that context, that that’s really what this is about. You’ve got to make some cultural changes.

So the heart of it really is the simple yet repeatable process. And at the heart of this approach is your context, as you mentioned. So to the extent that you’re not trying to meet these kind of arbitrary industry thresholds and designing the program around your environment, your ecosystem. And the thing we often forget is your people as well, that always works. So the key is to not force some mandated set of answers, but to really create a sense of excitement by making the team feel valued and empowering them to think, debate, and solve those problems.

I think that we’ll be really surprised at what teams come up with. I mean, it could be everything from the need to take breaks, right? There’re a lot of articles that I’ve been reading lately on the Tabata method, work for 25 minutes, take a break. Whether or not the team does team norming, how do you recreate the water cooler in a remote environment? It’s interesting that sometimes the breaks are the very things that can actually increase the productivity. So give the team the flexibility to think holistically about what’s going to work in their context for them.

AV:

You’re right, Cecilia. And just reflecting on what both you and Jimit have been saying, there is no single answer to this, there’s no silver bullet at the end of the day. There are so many variables here that we can play with to really drive progression along this entire concept of productivity. So this is going to be a multi-pronged approach.

We have obviously been researching numerous client environments over the past few years, and based on all of these experiences, we have identified a few levers that an organization can consider as it embarks on this productivity journey. And we see six of these as key dimensions where changes can be facilitated, and a productivity improvements can be achieved.

So just going through them, and in no specific order: first is the organization structure itself. Breaking silos becomes very, very important. So many IT environments have actually grown into a space and a size where it becomes really hard to bring teams together. But the focus needs to be around how you make the organization structure end-to-end. And how you enable and enhance coordination amongst the business teams and the IT teams. It’s one of the most fundamental requirements, in our view, to help drive the productivity mandate.

CE:

And, AV, I think that that’s one where we’re going to see a lot of challenges, right? Because that silo mentality is really strong. And it’s probably strongest not with the junior people, but the leaders who have their kind of empires that they’re building, their domain that they’re trying to protect. And so encouraging that collaborative versus siloed approach is really something that we’ve seen as a challenge, but it’s one of the most effective things that an organization can do.

AV:

Absolutely, Cecilia. And you point out a very important aspect, that especially when it comes to organizational structures, it has to be a top-down mandate. You need someone to bring the organization together. It’s a very valid point.

The second, then, is talent and skills. And I don’t think there are any surprises over here, it is potentially one of the huge talking points when it comes to enabling a successful IT operating model at this point in time. So how you build your pyramid, whether you have the cross-functional skills, all of this becomes very, very important.

JA:

AV, I think on that talent and skills piece, and I know we’ve spoken about this and I struggle whether it’s an org structure issue or a talent and skills issue, I think it’s somewhere in between. What’s associated with that is also the culture. And I think that, I believe it was Google that came up with this research, where it wasn’t the smartest developers who really enabled high productivity, but it was essentially elements of culture, the ability to work together as a team, the cohesion of that unit, that really determined how successful they were. And it wasn’t about you had eight black hat grade developers in your ecosystem. So, do you see that as an important dimension to the culture?

AV:

Absolutely. I think it’s a cliche, we use it all the time, but the fact is that culture eats strategy for breakfast. And in today’s IT environment where we have essentially a proliferation and the kind of themes and the functions that are getting built in.

CE:

I think that there’s a basketball analogy that works really well on this. If you think about the all-star games, they’re never really good. You take the absolute best talent from across the MBA, you throw them all together briefly on the court and the games aren’t very good, right? The teams that win are those that have a good mix of people. So they’re going to have the superstars and then not so superstars, but they’ve learned how to work together in really effective ways. Those games are a whole lot more interesting. They produce a whole lot higher scoring and everything. So I think that that’s a good analogy to what we’re talking about here. That it can’t just be about having the best, it’s about how they work together as well.

AV:

Sure. LeBron needs a team around him. Absolutely, Cecilia.

CE:

Exactly.

AV:

Yeah. But that’s a good point. And coming back to this. So absolutely, the organization’s structure, talent and skills, culture sits somewhere in between, but there are other important elements as well.

So the third one, and we simply can’t overlook this, this is about technology and platforms. It’s about making the right choice. And what we see in many cases is there’s almost a fixation to go for what is seen as the best-of-breed technology. We really want to invest in a particular tool because this seems to be the one that the market is telling us is the best. But it’s also about ensuring that that particular tool or solution is very much compatible in your environment and can speak to your existing investments as well. So as I think of technology and platforms, do ensure that the answer is not always about going for the best tool, but it’s about how it fits into the broader environment and the existing investments that you have made. It becomes really important.

The fourth one is the service delivery process. Again, it’s very important in the sense that we have been having IT function around services for many, many years now. Again, to use a cliched term, but the focus has always been on keeping the lights green. But when you are talking about making your own environment productive, there needs to be a flip in the way you measure outcomes from a service delivery standpoint. And this is where we see that the design needs to be expedience- and business-outcomes oriented, rather than being SLA first. It’s an important pivot. Again, things around culture and people and training, everything comes into the picture over here. But this is going to be another key element that if you can get right, it’s going to help you drive significant productivity within your estates.

Location, the fifth one, and it’s an interesting angle. So the debate around onshore and offshore has gone on for quite some time, but it’s a lever that you can again use within this context.

And then finally the sixth one, which in our view is a little overlooked, is reusability. And this is essentially tied to the knowledge management angle. So how do you institutionalize your experiences and learnings so that you do not reinvent the wheel, so you save input and consequently drive productivity? Now, typically what we have seen is there’s a lot of innovation that happens across different parts of the organization. It happens in silos. So one part is obviously the cultural part of it and the org part of it. But also a key requirement becomes how do you have a knowledge management platform that underpins all of this and then helps people learn best practices, previously used tools and accelerators, and whatnot? So reusability, a potentially overlooked item, but an important element.

And the key point here is if you look at all six levers, you have a variety of choices and adjustments that you can make. And in this, your context is what’s going to dictate what’s best for you.

Let me offer a couple of examples where we have seen some of these success stories. So Cisco as an example, sometime back, they claimed that they had reduced 40% of defects in their subscription billing platform. Now this was done by just launching three agile release streams and making them work together. So it was simply an organizational tweak that helped Cisco reduce defects by 40%. And it was almost like quite a bit of time and productivity being built into their entire platform and consequently helping impact revenues.

AV:

Airbnb, very recently actually, claimed that it improved its product development by erecting a single environment wherein it brought designers, engineers, and even the researchers, everyone who’s involved in the product development process, so that they could pull in ideas and create synergies. So this one, again, is an org and a process design lever being pulled together. But again, helping drive productivity.

Now, going back to Jimit’s points: these are good examples, but we’re not saying that what worked for Cisco or Airbnb is going to work for you. We can offer a set of standard guidelines, but we want you to remember this that it is always going to be very contextual and what worked for another organization won’t be working for you. But if you want to get started on this entire enterprise productivity journey, and especially if you want a copy of a framework to get started with it, feel free to ping us. We’ll be very happy to send this across and maybe have a product conversation.

