Tag: Digital Transformation

Existing ERP And IT Systems Constrain Collaboration And Productivity | Blog

The world’s businesses are moving into a deeper level of competitiveness and productivity. In the past, when we introduced sailing into the oceans, it improved trade, which resulted in a huge explosion in wealth. When we introduced the telegraph and phones into the world, it dramatically changed communication. When we introduced common accounting practices where we could professionalize the accounting function and rely upon a consistent way of record keeping, we thereby improved productivity. The next wave is where companies will share information across countries and organizational boundaries. However, this transition necessitates moving away from current IT architecture.

Read more in my blog on Forbes

Dilemma of Customers’ Increased Productivity or Service Providers’ Profitability | Blog

I previously blogged about the need for a new third-party services operating model that would be more productive and agile and focus far more on results. Though the industry was on the verge of moving to a new model, adoption was slow at first. Now, attraction for the move to a new model is picking up in the marketplace, but enterprise customers and service providers define expectations differently.

Read more of my blog in Forbes

Digital Reality Episode 15: Talent for the Future | Blog

This month’s podcast is all about the evolution of IT roles and the need for what we call Shift Right. In tech, we say Shift Left; when it comes to talent, three things contribute to the Shift Right: Right Scale, Right Skill, and Right Shape.

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Cecilia Edwards:

Welcome to episode 15 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.

When we were entering 2020 and talking about digital transformation, one of the biggest concerns that CIOs had expressed was their ability to get the right talent at scale and speed to support their transformation agendas. Pretty much every hot skill was in the red, based on our analysis, which looked at the demand-supply mismatch between the different skills across different geographies. And in a lot of these hot skills, such as machine learning, AI, and cloud, we saw that demand was exceeding supply by over 40% in select markets.

So, in this very changed environment as we close out the year, we’ve seen a few very different things play out. The one real thing has truly been that digital adoption has accelerated. And one of the things that we’ve always kind of spoken about is that technology is the relatively easy part of the change agenda. It’s the people part, be it the talent or the organization, which needs a lot more focus.

CE:

Right, the culture.

JA:

Absolutely. Absolutely. Any time you say, “Hey, technology is the easy part of digital transformation,” you get a funny look from the technologists. But if you talk to the leaders, you talk to the CIOs, they’ll agree with that. Maybe it’s because they don’t have to actually do it, but essentially it comes down to managing the people agenda, the organization, the culture, as you rightly said, Cecilia. And we see now more than ever before, just given the pace of change we are looking to drive to, the big demands on talent due to the scaled modernization efforts. And then also, if you think about the change that has happened in the operating model, in terms of how we work, where we work, all of this is truly emphasizing the need to look at talent in a fairly different manner than what we were at the beginning of the year.

Which is why today’s podcast is all about the evolution of the talent base, the evolution of the roles, and the broad theme is what we call shift rate. Again, in technology, there is a desire to do more automation, we call it shift left. When it comes to talent, we are saying, “Hey, let’s shift right.” So what do we mean by shift right? It’s building the right scale, it’s creating the right skills, and then defining the right shape of your talent model to really succeed in the talent transformation agenda.

Cecilia, I know we’ve spoken a lot about these three “shift rights.” So talk through the right scale pieces that you’ve been helping clients figure out over the last few months.

CE:

Okay, great. And for those of you who don’t know Jimit well yet, he loves alliteration. So, I will kick it off with our first “R.” so, here are some stats.

JA:

Cecilia, just one thing the “R” and “S”. So, right, right, right, scale, skill, shape. So, yes, I do love my three’s and the alliteration.

CE:

Seeing a double.

JA:

The double alliteration this time.

CE:

That’s right. So, here are some stats. According to a recent study, about 58% of organizations do not have sufficient internal resources to drive their programs. 58%. Furthermore, more than 90% are unable to source and train their talent on key next-generation capabilities. So, that whole model of on-the-job training and seniority, that’s kind of not working. So, these issues get further compounded by challenges related to attrition and project readiness or thinking about the time-to-value of these resources. So here’s where we see a pretty significant challenge in the current environment, and we think that coming out of this pandemic, there really is an excellent opportunity to go back and fix the scale issue at a time when the market’s not yet super hot.

