Author: MichelJanssen

2018: The Year When Faking Digital Won’t Work Anymore | Sherpas in Blue Shirts

Since the global financial crisis nearly 10 years ago, many enterprises have been riding high on the “free money” made available to them through endless central bank bond buying and low or even negative interest rates.

But there’s zero doubt that this capital bubble will burst. And as the flood of money recedes, some organizations that have been “faking” their digital transformations, i.e., taking a non-strategic approach to digital, will falter. Others will likely fail.

Does lack of a digital strategy really equate to such doom and gloom? You bet it does. Because digital isn’t just about technology. In fact, Everest Group’s definition of digital specifically looks beyond technology and focuses on how digital dramatically enhances the experience of users – customers, employees, and partners alike.

Need to be convinced of the importance of a superior digitally-based experience? Look no further than the alarming number of retail stores that have closed and gone bankrupt because they haven’t been able to provide an Amazon-like experience. Of course, it’s just not the retail industry facing challenges. True digital transformation is and will cause future disruptions in the healthcare, financial, pharma, and other industries.

Against that back-drop, here are my top five predictions for 2018, and what you should do to address them.

Top five digital predictions for 2018

  1. Digital agility will be the basis for competitive advantage: Your business value will increasingly come from making things easy, reliable, and fast for your customers. To win in 2018 and beyond, your focus must not be on the functional attributes of your product or service, but instead on the context for how customers purchases and use them, and how you manage their relationship and interactions with your company. These will be the critical proof points for building and sustaining customer loyalty.
  2. Delivering the right experience will become your organizing principle: The structural limitations of legacy organizational models – where functions and insights into customer needs and behaviors are fragmented and siloed – severely impact delivery of an enhanced customer experience. In order to effectively compete, you need to adjust structures, internal processes, incentives, reporting, and other levers to directly align to the customer experience. Imagine the impact if you took 20 percent of the team members in each of your functional departments and had them report to a newly-established customer experience department?
  3. Success won’t be about the information you have, but what you do with the insights: Your organization has most likely built and analyzed large sets of data about your customers, products, operations, etc. But data is only valuable if you take action on the insights you gain from the information. In the words of Jack Welch, former chairman and CEO of GE: “An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.” And, borrowing Nike’s trademark: “Just do it.”
  4. This won’t be your grandfather’s job: The increasing impact of technology and the acceleration of change will have dramatic impact on how humans are utilized and managed by companies. Success will mean increasingly virtualizing your employee and career models. These could take various shapes, including using talent free-agency models to staff initiatives, and replacing the concept of a career path with skill dashboards whereby individuals accumulate related sets of experiences and expand those experiences into new areas.
  5. There will be seamless interaction between humans and automation: Don’t fret about the FUD around automation replacing human workers. RPA, analytics, and other new technologies are accelerating the need for humans to evolve their roles and skills, which means less effort on collecting and manipulating information and more focus on identifying insights, understanding needs, developing new ideas, and applying judgment to make decisions. Empowering your employees with knowledge on how to use these new technologies for higher value activities will provide you with a distinct advantage over your competitors.

Three no-regret actions to ensure you aren’t left entirely behind

  • Understand beyond your immediate competitive landscape. You can gain all kinds of gems and jewels on how to leapfrog the competition from businesses in sectors other than your own. Make the ask of enterprises you respect: most are generally willing to share, as long as you are too.
  • Get your digital technology degree. Educate yourself on how available technologies can be applied to competencies, processes, and activities that are relevant to you. What types of problems do they help solve? What are the new tools in the tool box, and how can they build upon each other?
  • Don’t go it alone; invite your friends. Every one of my above predictions have big implications that go well beyond one function or process. They’re enterprise-level initiatives that need the collective to succeed in a meaningful way. Silos need to develop a shared need and vision, which is generally the biggest barrier to fundamental digital change.

2018 may not be the year the money bubble bursts. But it is the year that you must make highly strategic digital investments. So, the question your enterprise should be asking itself is, “am I ready for it, or am I faking it?”

Three Characteristics of Digital Pinnacle Enterprises | Sherpas in Blue Shirts

Earlier this week, we announced our new Pinnacle ModelTM analyses, which provide deep research on the capabilities top-performing companies have leveraged, and the journey they’ve taken, to become the crème de la crème.

Now, to sate your bated breath, here are the results of our first analysis on organizations’ adoption of digital strategies and what sets Digital Pinnacle EnterprisesTM apart from their peers.

Many people equate the word “digital” with “technology.” In the consumer world, they might think about the cool new mobile phone they just bought, the home entertainment streaming device that’s on their wish list, or how to carve out the time before the end of the year to turn their abode into a smart home. In a business context, cloud computing, robotics for their factory or their business processes, or a new customer interaction application may come to mind.

But one of the key findings from this analysis is that technology in and of itself isn’t Digital Pinnacle Enterprises’ biggest differentiator. Rather, Digital Pinnacle Enterprises stand out for making a strategic impact through their digital transformation efforts. Their track record for accomplishing business outcomes such as disrupting the industry, improving customer experiences, increasing market share, and launching innovative products and services, were significantly better than their peers.