JA:

Perfect. Hey, AV, thanks for that. I think this was a very productive discussion, if I may. And I know we’ve played around with one graphic that I like fairly well, which is: think of this as an equalizer. It is a graphic equalizer where each of these individual levers serves as a toggle switch, which you can move up and down. Every switch individually will create impact once you reach the most optimal configuration for your environment, that’s when you get to beautiful music. And so I learned a fair bit, and there’s obviously a lot of lessons for us as we think through how organizations need to create a culture of high performance, high productivity – hyper productivity – and effectively achieve more with less. These lessons we call digital reality checkpoints, so there’s a few that I wanted to sum up with.

First one, don’t let perfect be the enemy of good. Don’t try to create the right perfect productivity plan. Take the first step, identify a set of simple metrics, measure them, get started. Second, recognize that each organization will have this variety of choices. You do have multiple levers to continue optimizing to deliver greater impact and increase productivity. So it’s not a one and done. And each journey is different. For those of you who’ve been with us on this journey, you know that we consider digital transformation to be a journey. Of course it is, but it’s your journey. Understand your context, try not to seek industry benchmarks as you’re starting. Eventually, yes, we’ll get to that. But don’t start by going after arbitrary numbers, which in some cases might create a false sense of progress, “Wow, I’m doing better than the industry. So I don’t need to improve.” Or, become such a big mountain to climb that they result in early failures. So it’s your journey, make sure that you progress along it in your context.

CE:

So I’d like to add my thanks to AV for joining us today. And I’d like to thank you for listening to this episode of Digital Reality. Please check us out at www.everestgrp.com or follow us on LinkedIn at Jimit Arora and Cecilia Edwards. If you’d like to share your company’s story or have a digital topic that you’d like us to explore, reach out to us at [email protected].

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Digital Reality Episode #12: Challenges with Remote Education | Blog

In this podcast, we explore the challenges schools face in a remote environment. Whether you believe schools should be open in person or not, there are many learnings from the new digital reality schools are facing that can be applied to the business community.

Jimit Arora (JA): Welcome, to the 12th episode of Digital Reality, Everest Group’s monthly podcast that moves beyond theory and beyond technology to discuss the realities of doing business in a digital-first world. I’m Jimit Arora.

Cecilia Edwards (CE): And I’m Cecilia Edwards. Each month, we bring you a discussion that digs into the details of what it means fundamentally to execute a digital transformation that creates real business results. Last month, after several announcements from Google and others about extending their remote working policies until well into next year, we had a debate about the feasibility and the merits of a long-term work from home model. Today, as the school year begins in the US, we’re taking a look at a similar question…what’s the feasibility of remote education models, long-term and at scale?

Our intent here is not to enter into the political fray and make judgments about whether or not schools should be opening, hence no debate format this month. Instead, we’re going to take a look at why the decision is so challenging and see what lessons business can learn, and how they need to challenge some of their assumptions in order to be part of those who are going to eventually shape whatever our new normal is going to be. So Jimit, let’s start by first taking a look at some criteria where digital channels or remote delivery work from a business perspective.

JA: Sure. This is an important question. And the way I think of this is there are three potential modes or three potential archetypes of how remote delivery can be enabled.

So I’ll kind of unpack this. The first and most obvious one is anyone who doesn’t have a consumer-facing desk job and their work is primarily conducted from a computer or over the phone. So, it’s a non-consumer facing, technology-enabled desk job. In these instances, the technology can take over and allow the same functions to be performed from essentially anywhere in the world, as long as there’s a reliable internet connection.

CE: Yes. That’s roughly what we’re doing at Everest Group, for example.

JA: Yes. And even though it’s non-consumer facing, it is customer-facing if you think of it in the B2C sense. But video enables a lot of that, so that’s really allowed us to pretty much operate from anywhere, and that seems to also be the model of the future, even for consulting professions.

Second, and this is where even if you move beyond just the knowledge worker category and think about businesses that sell products, they do need workers on-site to perform the fulfillment and shipping off orders. And yes, a lot of that has also been automated, these businesses can also rely on digital engagement and shopping experiences with their customers as a substitute for brick and mortar stores.

And if you just think about what’s really happened over the last few months with eCommerce really kind of exploding, you think about what’s been happening to Instacart, Amazon, Shopify, and even Home Depot. So traditional brick and mortar stores are seeing that there’s a pretty significant surge in the digital channels. So the digital channels have been enabled, and that’s causing a lot of value creation in this marketplace.

CE: Absolutely.

JA: The third one, this is essentially businesses that perform services that can be consumed virtually. Think of it as the world of entertainment, the world of virtual learning. So much consumption has happened for new media that’s being streamed on Netflix, Disney, and Hulu. And these are digital native companies that are essentially enabling their services to be delivered quite seamlessly. So those are the three broad archetypes, and I think the key question that we need to be asking ourselves is, are there other characteristics or assumptions that are inherent in the models that underlie these business archetypes that I just described?

And as you think about it, what becomes apparent is that these are models that are primarily buried for an adult population. And as you think about it, we’ve said, well, there are different cohorts, there are different generations of adults who behave differently. We’ve generalized and said that, “Hey, seniors might not really like the digital channels, but they do have the ability to engage digitally either autonomously or with some technical assistance with the help of someone who’s close to them.” And I think what we’ve seen during the pandemic is that the assumption that, hey, the senior population that we thought was less interested in digital seems to have gone entirely. And pretty much consumers across the spectrum have made the shift.

CE: Yeah. I mean, they did what they had to do, in other words.

JA: Exactly. Exactly. I think associated with that is the fact that hey, we are essentially dealing with an adult population is that it’s fairly straightforward, in some ways, I’m going to call this transactional approach to the nature of services being consumed or to the nature of products being purchased…all the adults really want is that the product or service that you’re providing them meets certain standards. They have the option and can deploy other methods to satisfy other aspects of their personal lives, such as friendships, social interactions, creative outlets, mental stimulation, and entertainment. So you want to make sure that the transaction with the business delivers what you need, and you’re not dependent on that business to provide you with all of these other aspects of your daily life.

And as you think about that, going back to the topic you mentioned in the beginning, Cecilia, what does this mean for schools? I think that’s where there are some inherent differences across how we think of schools and the segment of customers that they cater to, which is kids, and how they behave versus what it really means for adults.

CE: Yeah, Jimit I think that that’s really a good set up for this conversation around schools. Clayton Christensen, who unfortunately passed away earlier this year, brought forth this concept, this theory called jobs to be done. And in that, he kind of says you need to not just think about the product or service that you’re delivering as, if you sell pens, the job that the pen needs to do isn’t to be a pen, it’s to help communicate and write, and it’s comforting, et cetera. So you stop and think about, what is the job that your service needs to do? That’s his jobs-to-be-done theory. And I think that can help us frame this discussion on education pretty well.