So, some of the key things we see in companies looking to right scale their environments are these. First, they need to forecast the demand to get an objective view of the gap assessment and plan accordingly. That’s obviously going to be a little bit more challenging, but it’s a critical first step that they need to do in terms of right scaling.

Second, they need to create centers of excellence for the areas that are the hardest to find, and they need to drive the company’s recruiting efforts accordingly. You can no longer just have a, let’s say, fair recruiting approach or a generic model. You really need to focus on those areas that are going to be hardest to find.

They need to re-skill. Re-skill and not just replace. So, we’re going to capture this right skilling in a little bit, but you need to do some re-skilling.

You need to partner with the ecosystem. Academia is actually a great place to incubate and absorb talent for the future. I had a client last year who was in the middle of the Midwest, and you’re kind of going, “Where in the world are you going to get the talent?” And there was a school not too far from them. And you know what? They’ve had their best success by partnering with the local universities. So you to actually think about if you’re going to train up the people, why not train them in the skills that you need? So partnering with academia is a great place to do that.

For the remainder. They need to build a robust pipeline of services partners that can ensure that the talent is available and ready when the demand hits. So, there’s this whole piece around, make sure you know what you need, focus with the centers of excellence, think about re-skilling and not just replacing, and then find ways to create a pipeline that’s going to be helpful in your ecosystem. And then at the same time, go ahead and borrow skills from your partners. A group of service partners that can do that for you when the demand hits. So, that sort of helps you with the flexibility of demand that we all know is part of the current business environment.

JA:

Actually, I just have a quick question for you. So as you go back to that first thing, when you mentioned a forecasted demand, we’ve seen that the time horizon that people need to look at needs to change. So, traditional planning assumptions were for a one-year period. What are you seeing change there? Is that becoming longer shorter? What’s your sense?

CE:

We’re actually seeing this interesting combination. It’s got to be shorter, but it also has to be longer. So, weird mix. They actually are needing to still think through what the one-year and three-year plans are going to be, but that cannot be your demand forecast that you’re reacting to. You’ve got to pull that in into much shorter horizons, which is why, if you think about all of the things that we just mentioned, things like partnering with academia, that’s actually going to help you with a longer-term plan. It’s going to help you next year and the year after that, to make sure that you have a flow. If you think about connecting back into that pipeline of services partners, that’s going to help you with the things next month. And so they’re actually having to plan both time horizons, but it certainly, I think, more than ever before, the planning cycle on the shorter end is something that is going to be relatively new for most organizations. And they’re going to have to think about strategies a little bit differently.

JA:

Yeah, that’s a great point. I think what we’re truly seeing is this whole thesis of agility permeates every part of the IT organization.

CE:

Every part.

JA:

You’ve got delivery, you have agility in budgeting to make sure that you don’t create static one-year plans. And now you’re saying that, hey, you need that same agility as you also start thinking about building your talent pipeline.

CE:

Absolutely. Absolutely. So a great example of this right scale is the right scaling initiative of AT&T. It has a vision to change business from hardware to cloud and from a landline business to a mobile-first enterprise. So, the situation was that about half of their employees didn’t have the necessary skills to keep the company competitive. Those are some pretty big shifts. To move to the cloud, but even moving from a landline business to mobile-first, pretty big shifts, and they just didn’t have the talent. The cost of hiring new employees was greater than retraining the existing ones, and replacing workers meant making new ones learn the company culture from scratch – that was going to be a really big challenge.

So, here’s what they did. They started a future-ready initiative where employees were able to get trained by web-based online courses on things like data science and cybersecurity and agility, all of these skills that were going to be necessary in this cloud-based mobile-first world. They developed an internal portal called Career Intelligence where workers could actually see the jobs that are available and the skills that were required for each and the projected salaries, and whether that area has a scope for future growth because what that did is created some incentive because you could see where the opportunities are and then take advantage of things like the future-ready program to train yourself up on skills. And you have a sense of not just why it was good for the company, but how am I going to benefit from it as well? Because I can look at where the salaries are and where the opportunities are for other jobs within the company.

And then the third thing they did was they collaborated with Georgia Tech to launch an online master’s degree program in computer science. So again, they were focusing on: I have a pool of people here today, I’m going to do what I can to re-skill them, work on the culture a bit to motivate them, and then think about longer-term how I’m filling that pipeline so that the marketplace outside of the organization, that those new people coming in would actually have the skills that they need. So there’s a little bit of a summary of our right scaling.