And the value their digital transformation projects deliver are measurable and quantifiable. For example, as I mentioned in my previous blog, one banking client reduced its customer onboarding process from 16 days to 9 minutes. A retailer reduced its SKU management efforts by 80 percent, while simultaneously improving accuracy. And a software company saw improved invoice processing that reduced direct FTEs by 67 percent, and decreased customer calls to the help desk by 20 percent.

Digital pinnacle enterprise characteristics
Our analysis showed three key capabilities that Digital Pinnacle Enterprises have leveraged to realize these types of outcomes.

  1. Culture: Digital Pinnacle Enterprises have invested extensively in adopting and embracing an innovation-focused culture. They have partnered in startups to source new innovation across their product and services portfolio, and established a centralized team responsible for sourcing ideas from vendors, startups, employees, and customers. Their peers did not.
  2. Technology adoption practices: Digital Pinnacle Enterprises have built management practices around the evaluation of new innovative technologies such as big data analytics, cloud, DevOps, cognitive computing, and artificial intelligence. Their peers did not.
  3. Process Re-imagination: Digital Pinnacle Enterprises have defined current and future states of key internal processes, and worked with their process owners to identify waste. And…you guessed it. Their peers did not.

Of course, technology is a required core of any organization’s digital initiative. But those that have reached the pinnacle have focused on the key capabilities required to achieve real, measurable transformation.

I hope this has given you some food for thought on how to elevate your company to a Digital Pinnacle Enterprise. I also hope you’re hungry for more, because over the next few months and quarters we’ll be discussing very specific disruptive digital technologies and other market hot topics in additional Pinnacle Model Analyses. Bring your appetite!

Global Services’ Pinnacle Enterprises – How Did They Become the Best of the Best? | Sherpas in Blue Shirts

Companies like Amazon, Apple, Disney, GE, Starbucks, and Tesla are considered by most as the best of the best in their industries. The ways they became the “coolest kids” are the stuff of business school case studies, countless news articles, and lunch room / board room discussions around the world.

Of course, there are many less iconic enterprises that have unlocked the performance excellence code. For example, a leading global bank recently reduced its customer onboarding time from 16 days to 9 minutes. Yes, you read that right…from 7,680 minutes to 9 minutes, assuming an 8-hour business day. Wouldn’t you love to know how it achieved that mind-numbingly positive business outcome, and how you could extrapolate what it did into your organization?

Therein lies the rub. You might read a case study that explains how it implemented an enterprise-wide automation platform that helped it transform operations. Seeing that automation was the core of its solution, you might access benchmarking studies to better understand best practices and how your business compares. Broadening your research, you might also access high-volume surveys that gather opinions and intentions on automation.

But none of these tools reflect actual performance or the capabilities this organization – or others achieving such remarkable results – has brought to bear to become the best of the best. They lack the insight you need to accelerate your impact in measurable ways.

We believe that to understand a topic, you need to directly compare and correlate business outcomes with the capabilities required to achieve those results. Our new Pinnacle ModelTM anayses do just that.

Pinnacle Model for Enterprises

The analyses paint a picture of the capabilities the “cool,” “it” companies – what we call Pinnacle EnterprisesTM – have leveraged and the journey they’ve gone through to realize superior business outcomes. They’ll arm you with the self-discovery of comparison that will help you design a change roadmap to be competitive today – and tomorrow.

Recently. we released a complimentary assessment of our first Pinnacle Model analysis results, which are for Pinnacle Enterprises adopting digital strategies. Spoiler alert: the capability that distinguishes the Pinnacle Enterprises from their peers isn’t their actual technology deployment.

And as 2018 approaches, we’ll use the Pinnacle Model to tackle other hot topics.

PS: For our service provider friends: When we talk about enterprises understanding their unique paths to accelerating their impact, I challenge you to think about how your differentiated capabilities can help accelerate the journeys of your clients and prospects.

Gazing into the Global Services Crystal Ball: Sometimes you get it Right, and Sometimes, Not so Much | Sherpas in Blue Shirts

When I visited India for the first time in the early 2000s, the country was largely unknown in terms of business. The airports were small and dingy. The upscale hotels were really nice but also scarce. That meant they could charge insanely expensive rates…I remember paying US$700 per night at the Leela Palace!

My U.S. colleagues and I were on a mission to visit largely unknown service providers like Infosys, TCS, and Wipro, all of which had around 10K employees. At the end of the trip, we concluded that this was going to be real, and big…very big.

So we, and the other industry analysts in the space, pulled out our crystal ball to see what specifics we could predict. How clear, or cloudy, were our sixth senses back then?