When you think about the job that schools are to perform, most of us would, top of mind, say that they’re there to teach children, whatever your expanded version of the three Rs, your kind of reading, writing, and arithmetic, whatever your expanded version of that is, they’re there to teach your kids that. So, if that was the whole story, I think the debate on how we educate kids during this pandemic would be so much easier. Instead, schools really perform a much broader set of jobs that can include everything from the obvious teaching the kids, but we kind of support their social development and teach them coping skills. They’ve got to move and we provide their physical developments there. It’s the place where they make their friends and they get to celebrate their accomplishments.

There is a lot of entertainment going on when you think about how long their attention spans are. So you have to feed them good entertainment. Talking about feeding, especially when you have low-income families, the schools actually have to feed the children one or two meals a day. Some even send food home for dinner. They need to provide the supervision so that parents can work. They need to teach kids leadership skills. They need to help them learn how to collaborate, develop more character. When they’re a little bit older, schools need to help them make decisions about college, provide creative outlets, provide inspiration, teach them discipline. There’s a lot of things. This list could really be expanded several times over the jobs that a school is supposed to do.

JA: Yeah, it’s interesting. And this is something that really hits home. The last one, teaching them discipline.

CE: Yes.

JA: Yeah. I have a four-and-a-half year old. I mean yeah, he was four years old when they stopped and then six months passed, I can’t believe it. And it’s been rough. It’s been rough on him. It’s been rough on us. And the biggest thing that’s kind of gone away is the structure and the routine that really exists in an environment like this. And I think that’s essentially part of the debate. So how do you really make sure that you create this list of guarantees in some ways, that yes, you are going to get that meal, yes, you are going to follow a rigorous schedule. I think it’s a lot of those things and the fact that, hey, you get to hang out with your friends and don’t have to be next to him when he’s on a video call.

CE: Exactly.

JA: I think all of those are really important attributes. And we’re kind of wrestling through this decision ourselves as schools start to reopen here.

CE: Exactly. I mean, you think about the book probably telling my age, but “All I Really Need to Know I Learned in Kindergarten.” And they weren’t talking about the three Rs, they were talking about being nice and sharing and waiting your turn, having patience, taking good naps, so some self-care, empathy. They’re thinking about all of those other things that school brings to the table. So the point is, that’s a lot that a school needs to do. And it’s really, when you think about it that way, it’s much more complex than what any single business has to provide to its customers.

Only a handful of those jobs could actually easily be replicated digitally. Clearly, there’s no single technology solution that’s going to enable them to accomplish all of those jobs at the same time. So they have to start thinking about, just as most businesses do, an entire ecosystem of solutions, some of them digital and some of them physical, that are going to be required to deliver these jobs. So that’s kind of the first element of what makes it challenging for schools to do this digitally. Jimit, do you have another?

JA: Yeah. I think what’s also interesting is that as you think about it, not everything. And while we’ve kind of emphasized and thought about the community aspects of school, not all of the activities for kids, even when they’re in a classroom or group activities. What this means is that the standard Zoom or equivalent meeting interface that’s used by adults in businesses doesn’t quite replicate the experience of teachers sharing the same content with everyone. And then students need to be able to work independently under teacher supervision, ask one-on-one questions, get the individual attention and time that they need.

CE: Yeah. I was having this conversation with my college sophomore son, where it was, we were prepping for this and kind of batting this idea around about the one-on-one time. And he said, “My goodness, if I couldn’t ask my teachers questions, I don’t know that I would have been the type of good student that I was.” I mean, we had to sit him in the front of the class because he was always thinking about the next thing, the next thing, the next thing, even beyond what the assignment was. And his teachers encouraged that, but that’s a one-on-one activity that you have to do.

JA: Yeah. And in some ways it almost kind of reminds me of, hey, you’ve got Zoom calls and you’ve got webinars. Webinars are typically closed and they’re, “Hey, it’s going to be a one-way impartation of insights, stay on mute.” Most people are distracted. And so I think there are some limitations to something like this, which really we need to kind of wrestle with. Even if you think of our own video meetings, we typically think of either one-on-one sessions or one-to-many meetings, and schools also need these. So, some of them will be one-to-many, some of them will be one-to-some, one-to-few, and all of these need to be done in a largely unstructured manner.

And if you think about one of the things that we recognized in this world of Zoom meetings, usually you’re living up to a fairly scripted routine. So if it’s on the calendar, that means it exists. So the unstructured point of making sure, hey, if a student just needed to speak to a teacher separately, or a teacher needs to provide individual attention while a student is working on an assignment, stuck somewhere, that can’t be scheduled.

CE: Yeah. The teacher doesn’t have the opportunity to notice that somebody seems to be sitting with their eyes glazed over and how do I just go over and quietly help them through. That’s some of that individual time that’s missing.

JA: Yeah. Or in my case, as I reflect back on my own childhood, don’t judge me too much, having that piece of chalk thrown at me just to snap out of whatever Greenland I was in.

CE: Exactly. Whatever it takes to discipline.

JA: So, yeah. And going back to parallels with the business world, businesses often use a mix of channels to address the different customer needs. So they’ll use social media, online forums, call centers, email support. The need for a personal relationship with the individual providing the service, as is the case with students and the teachers, is usually not as important as them having the information that you need. So if you’re going into a store buying something, you might be a regular there. The level of interaction that you need with the person in the store is going to provide you that service, the level of intimacy or understanding is just not the same. So I think, yes, there are some analogies that we can draw from this, but there are other places where this totally breaks down.

CE: Yeah. I think if you think about it, the medical profession, the relationship that people might have with a therapist or their doctor, it has that, but if you’re not in those types of professions, “Oh yeah, I got a new barista. Thanks.” So I’ve got another one. Students really are not independent consumers or decision-makers. So if you think about, with the exception of some older high school students or college students, the kids who attend school don’t make the decision about what they’re going to consume, when they’re going to consume it, how they’re going to consume it and they typically need some help.

So just the other day, a friend posted on Facebook on the first day of school that she left the room where her elementary school son was working remotely. He was sitting at the table looking at his video, in class. She left him alone for about 10 minutes. When she came back into the room, he was cooking himself an egg during class, while the video was still on. It’s just like, “Oh, what are you doing?” And he’s like, “Well, I was hungry.”

JA: Hello.

CE: And so, if you think about this, these little people need some supervision, constant supervision. Additionally, they need somebody else to set them up for success. The parents have to get the computers, they have to find the space, they’ve got to make sure the environment is right. I saw another friend’s set up where she has all the extra supplies, nicely organized and that’s what teachers do for them in their classrooms. So, at home, who’s providing all of that attention to detail that the teacher is to make sure the environment and the tools, et cetera, are there?