Jimit, do you want to talk about skilling?

JA:

I sure do. I think the last point you made about what AT&T did with Georgia Tech, it actually serves two purposes. One is you’ve got these programs that help you with right skilling, which I’ll get to in a second. But it also, in some ways, acts as a finishing school where maybe in the last semester, there’s a bunch of specialist courses that just make you AT&T-ready so that the company has to spend a lesser amount of time in the first six months to just onboard them on the things that matter. So bridging the gap between academia and business while the students are, are finishing school.

CE:

That’s a great point.

JA:

I’m a great fan of these collaborations between big business and academia. So, right, scale, and this is the one that actually gets a lot of attention, so I don’t think we need to unpack that too much. Most organizations that you speak to instinctively recognize the need to rescale, upscale, right scale. And what we are now seeing is a new set of operating models, which are causing us to redefine the existing job descriptions. And also new roles are emerging. In fact, in the same study that we’d completed earlier this year, about 67% of the organizations said that they expect new skill gaps to emerge because of structural changes in the business, given the current situation.

Let’s take networking as an area. It doesn’t get spoken about a lot, if you think across, everyone’s focused on the agile development on the cloud side, cybersecurity, underpinning all of this as the big network and, hey, we started talking about AT&T, so let’s stick to the team.

We place significant demands on infrastructure in a work from home environment.

And Cisco, for example, identified five new roles that are focused just on making sure you have resilient networks that are secure, that have the throughput to make sure that people stay productive. The one that I find the most interesting is the one called a business translator, and this role effectively takes the business need into a service level security and compliance requirements that can be applied and monitored across the network. And this is astounding. It’s starting to say that there’s a hierarchy of business needs and the network configurations that you need to support these need to be thought out and planned. That’s what that business translator is doing. I know we’ve had variants of this in terms of within your data center, you’ve got X levels of redundancy, but this is trying to create more granularity into that process.

Similarly, we’ve got new roles coming in such as a network guardian, somebody really got creative with these names, I must say. You’ve got a network guardian, you’ve got a network commander who centrally manages automation and orchestration processes to drive intent-based networking. You’ve got a network orchestrator, and then this is my favorite, truly is, you’ve got a network detective. So, what does a network detective do? They queue network assurance tools to ensure that the business intent we identified is being delivered and then work closely with the ITSM and SecOps teams to really identify if there are any places where, well, if it’s a detective if theft is happening in the network protocols, I guess.

CE:

Yeah. As you think about things like network, it’s one of those things that you mentioned that doesn’t get a lot of attention because you just assume it’s just the pipes and it’s taken care of. And I think that it highlights the need to really take a good, hard look at the kind of talent that you need because this environment that we’re in is making us rethink a lot of the things that we took for granted, and those things that were in place and worked extremely well in the old world now have different demands on them. And you just kind of highlighted a few of them, as people are working from home all over the place, you need to now rethink these things. And it’s not the exact same skill that was there before. This network detective’s job just got a whole lot harder with the entire workforce being distributed all over the world and in homes and in any kind of environment. So, definitely important to rethink all of the roles that you have in IT now.

JA:

Here’s the interesting part. What you see on the network side, you take that to applications, you probably have the best examples there. So, the traditional developer tester is becoming a full-stack engineer. You’ve got DevSecOps engineers. And here’s the part that I find the most interesting or frustrating as you start looking at the job requirements which are cookie-cutter, “Hey, I need Technology X, seven years of experience.” Technology X has been around for three years. So, that’s been the traditional mindset. Guess what? You aren’t going to find these people out in the marketplace. And what you really need to do is you need to take who you have right now, re-skill them to fill the gaps in their capabilities to become what you need. So, we’ve done a lot of analysis in terms of what are the best skill pairs. So, if you want to get to a network detective or a network orchestrator, the places where you will start is with your Cisco-certified network engineers. You just want to augment what they have and take it forward.

CE:

So, Jimit, let me ask you this. It seemed as though, not too long ago, we’ve been talking about talent for a while, that one of the themes was: it’s hard to re-skill. Who’s going to teach people how to do it? Where’s that coming from? Have you seen a shift, as we’ve been dealing with this challenge for a while, that there are more resources available to support this re-skilling?