What we got right

We did well in this category. India, along with many, many other low-cost locations, is absolutely capable of doing the global services job with scale. It’s also capable of doing many sophisticated processes (full disclosure: we might have underestimated this one a bit.) And those “unknown” companies I mentioned above? They’ve become truly global players, by some measures even surpassing the original powerhouses like Accenture, ACS, CSC, EDS, IBM, and HP (many of which have already consolidated).

What we got wrong

While inflation slowed in the U.S., it did even more dramatically in recent years in India. This, in turn, slowed the arbitrage difference, creating relatively smaller impacts on our models. And currency moves – such as a change from around 45 to 64 rupees – created a large positive impact, offsetting inflation by roughly 50 percent.

What we got really wrong

Labor supply was the biggie. All of us in the analyst community completely underestimated the impact of the available supply, which created an ongoing downward pressure on entry-level salaries. Using the best available data, the number of college students in India has risen from 13.6 million in 2008 to more than double that (28.5 million) in 2016.

While we didn’t predict it in the earliest years of the global services industry, by the end of the 2000s we were forecasting the end of labor arbitrage. India salaries were rising at double digit rates, and it seemed that it was only a matter of time before we reached parity (for offshoring purposes, 70 percent of U.S.-based salaries was considered parity.) As you see, we were miles off on that one.

What we got really wrong | Supply of labor

Increased labor in India as well as other locations have ensured limited salary increase, especially for junior roles

Future of Global Services

Looking forward (through our much more mature crystal ball) on the cost question

  • Temporary shortages of key skills, particularly digital, will create upwards pressures on salaries. But as the education and corporate systems retool their training curriculums, I expect the resulting surge in available talent will allow a cap and perhaps drive down salaries. Still and all, India is still a viable place to get low cost labor, albeit not quite as good as it was 15 years ago. (Review our Executive Briefing, India Global Services Industry: A Look Back at the Last Decade and Our Future Outlook, to drill down into the supporting analytics for this analysis.)
  • Many functions and processes have reached an offshoring saturation point. This doesn’t mean a complete stoppage of work moving offshore, just that many of the big, concentrated moves have already happened.
  • New automated solutions like RPA are going to create significant process labor efficiencies, in turn increasing headcount pressures.
  • The tipping point in this equation will go back to the supply side, where the ongoing wave of college students will keep pressure on wage advances far into the future, especially for the entry level positions.

Gazing forward to at least a 2040 – 2050 timeframe, other low-cost locations such as eastern Europe may get tapped out, since they don’t have as large a stream of graduates as does India. So, I say: advantage to India in keeping the wages compelling with its tidal wave of ongoing supply. But the looming question will be, what to do with all of those freshly minted grads?

My next blog will tackle the interesting another aspect of my looking back and looking forward retrospectives: “Are the India Heritage Services the new Global Leaders? The answer isn’t obvious. Stay tuned…

An Outsider’s Inside View of the Global Services Industry: New Value Props, and Bots to Boot | Sherpas in Blue Shirts

Just a month ago I rejoined Everest Group as its chief research guru. And while I thoroughly enjoyed my stints as chief research officer at Market Track (a competitive intelligence firm for advertisers) and The Hackett Group (an intellectual property-based strategic consultancy and benchmarking firm) over the last 10 years, I’m feeling like a kid in a candy store in today’s digitally-oriented global services industry!

Here are my gut reactions to visits I had last week with two sell-side organizations.

Wipro

Wow, wow, wow.

That’s research speak for how I felt after the inauguration of Wipro’s brand new Silicon Valley Innovation Center on August 1. The Center, which Wipro bills as, “…state-of-the-art R&D and incubation hub, designed to develop and showcase next-generation technologies and solutions for enterprises” clearly displayed how much its value proposition has changed.

It wasn’t that long ago that Wipro and its peers were promoting savings, quality, and scale, along with a thin layer of industry expertise. Now it’s showcasing innovative solutions along a broad array of concepts that include the future of retail, banking, and healthcare, to name just a few.

It’s clear Wipro knows that the robots are coming, rendering its traditional proposition passé, similar to what EDS, CSC, ACS, and HPE experienced over the past 15 or so years. So will its ideas be enough to compete in this dog-eat-digital global services environment? It’s hard to say, but it’s certainly going to give it the old college try. We’ll update our thoughts in due time.

Automation Anywhere

No C3POs to be found, but I did see some game changers.

I took advantage of my time in Silicon Valley to stop by Automation Anywhere’s headquarters. And I was sorely disappointed when they didn’t show me a warehouse full of R2D2 and C3PO robots. Instead, they showed me an evolutionary capability that has reached a tipping point that should make enterprise executives do an immediate rethink of how they design their organizations.

I had a spirited debate with CEO Mihir Shukla and his team about how Automation Anywhere’s RPA-based solution will impact enterprises. Our mutual thoughts were that some will use it incrementally to create short-term savings and process improvements, but that really innovative executives will use it as one of several key tools to change the competitive landscape in their markets. For them, it will be a thing of beauty. For others? Well, let’s be positive.

Watch this space for some really cool fact-based insights that help differentiate the winner and loser enterprises over the coming months.

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