That means that the economic buyer equivalent in education, but kind of the parent, isn’t the consumer. This creates a really interesting dynamic when you need to convince a separate buyer, convince the parent, that the service is correct for the consumer. In some of the food commercials that you see, you’ll see things like “kid-tested, mother approved.” That dynamic really does come into play when you’re thinking about educating students.

JA: Yep. I think that’s a great example. And I think that goes on to highlight how some of these decisions are different. And I actually have another important one, which is the thesis around how we think of trying to generalize and understand our population segments. So if you think about it, a school has to be able to serve everyone. They have to serve all the students that attend equally, in some ways. They don’t have the luxury that businesses have of only focusing on smaller target markets.

So, all the kinaesthetic learners, visual learners, and oral learners in the classroom must be taught potentially using similar techniques. The kids who pick things up a little faster are in the same room with those who may have to work a little harder to grasp a concept. Those who prefer physical books sit next to those who like digital copies. And then the situations where parents’ work situations make it nearly impossible for them to provide their children support during the school day, which would allow them to be educated in a manner that would be consistent with those parents whose work doesn’t have the same demands or the same pressures. And we’re kind of trying to deal with those situations.

And finally, let’s think about the digital divide. Not all children have equal access to the technology required to engage in online learning. And at the beginning of the pandemic in New York, for example, yes, there were a lot of iPads that were procured and distributed, but you do need bandwidth. And what’s to guarantee that the level of bandwidth to support the right video is available?

So, I think recognizing a lot of these differences is important. If you contrast that with how businesses think, businesses tend to think of themselves as having customer segments in which preferences are relatively similar. But if you think of a socially distanced and digital engagement model, there are other behaviors and preferences that begin to challenge this assumption of homogeneity. And I think that’s something we need to factor into the decision of how do you really make this hybrid world and back to school really happen.

As an example, are introverts and extroverts in the same customer segment as they’re both having a remote experience? Does a mobile-first experience really work well for all service delivery scenarios? Or do those with larger screens or computers, might they have an easier time engaging? I think it’s kind of factoring all of these things that becomes really important as you go back to the basic assumption that schools have to really serve everyone.

CE: Yeah. Thanks for that. So wrapping this up, regardless of where you stand on whether or not schools should be opened for in-person classes this fall, I think we can all agree that the challenges that they face are quite complex and dare we say that they’re significantly more complex than what a typical business would be required to address. So, there are some lessons that we can learn from those in the education sector, our digital reality checkpoints, that can be more broadly applicable.

The first one is that you should note all of the jobs that your company provides to your stakeholders. We spent time talking about customers, but your stakeholders are really customers, employees, and business partners. And then once you’ve noted those, determine the mix of strategies you need to deploy to perform all of those jobs. Second, make sure you understand whether the consumers of your offerings can do so independently or whether they need support from others. If they need support, make sure you’re considering the needs of their support system. And third, challenge your assumptions about how homogeneous your stakeholders really are. As you identify meaningful differences, reconsider how you engage and then support them differently.

JA: Thank you, Cecilia. I think those were great checkpoints. It’s always fascinating to see how some of these translate across sectors. So thanks again for this. And thank you for listening to this episode of digital reality. You can check us out at www.everestgrp.com or follow us on LinkedIn at Jimit Arora and Cecilia Edwards. And if you’d like to share your company’s story or have a digital topic you’d like us to explore, you can reach out to us at [email protected].

The Contactless Economy – Reimagining Process Through Technology | Blog

Digital Reality podcast episode #10 examines how savvy companies leveraged technology to redesign their processes to continue to serve clients, streamline operations, and even thrive during the crisis. We examine lessons from three diverse B2C sectors – restaurants, apparel stores, and liquor stores – that ensured some semblance of “normal” during these uncertain times.

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Jimit Arora (JA): Welcome to the tenth episode of Digital Reality, Everest Group’s monthly podcast that moves beyond theory and beyond technology to discuss the realities of doing business in a digital-first world. I’m Jimit Arora and…

Cecilia Edwards (CE): I’m Cecilia Edwards. Each month we bring you a discussion that digs into the details of what it means, fundamentally, to execute a digital transformation that creates real business results.

This month, we are talking about how technology impacts an organization’s ability not only to continue to operate, but to streamline operations and thrive during times of crisis. As the pandemic wreaked havoc on the economy, many businesses shuttered or lost a tremendous amount of value amidst the shelter-at-home orders. However, today we want to look at two examples of companies that leveraged technology to meet the shifting demands of the “new normal” we find ourselves in.

Jimit, do you want to kick us off?

JA: Let’s start with B2C examples because most of us can relate to whether or not we can still eat from our favorite restaurants or purchase the goods we desire. I’ll briefly touch on restaurants. The shift restaurants have made during this time period was clearly a technology plan supported by some operational shifts. In a previous podcast, we talked about how Domino’s transformed itself over a 10-year period into an e-commerce company that sells pizza. Every restaurant that wanted to survive the pandemic has had to do the same. They have had to beef up their online capabilities to make it easier for customers to order. And they had to create changes in their operating processes to support curbside pick-up without the convenience of the drive-through windows that are used by fast food stores. While they are still cooking food, their survival depends on a technology play.

Now let’s talk a bit about brick and mortar apparel stores. This pandemic caused nearly all of them, as non-essential businesses, to shut down. Their only option to not be completely decimated by the crisis was to turn to e-commerce. However, it became clear quickly that merely having an e-commerce website, which by now, most retailers have, was not sufficient. Order fulfillment and inventory management became an issue. Most businesses handle their e-commerce sales from centralized warehouses. With no new shipments and lots of inventory at retail locations, Lululemon’s technology choices allowed them to thrive.

Having invested in RFID technology to track every piece of clothing in every store or warehouse worldwide, it was able to effectively use its retail locations, and staff, as fulfillment centers to support their online business.

This strategy worked for Lululemon; its stock is up 37% so far this year. The company has pulled back on its plans to build experiential bricks and mortar stores and will invested in digital, omnichannel, and e-commerce tools. While not able to completely offset the loss of in-store sales, the company is planning for double-digit growth in online revenue over the next three years.

Question to you Cecilia: What do you see as some of the lessons companies can take away from both the restaurant and Lululemon stories as companies contemplate their technology strategies?

CE: B2C success in a social distanced world requires more than an e-commerce site – there are implications for the entire operation’s ability to support the digital strategy. There needs to be a plan for how people will be deployed differently to support the e-commerce strategy. These new practices are likely, in some form or another, to become part of our future business norms.

Let’s shift our focus now to a B2B example and talk about how Johnson & Johnson has been doing. As one of the world’s largest healthcare companies, supplying consumers and businesses with medical devices, pharmaceuticals, and consumer packaged goods, J&J was obviously deemed an essential business during the shutdown. But that doesn’t mean its business wasn’t impacted.