JA:

So, I’d say there are more resources available. It doesn’t mean that it’s become any easier. And as you mentioned in the AT&T example, it’s always more expensive to replace versus re-skill with budgets being under the pressures they are, and only about to get worse. I just think that companies are getting more and more creative in terms of trying to do what they can with what they have versus just going out to look into the market.

CE:

I’d imagine that the online has become a much more acceptable form of re-skilling?

JA:

Oh, absolutely. And you know what? Let’s take an example from the most innovative company out there, which is Amazon. Most innovative, let me back that up, I’m sure I’ll get hate mail for saying that. But if you look at what they’ve done and to think of Amazon struggling with anything when it comes to technology skills comes as a bit of a surprise, but they’ve made a lot of progress in automation. Where they were lacking was in the areas of data science and solution architects of all things. So what did they do? They initiated the up-skilling 2025 program. So, that’s a five-year horizon to retrain the workforce, create a machine learning university. So, there you go. So, that’s an online program which allows people to do self-service, self-based training.

They set up an Amazon Technical Academy, which allowed people with non-technical backgrounds to take up more technology-centric roles, and then most important, and I think this is key to the success of this, is you create learning pathways, which are tailored to the … I wouldn’t say individual, in some ways they are, but you identify personas or archetypes. And then you make sure there are trainings and certifications which help you advance these capabilities. And at the same time, you link performance incentives, where it’s not a penalty, but you get additional growth if you keep progressing on those milestones as defined. So, they’re making it very easy and they also incenting the right re-skilling behavior because they know it’s cheaper for them in the long run.

CE:

Yeah, and I think in both of those examples, AT&T and Amazon, they have a combination of, I’ve got to put the training in place, but I also have to address the cultural component. I have to provide some level of motivation for the people in order to want to participate in these things. So, very interesting.

JA:

Absolutely.

CE:

So, should we talk about right shaping? That’s the third “R.” We see that the third turn that companies need to make is really to ensure that the shape of their workforce is aligned to contemporary requirements. So, that classical pyramid-based approach to services delivery and the commoditized role definitions is really giving way. And I think, Jimit, you mentioned this in an example, just a few minutes ago, it’s really giving way to that full-stack, multifunctional teams, which have both business- or customer-aligned pods that combine technology and functional skills and essentially collapse the previous pyramid structures.

So, I know that was a big mouthful. The takeaway is multifunctional, business-oriented. You’ve got to look at tech and function all combined. So, that whole pyramid structure is really giving way to product-aligned teams, with some companies creating DevOps factories or benches to manage all the different variances in demand.

Another very important dimension of the right shape is also in terms of how companies think of the transition from STEM to STEAM. So, there’s an extra “A” in that second one. The “A” in there represents arts and humanities. So, if we think about digital transformation as helping organizations create breakthrough impact in customer experience and user experience, non-technical skills start to have a really important role to play in the shape of the delivery organization. And so, all of those become really important. So again, you take the full-stack, multifunctional, business-aligned technology, functional product, and non-technical all working together in this very collaborative way that actually helps collectively deliver the talent and skills that organizations need.

JA:

You mentioned this before, and I think it’s important to underscore the point. The whole focus on culture is really key to making sure that the scale, the skill, and the shape really come together to deliver high performance. So, the terms you tend to hear a lot is this whole thesis of a high-performance culture. And again, anytime you get into some of these squishier aspects in a budget constraint environment, then you get a few of the eye rolls, but then if you go back and unpack, why are people really putting this culture in place? It is because it’s actually a very tangible ROI defined through better productivity, velocity throughput.

So, don’t let anyone talk you into, “Hey, culture can be relegated to the sidelines, not important. I’ve got a budget to meet.” The way you meet those budget numbers is by creating this high-performance culture. What research also shows is that the high-performance culture at a team level eliminates the rock star developer role, and then you find that the team always outperforms a collection of very capable individual contributors. So, some very profound implications of not just setting up the right talent model but also making sure that you have the culture backing it up to make this succeed.

CE:

Absolutely. Whenever I hear that conversation, I’m always reminded of the All Star games. I don’t think they’re very good. You get the rock stars from a bunch of different teams together and just throw them together, and there’s no magic because they don’t have a culture. They haven’t worked together. They’re not really a team and they all want to do the rock star thing. And I think that the teams that have worked together and create that culture and rely on each other and have the mix of skills all blended nicely, definitely have the opportunity to perform better.

