Category: Digital Transformation

Digital Transformation Benefits Beyond Cost Reduction | Blog

This is an intriguing time for digital transformation. For the past few years, many companies held back in the extent of digital transformation they were willing to undertake because the change management effort was huge. But the COVID-19 crisis and subsequent recession changed that picture and companies now look to accelerate digital transformation. Why? Because digitized processes deliver robust value-creation opportunities that go way beyond cost savings.

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Integrating Customer Support Call Centers With Artificial Intelligence | Blog

Companies currently invest a lot of money in target markets to generate potential customers’ interest in products and services. But after they achieve a sale, they often frustrate customers by not providing effective customer service support. A poor customer experience can erode the company’s brand and reputation and destroy the company’s opportunities to increase revenue through new purchases by those existing customers. Obviously, these are significant problems, especially in today’s highly competitive environment with customers’ quick pace in buying decisions. Let us now explore the solution.

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Data Management: An Unwitting Game of Russian Roulette | Blog

I noted in several recent blogs that the COVID-19 crisis increased the need for digital transformation because the crisis brings new value-creation opportunities to businesses, and I explained how to capture those business advantages even in a recession. It necessitates implementing the right infrastructure – not just cloud and automation, but also a robust data management capability. Unfortunately, many companies accelerate digital transformation without a robust data management structure. Warning: Lacking this ability for data mastery, they essentially play Russian roulette with their business going forward.

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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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SLAs Constrain Improving Productivity | Blog

Three years ago, I wrote some blogs stating that Service Level Agreements (SLAs) are dead. Unfortunately for businesses, SLAs are still around – they’re like zombies. Companies realized for many years that SLAs don’t work. They are not just ineffective; they constrain companies from getting to their goals for services. But, like zombies, they did not die. Why? Because there was nothing better to use in governing service agreements. Until now. In this blog, I will explain what works better than SLAs, and why.

In digital service models, companies need to move to a new set of metrics. Metrics that focus on productivity. Metrics that focus on velocity. Fluid metrics that allow companies to adjust the target to a changing reality. Metrics that accurately affect pricing. Metrics that do not lock companies into old contractual vehicles that no longer work.

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How To Structure A Company To Use A Gig Platform | Blog

In my previous blog, I talked about companies needing to structure their IT organizations so they are leaner, more agile and able to constantly use the world’s best coders with the rarest and newest skills that are dramatically scarce. To achieve these goals, I explained that they need to consider using a gig platform as an integral part of IT.

In the blog, I explained the benefits, especially accelerating the rebuilding of a business in the post-COVID-19 world. However, companies must understand the challenge in embracing a gig platform at scale: they must first restructure their organization. Here is a look at some important considerations and what is involved.

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Using A Gig Platform To Access Key Skills In The COVID-19 Crisis | Blog

The COVID-19 crisis has resulted in a devastated economy. Executives are looking at their businesses from a recession and retrench mindset, knowing they need to preserve cash. That involves eliminating inefficiencies, and enterprise IT organizations have significant inefficiencies and redundancies. So, companies have laid off many programmers and IT professionals. While these lay-offs created a surplus of IT talent, there is a talent shortage of necessary skills. Despite the lack of skills, companies recognize that coming out of the crisis will necessitate becoming more agile and innovating faster. In this blog, I discuss a potential answer to this problem.

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The Transformation Paradox: Funding Digital Transformation | Blog

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.

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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COVID-19 Crisis Pressures Service Providers To Cut Prices | Blog

As individuals or as businesses, any life-changing event results in rethinking our position. In the case of the COVID-19 crisis, it will change the way companies conduct business for a long time, as the crisis revealed weak spots in business practices and investments. Moreover, as companies begin to exit the crisis, they move forward with a recession mindset. However, the global crisis also reveals business opportunities going forward. Let’s look specifically at two factors: working from home and discounts from third-party service providers.

Read more in my blog on Forbes

COVID-19 Business Crisis Proves Automation Matters | Blog

Consider what’s now happening at companies that made investments in automation and moving work to the cloud. They’re doing better than others in the COVID-19 pandemic. They’re more flexible under trying conditions. They’re more resilient to challenges. They are a bright spot in this awful crisis. The pandemic showed what companies invested in as preparation for challenges. Unfortunately, it also exposed companies that were less prepared. As I mentioned in my prior blog, the pandemic was like what Warren Buffet described as the tide going out, exposing naked swimmers. One fact that the COVID-19 crisis exposed is that automation matters.

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