In addition to the same work-from-home challenges most businesses had to adjust to, J&J has been supporting front-line workers with medical devices and products, continuing to supply consumer hygiene and health products, and is one of the companies working on a coronavirus vaccine.  It’s a bit of an understatement to say J&J has a complex business, with over 200 business units in different parts of the essential business spectrum.

Its IT capabilities have played a critical role in keeping J&J going. Data and analytics has been a big focus. The company has needed to ensure that the data required to scale up its supply chain was available to both internal and external partners and that real-time insights were uncovered to provide patients with the right care at the right time. For example, J&J consistently overcame operational challenges by using data analytics to assess alternative logistics and supply chain routes.

J&J has updated its mission statement to reflect the importance of IT. It now reads, “We shape the future of healthcare by unlocking the power of people, technology, and insights.” This mission has translated into investments in digital robotic surgeries, cloud computing, AI, and blockchain. J&J has obviously also had to take security into consideration. Its digital infrastructure allows its cybersecurity to scan the entire system every 15 minutes. And lastly, the company has a clear focus on business outcomes – it can routinely provide performance against key business metrics to the entire firm, not just IT.

While it’s unclear whether it is causal, J&J has announced that human trials of its coronavirus vaccine will begin in July versus its previously planned September timeline.

Question to you Jimit: As other companies are unsure about investing in technology during times of crisis, like now, what are some of the people considerations they should take into account?

JA: Three things:

  • Aligning everyone against a clear set of business objectives and investing against those
  • Ensuring transparency and collaboration across business silos and external business partners
  • Fully leveraging data – having the right data, updating it, making it broadly available

Digital Reality Checkpoints

CE: While technology is not the silver bullet to address all of the challenges companies currently face – and will continue to face – as we navigate through and eventually come out of this COVID-19 crisis, it has been shown to be a key enabler in the success of both B2C and B2B businesses. As usual, there are some lessons, or Digital Reality Checkpoints, that can be broadly applied:

  • Invest beyond the technology basics, but at a level to support your business objectives
  • Plan for how people will be deployed differently after the technology investments are in place
  • Ensure you have the data and analytics capabilities required to power your digital investments and make sound business decisions

Please check us out at www.everestgrp.com, or follow us on LinkedIn at jimitarora and ceciliaedwards. If you’d like to share your company’s story or have a digital topic you would like us to explore, reach out to us at [email protected].

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The Transformation Paradox: Funding Digital Transformation | Blog

DR LinkdIn banner Ep 9

In the ninth episode of our Digital Reality podcast series, Cecilia Edwards and Jimit Arora highlight examples of financial engineering solutions service providers are offering to accelerate the digital transformation of cash strapped enterprises. They also discuss changes in internal funding approval and allocation processes that support rapid decision-making while limiting the associated risk.

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Jimit Arora: Welcome to this month’s episode of Digital Reality, Everest Group’s monthly podcast that moves beyond theory and beyond technology to discuss the realities of doing business in a digital-first world. I’m Jimit Arora…

Cecilia Edwards: and I’m Cecilia Edwards. Each month we bring you a discussion that digs into the details of what it means, fundamentally, to execute a digital transformation that creates real business results.

This month, as we continue to see the impacts of the COVID-19 crisis globally, we shift the conversation to an important issue facing IT leaders as they wrestle with whether they should they increase or decrease the pace of digital transformation. From our leadership team’s conversations with over 50 enterprises in the last few weeks – the biggest regret we hear is that they wish they had made more progress on our automation and digital agendas prior to the crisis. So clearly the posture coming out of this crisis is that the pace of digital transformation needs to accelerate to drive the needed efficiencies in the organizational value chain.

However, there is a sobering reality check here – digital transformation requires investment, and budgets are the one thing that have been impacted significantly given the broader recessionary environment that we find ourselves in. So this creates a paradox – companies need digital transformation to bend the cost curve and at the same time find themselves lacking the budgets to realize these transformations.

Jimit, you have noted this paradox in the past – what are some strategies that you think are important to potentially find the funding to drive digital transformation.

JA: Yes, this is indeed an interesting paradox – the good news is that this isn’t new. As an industry we have been dealing with this issue for as long as I can recall, because no CIO will say that their budgets are adequate to keep the lights on and deliver the change they need. What is most instructive is: if you look back to prior crises – the dotcom bubble, the global financial crisis, and now in the aftermath of COVID-19 – one of the funding strategies we are going to see is a resurgence in is financial engineering.

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Now, financial engineering is not new – it has been around for a while. Effectively, you end up using accounting strategies – either your own or your vendor’s – to realize benefits without incurring all of the costs upfront. The most common manifestation is that you are using a partner’s balance sheet in the form of financing to make investments today and realizing value in the near term, where the payout happens over a longer period of time. A simple example of this becomes taking investment strategies that require CapEx and turning them into OpEx.

It might sound simple, but it isn’t a one-size-fits-all approach and is going to be a function of how a company’s financial rules and internal accounting policies are structured.

For example, what aspects of new projects and upgrades are capitalized vs. considered an operating expense? How does your organization account for the labor involved in implementing new features and functionalities? Fundamentally, if the goal was to increase OpEx and your finance organization insists that these need to be capitalized then you may not be able to realize the benefits. I think that is one caution I provide organizations that are looking to leverage vendor financial engineering solutions to ensure that the path you are looking to go down will meet the necessary approvals of the finance organization. Which is why one of the most important things for IT leaders to do is to ensure you work very closely with your finance organization.

CE: Excellent point Jimit and a much-needed word of caution here. I think there is definitely a lot of commitment on the part of two categories of participants in the digital transformation enablement stack. BigTech vendors, like Microsoft, SAP, AWS, Oracle, Cisco, and systems integrators are preparing significantly to leverage their impressive balance sheets to enable client transformation programs to offset the decline in demand that they are likely to see.

A very public example has been Cisco, which said it is allocating $2.5 billion to help customers defer up to 95% of payments on new products and associated services until 2021. I also have examples of systems integrators that are offering to help “collapse the stack” by offering to the client a single monthly invoice that takes into account the investments in the infrastructure, software, and services by getting the client to the post-transformation run rate in year one in return of a seven- or 10-year deal. So clearly the wave has started, and companies need not be constrained by their own budget challenges, because BigTech and SIs are ready to make things happen in return for a large, long-term deal.

JA: Cecilia, changing gears somewhat. I know you have been examining an alternate mindset to thinking about investments and funding for digital transformation and you actually presented that in a recent webcast we conducted.

CE: Yes Jimit. In some ways, the approach we mention is consistent with the discussions we have had on how digital transformation is not an IT conversation exclusively but a business conversation. So three broad factors to keep in mind:

  • First, ensuring alignment of the digital transformation effort with strategic objectives is very important and often this trumps traditional ROI calculations. Why? Because in a number of situations, the business objectives might be framed on dimensions that are hard to quantify and put a dollar figure on. Coming out of this crisis, productivity and resilience are emerging as very important dimensions – and current models can’t effectively frame these into a robust ROI conversation;
  • Second, empowering those with business context to make many decisions becomes most important;
  • Third, strategic priorities will change over time. Having the discipline to stop funding for things that no longer align with the strategic priorities is important (i.e., avoiding the sunk cost fallacy) and also ensuring new funding for new priorities. Traditional budgeting approaches need to change, and ensuring that you have mechanisms to fund and defund only for value becomes paramount.

JA: Unprecedented is probably the most used (and potentially misused) word to describe the nature of the crisis at hand. However, this crisis has also helped amplify the need for digital transformation. Microsoft CEO Satya Nadella recently said that we saw two years of digital transformation in two months. And this transformation needs sustainable and creative funding strategies. There are clear lessons for us as we think through the funding strategies available to us today. We call these lessons Digital Reality Check Points:

  1. Leverage financial engineering – it is real, effective, especially in a hypercompetitive supply environment and can help accelerate your transformation journey;
  2. However, this is not a one-size-fits-all approach. Ensure the applicability of these vendor financing solutions to your organization’s financial and accounting context;
  3. Align new investment strategies to the business’ strategic objectives.

Please check us out at www.everestgrp.com, or follow us on LinkedIn at jimitarora and ceciliaedwards. If you’d like to share your company’s story or have a digital topic you would like us to explore, reach out to us at [email protected].

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Impact of Automation in Business Continuity – Removing the Human Risk | Blog

In the eighth episode of Digital Reality podcasts, Cecilia Edwards and Jimit Arora examine the impact of automation on an organization’s ability to continue operating during times of crisis, especially as it pertains to mitigating risk to human life and enabling safety. This blog is a summarized transcript of the podcast.

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Cecilia Edwards: Welcome to the eighth episode of Digital Reality, Everest Group’s monthly podcast that moves beyond theory and beyond technology to discuss the realities of doing business in a digital-first world. I’m Cecilia Edwards…

Jimit Arora: …and I’m Jimit Arora. Each month we bring you a discussion that digs into the details of what it means, fundamentally, to execute a digital transformation that creates real business results.

This month, we are going to talk about the impact automation has on an organization’s ability to continue operating during times of crisis. We are all familiar with some of the top of mind benefits of automation, such as reducing costs, increasing productivity, ensuring high availability, increasing reliability, and optimizing performance. Another use case that is frequently deployed – but may not have been as top of mind before the COVID-19 crisis as it is today – is the protection of human life. When human life is at risk, availability naturally takes a back seat. Yet we have examples, both historic and current, where automation is being used to simultaneously address both of these objectives.

Cecilia, why don’t we start with an experience that is personal for you – and that is the form of automation deployed after the Challenger exploded back in 1986.

CE: You’re right, Jimit. This accident was an integral part of the start of my professional career. After graduating from college, I was commissioned as an officer in the US Air Force and worked on the Titan Space Launch Program at Vandenberg AFB in California. So, what does that have to do with the shuttle?

VANDENBERG AIR FORCE BASE, Calif. -- A Titian IV Centaur rocket launches here Oct. 19. The rocket is the largest unmanned space booster used by the Air Force. The vehicle carries payloads equivalent to the size and weight of those carried on the space shuttle. (U.S. Air Force photo)
Photo credits: U.S. Air Force

Back in the ‘80s we had grown accustomed to successful launches of space shuttles, and deeming them safe, we sent politicians, royalty, and civilians on missions. The 25th mission, the 10th for the Challenger, ended in disaster, blowing up just 73 seconds into flight and killing all on board, including a school teacher. This incident rightfully grounded the shuttle program for almost three years as the investigation and remediation procedures were put in place to ensure there would not be a repeat.

One of the functions the shuttle performed was to launch satellites, in particular large satellites, for the US Air Force. With the shuttle grounded, the Air Force was left with no means of completing its mission of putting several large satellites into orbit. Instead of waiting it out, the Air Force made a determination that injecting a satellite into orbit really didn’t require a human, and the Titan IV program was born.

The Titan IV was an unmanned space launch vehicle with flexibility to configure the payload to match that of the space shuttle. In other words, anything that could be launched on the shuttle could also be launched on the Titan IV.

The Air Force chose to automate the launch of the remaining satellites to resume the mission more quickly and to reduce the risk to human life going forward. People worked to prepare the satellite and rocket and then launch remotely, from a control room about 20 miles away. Future disasters would be costly only in dollars, not lives.

Jimit, what do you see as the lesson companies can take away from this story as they contemplate their automation strategies?

JA: Just because you have always done something a certain way doesn’t mean you shouldn’t challenge your assumptions. What might have been the only option at one point might be outdated; you should consider other technology solutions.

Assume that at some point something will go wrong. How long will your operations be shut down if the loss of human life is a part of an incident? Can you identify ways to eliminate or minimize the risk to people so your business can quickly recover?

Given the massive loss of jobs we are witnessing right now, on the surface, it seems a bit thoughtless to be considering navigation solutions for a crisis of the type we are experiencing that would result in the loss of additional jobs. It is actually a misconception that automation necessarily results in disadvantages for the displaced humans. That wasn’t the experience at Rio Tinto.

Rio Tinto is the world’s second-largest metals and mining corporation, producing iron ore, copper, diamonds, gold, coal, and uranium. I don’t know if you have ever seen pictures, but these mines are humongous holes in the ground; trucks are required to move the mined resources. It is a very dangerous job to drive these trucks and the mines are located in very remote locations. Not the ideal working conditions.

In 2008, Rio Tinto began deploying automation, in particular, a fleet of self-driving trucks to perform this dangerous task. This allowed them to run safer operations that were more efficient – self-driving trucks don’t get sleepy – and lower production costs.

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Photo credits: Getty Images

But what was the impact on the people? They were able to reskill, upskill, and redeploy their people to safer and higher-value tasks. This technology has enabled them to create new career pathways and with investments and innovation in training, they believe their adaptability will be a key factor of their longer-term success.

CE: As other companies are thinking about increasing automation, here are some of the people considerations they should take into account:

  • Ensure you have people to work on the technology
  • Consider the implications of a blended workforce – you don’t necessarily need to get rid of people. Use the technology to make them more productive if you plan on having a blended automated and human workforce
    Side note: when Henry Ford introduced the assembly line – a major new innovation of the time – instead of people losing their jobs, with the increased productivity, they were able to produce cars at a lower price point that led to an expanded market for cars. He ended up hiring more people to keep up with the demand.
  • Train people for their new, higher-value jobs

Digital Reality Check Points

JA: Humans ought to matter to business as much as costs do. We can take a few lessons from the past that provide a guidepost on how protecting your people is protecting your business. As we do every month, we’ll share three of these lessons, our Digital Reality Check Points, that you can apply to your business.

  1. Understand the tasks in your business that are dangerous for humans to perform and determine whether there is an automation or other technology solution to protect them.
  2. Plan for humans to work alongside any technology solutions you deploy.
  3. Seek opportunities for your more efficient automated and human processes to be leveraged as an advantage in the marketplace.

Please check us out at www.everestgrp.com, or follow us on LinkedIn at jimitarora and ceciliaedwards. If you’d like to share your company’s story or have a digital topic you would like us to explore, reach out to us at [email protected]

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Customer Expectations Are Changing Everything We Know About How Business is Done | Blog

There is no business we can think of that is immune from the shifting demands of consumers in our digital world.

I was recently doing working with a 125-year-old insurance company headquartered in the American Midwest to develop a digital transformation strategy. As with most insurance companies, its policies are sold through a network of financial professionals, who, in this instance, are predominately male, “middle of America” seasoned investment advisors. They have their ways of doing business that have worked for them for decades.

But here’s the challenge they are facing. Their customers are aging and, in a few years, their wealth will transfer to their children. Connections need to be made today with this generation of people set to inherit their parents’ wealth. Most likely, the old ways of doing business will not work with them.

One of the first exercises I performed with the senior executives of this insurance company was to ask them to individually share digital positionings of other companies that they admired and could be used as examples for their own transformation. In total, they provided 25 names with 11 of them being digital natives. The significance of this is that a group of senior executives of a 125-year-old, Midwest-based company competing in a highly conservative industry offered companies such as Amazon, Uber, and Zappos as ones they wanted to emulate.

The impact digital native companies are having on customer expectations is so pervasive in the marketplace that not even this group of conservative executives could escape it. Regardless of your industry, customers will expect a digital experience.

Elements of the pervasive digital expectations that are currently in the market include:

  • Anywhere, anytime functionality, including a fully functioning mobile-first user experiences
  • Minimal wait times with preferably near real-time processing of everything
  • Micro-customization of the user experience based upon data and analytics
  • Multi-channel communications
  • Self-serve service and delivery options

As you think about and plan your digital transformation journey, do not think you are immune from the massive shift in consumer expectations – even if you are in a B2B industry. The reality is that all businesses are filled with humans that consume goods and services in a digital marketplace every day. Once exposed, they cannot help but bring the same expectations of convenience, speed, and customization to all of their business and commerce interactions.

Digital Transformation ROI: How to Measure the Impact of Your Investments | Blog

Organizations around the world have invested millions of dollars on digital transformation initiatives. Yet, many IT leaders struggle to measure how well their companies’ digital investments are performing, and others see just a portion of the ROI picture because they only look at one or two parameters.

Here are Everest Group’s two key recommendations for how IT executives should measure digital transformation ROI.

Think and act like a mutual fund manager or venture capitalist

Mutual fund managers and venture capitalists view their investments through a portfolio lens. They look at the portfolio’s overall performance to understand how it is doing, recognize that underperformance of one stock or seed-stage company doesn’t signal overall failure, and make as needed adjustments to individual stocks or investments that are underperforming.

They also make sure their portfolios are comprised of investments with different risk profiles. This is because higher risk projects create the opportunity for higher returns, and deliver a lot of learning take-aways if they fail. Note that when it comes to measuring digital transformation ROI, IT executives need to look at overperformance as well as underperformance. If every project in the portfolio is deemed a success, the organization is likely not pushing the boundaries enough, isn’t innovating enough, and will likely only reap incremental benefits.

Define a clear set of business metrics before you measure

IT executives should define a clear set of business metrics for the digital transformation effort well in advance of the measurement initiative. The metrics should be rooted in a hypothesis about the various impacts the portfolio of projects will likely have on the business. While it can be difficult to link individual projects to outcomes, . Examples of hypotheses include:

  • Meeting customer expectation – as customer experience a more digital world, their expectations of how to engage with the enterprise will change. An hypothesis that keeping up with the evolving customer expectations could be that it will increase customer retention and potentially new sales
  • Breaking down the silos between IT and the business – secondments between IT and business units can increase and understanding of the links between IT initiatives and business objectives. An hypothesis could be that a greater understanding could enable faster innovation

Many IT executives err by focusing only on cost savings metrics. While the business case for technology projects must include cost savings, organizations that make strategic and operational impact their objective consistently achieve higher returns across all dimensions, including cost. In a recent Everest Group study on next-generation infrastructure, the 88% of the leading enterprises were able to achieve some level of reduction in operating costs from their infrastructure transformation efforts with 65% achieving reductions in excess of 10%. Only 29% of the rest of the study participants were able to achieve savings at that level.

Thus, IT executives should employ metrics that fall into three buckets. This ensures they are looking at the total value of the digital transformation initiative.

  • Strategic impact: revenue growth, increasing lifetime value of the customer, reducing customer acquisition costs, accelerating time to market of new products, etc.
  • Operational impact: productivity improvements, greater scale, operational efficiencies, etc.
  • Cost impact: reduced IT operating costs, reduced business costs, reduced total cost of ownership of IT assets, etc.

Once the measurement effort is underway, IT executives should regularly – quarterly tends to work best – look at every project in the portfolio for signs that it is delivering the anticipated type of impact, or is instead contributing in an unintended manner. This gives them the opportunity to determine if adjustments need to be made to how the project is being executed, if business requirements have changed (e.g. shifting customer demands, new competitive threat, etc.), if they have gleaned sufficient learning from the project (e.g. process optimization, technical limitations, success requirements, etc.), or to terminate the project it if they conclude it will not deliver results.

Please reach out to me directly at [email protected] to discuss how to measure the ROI of your organization’s digital transformation initiatives.

Digital Transformation: Five Steps to Better Metrics | Sherpas in Blue Shirts

Everest Group’s recent Enterprise Digital Adoption | Pinnacle Model™ Assessment suggests that the organizations that are having the greatest success in achieving outcomes from their initiatives have a focus on a set of success metrics the extend well beyond cost savings. They include a focus on things that are relatively easy to quantify such as reduction in process cycle times. However, they also include an emphasis of more nebulous goals such as improving customer experience, introducing innovative offering, and engaging in disruptive behavior in the market.

Measuring this latter set of goals is a far departure from the familiar service level agreements (SLAs) and key performance indicators (KPIs) that IT organizations and their internal business customers are accustomed to using to determine success. Not only are SLAs and KPIs insufficient to measure the strategic impact of digital efforts, they also fail to capture the real essence of what business customers desire. While every SLA and KPI can be met, enterprises on digital transformation journeys tend to find those metrics unsatisfactory.

Five steps enterprises need to take to establish a meaningful set of digital performance metrics

1. Ensure a clear set of business objectives have been established – an objective to improve customer experience is not a clear enough metric to guide a focused set of activities and investments in a digital effort.

Within the customer experience realm, an enterprise could focus on increasing the level of consistency of the experience. In this case, the digital effort may be around automating a set of processes to reduce the variability in results and decrease the dependence upon the knowledge and experience of individuals.

If the desired improvement is to create a personalized experience, the enterprise may be more focused on ways to leverage analytics to consolidate the customer’s activity with the enterprise, make recommendations based upon the behaviors of similar customers, and predict the likelihood of purchasing.

In addition to defining the objectives, a business value should be attached to each. What is the anticipated benefit to the business, in terms of dollars and cents, were the objectives to be met.

Related: See our latest research on digital transformation readiness

2. Develop a quantifiable baseline for the business objective – even with a goal as vague as improving an experience, enterprises who want to ensure their activities are leading to results will find a way to quantify them. For example, if you are trying to improve customer experience through consistency, you may want to measure and set improvement targets for the level of variability in the time to serve a customer or whether the customer experience is similar regardless of the channel through which the customer engages.

3. Track the progress of adoption – while getting a technology solution implemented or a new process defined is clearly the first step, enterprises that get results from their efforts also focus on the level of adoption. These enterprises understand that without behavioral changes to use the technology and follow the new procedures the value potential of the digital efforts cannot be realized.

4. Track the achievement of the quantifiable results – once it is clear that there is a high level of adoption of the technology and redefined business processes, enterprises can begin to track the achievement of the quantifiable objectives identified in step two. Until adoption is achieved, tracking these results is futile.

5. Determine whether the desired business impact is being achieved – a critical and oft overlooked step is to ensure the achievement of the quantifiable results is delivering the desired business impact. In the age of digital transformation, the level of certainty  in effectively achieving outcomes is much lower than in times past. Additionally, the pace of change is greater, meaning that an approach that worked last month might begin to lose its effectiveness this month. Enterprises that want to achieve business results are wise to continuously monitor the impact of their efforts on their desired business results and make the necessary adjustments to both technology and business process to sustain the desired business impact.

Even in the digital era, the adage that what gets measured gets done remains solid advice for enterprises interested in not merely engaging in digital transformation activities but in achieving business results.

With All The Talk of Transformation, Are RPA Projects Bad? | Sherpas in Blue Shirts

This past week, I had the opportunity to deliver a keynote speech at the Dallas RPA and Cognitive Summit that focused on the difference between digital projects (in this case, RPA projects) and transformations. In a nutshell, here are the key takeaways:

  • Your Why Matters: RPA implementation by itself is not a strategy but an enable of a specific objective(s) the organization is trying to accomplish
  • What you want to accomplish can be far reaching: The outcomes of your RPA effort have the potential to range from IT operations improvements, business efficiency, or improvements in the customer experience. The closer to the customer, the more transformative the effort is likely to be
  • How you choose to execute determines your impact: Since technology is rarely a barrier to success, the alignment of the business stakeholders, the cultural adjustments, and the approach to risk management will be the determining factors in the ability to scale and to capture the intended value

While my talk was purposefully focused on pushing the group’s thinking around transformation, the world in which most of the attendees current live is all about projects. The dichotomy between my focus and their reality led one of the attendees to ask whether projects were a bad thing and what they as mid-level manager could do to encourage transformation.

RPA projects are not bad

RPA projects are by no means bad or inferior to transformation efforts. In fact, most transformation efforts are implemented through a series of projects. However, it is important to know that projects implemented outside of the context of a transformation effort will have limited impact. It is perfectly acceptable to do standalone projects – just do not expect them to deliver results that will be significant enough for customers or the marketplace to notice.

On the other hand, understand that you cannot run a transformation as though it were a project and expect good results. Given the level of complexity and need for executive sponsorship, transformation run as projects usually do not scale well beyond the initial pilot, take excessively long to implement, and rarely achieve business impact. If it is a transformation, run it as such.

Use RPA projects to ready your organization for true transformation

Realistically, if your title is Director of RPA, Business Process Improvement, Operations Excellence, etc., the chances of you being able to initiate a digital transformation in your organization are slim. That is not to say, however, that you cannot have some influence on the organization through you work you do with your RPA projects.

RPA adoption is still relatively new and most business stakeholders are not familiar with the potential impact it can have, comfortable with the different type of risk it brings, nor aware of the level of effort required to use it for transformation. An approach that starts with a project focus that creates a pull in demand from the business side of the organization could be just the early experience an organization needs to begin to consider RPA and other automation technologies as a part of its digital transformation efforts company-wide.

View the full presentation.

How to Become a Digital Pinnacle Enterprise | Sherpas in Blue Shirts

Transformation goes beyond applying new digital technologies

In years past, in the midst of some hype and some reality, enterprises applied digital technologies to existing processes with the goal of reducing costs, improving quality, and increasing efficiency.

But today, digital native companies – such as Fin Techs, Uber, and Airbnb, with origins in the digital space – and traditional enterprises that rapidly moved towards digital maturity, are causing significant disruption in an already disrupted environment. Their successes are driving today’s enterprises to not only improve but also transform their businesses to deliver value to customers in completely new manners, at radically different price points, and at breakneck speeds.

As presented by my colleague Michel Janssen in his recent blog on Digital Pinnacle Enterprises, the enterprises that are more mature in their digital transformation capabilities have a far greater chance of delivering the necessary business outcomes.

Digital Pinnacle Enterprise differentiators

Interestingly, it is not the choice or implementation of newer or different technology that distinguishes these businesses. Rather, they stand out because of their moves to establish a more collaborative culture, their shift to embracing innovation, their clear approach to move past technology implementation to adoption, and their willingness to change core business processes. These leading companies realize that success in digital transformation is not an event, but a journey.

Executing on those differentiators – culture, innovation, technology adoption, and business model change – is highly complex, cannot be accomplished in one big bang effort, and is more time sensitive than traditional multi-year IT project plans allow. A journey carefully mapped out to efficiently accelerate the impact of digital efforts is required. Elements of this journey include:

  • Establishing a vision for where you would like your enterprise to be digitally. While it will be virtually impossible to predict the exact form it will take, you can well articulate the characteristics of your future aspirations. For example, you can determine whether you want to establish a micro-segmented customer experience, or be able to rapidly introduce products into the market that are responsive to your customers’ evolving desires.
  • Deciding on the priority elements required for your success and, informed with data, determining the characteristics of your target operating model. You will obviously need to make decisions regarding your required technical capabilities, but business process changes, and funding, adoption, and accountability approaches are equally critical to achieving your goals. Determining priorities will also provide guidance into which elements of your business require little change focus as they are anticipated to have minimal impact on your business results.
  • Building a journey map to close the gaps between where you are today and the priority elements of your target operating model. The focuses should be on delivering results as quickly as possible, and remaining agile enough to respond to the evolving business requirements.

Moving at the speed of digital is no longer a nice-to-have

Enterprises that are succeeding in today’s environment understand that their underlying information technology and business model approach must move at the speed of a digital world. They recognize they must be designed for a world in which customer demands are routinely and rapidly changing, and enabling technologies available to them, and their competitors, are evolving even faster. They are prepared to embark upon a journey whose destination is only partially known at any given time, and to shift approaches, as needed, along the way.

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