So, this has been a really interesting year for talent development, from a position of demand significantly exceeding supply. We have some normalcy in the talent market and more talent is available now and organizations have that opportunity to shift right on their talent journey.

So, in every podcast we call out our lessons – we call those the digital reality checkpoints. So now, obviously, I have three again for us this month. The first is put the three-year roadmap in place to shift right. That’s right scaling, right skilling, and right shaping of your organization. You need to think about that long term, even though you have to act short term. So put that three-year plan in place. The second is emphasize a culture in the organization that rewards high performance teams and drives greater alignment between business and IT. And finally, define the skills passport and the learning platform to enable your organization to respond to the dynamic needs of the business environment.

JA:

Thank you, Cecelia. 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 @jimitarora and @ceciliaedwards. If you’d like to share your company story or have a digital topic that you would like us to explore through alliterations you can reach out to us at [email protected]

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Digital Reality Episode 14: Accelerating a Smart Recovery | Blog

In this podcast, we examine the approaches to post-pandemic recovery being undertaken by leading companies. We examine three key priorities in creating a future-ready operating model – smart savings, smart agility, smart resilience.

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Jimit Arora:

Welcome to the 14th 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.

As we rapidly march toward the end of 2020, we thought this would be a good time to focus on some of the shifts in digital transformation strategies that we’ve seen throughout the year and take a look ahead to the role that digital strategies are likely to play as businesses think about planning for the recovery from this crisis. So, let’s take a minute and step back to think about digital, kind of at the beginning of this pandemic.

During the second quarter of this year – probably March is a little early, we were just getting into it – but by the time we got to April, I think that’s primarily when the world recognized that we were fully in a pandemic. During that quarter, we were just entering it. We were making a mad scramble to figure out how to enable as many people as possible to efficiently and effectively work from home. And, really, that might be a little high of an aspiration just to be able to work from home and figure out how to serve customers remotely.

There were a number of digital strategies that were critical during that stage of the pandemic. Cloud-based SaaS solutions, especially those geared toward collaboration, such as Zoom. Right? I mean, that’s the big joke now, right? Everybody’s like, “Did you hear me?” Everybody’s kind of full of Zoom. So it’s Zooms, Teams and really the entire Office 365 Suite that allows you to collaborate on documents and collaborate with your teams. All of that was critical to keeping workers engaged remotely.

JA:

Hey, Cecilia, I can’t hear you … I’m just kidding.

CE:

I know. Are you on mute? That’s funny because I did check my mute button just right now.

Exactly. So, there’s a T-shirt that says you’re on mute. So to support their customers though, enterprises made sure that their e-commerce sites were functional and that they were able to handle additional capacity. So in general, during this time period, we saw that those who had already made the investments in their digital transformation and were further along in those journeys, those folks were able to better weather kind of this early stages of the transformation.

I think in one of our earlier podcasts, we talked about Domino’s Pizza – they’d gone on a 10-year transformation journey that left them really as an e-commerce company that happened to sell pizza. So, that entire decade’s worth of investment and transformation that that company went through meant that they were extremely well positioned to serve a socially distanced customer base during this pandemic – people who obviously still had a pretty high demand for pizzas to be delivered to them.

JA:

Let’s just say I’ve been indulging in a lot of e-commerce and it just happened to be pizza, right?

CE:

Exactly.

JA:

Yeah, I think we’ve seen a pretty significant shift. And one of the things that’s been interesting is we’ve spoken about how e-commerce is an important channel from a retail perspective. If you look across the manufacturers, the consumer goods companies, most of them have been kind of upping their game, driving more focus in helping their e-commerce partner succeed. Right? So the whole e-commerce thesis has definitely played out significantly.

One of the other things that we are seeing more as a lead indicator in some ways is that there’s a lot of transformation activity, which has actually accelerated? So most of the larger, smarter companies are doubling down on their efforts to drive transformation because they see this as a critical enabler not just for the short term but in terms of how the market has truly shifted. So, we’ve definitely seen a lot more progress over the last few months – 10 years’ worth of digital transformation in two months, I think that’s playing out quite well.

CE:

And I, for one, am very pleased because our team’s experience has improved dramatically over the past few months.

JA:

When you said teams, do you mean Microsoft Teams or do you mean people teams?

CE:

Probably a little bit of both but specifically Microsoft Teams.

JA:

I think the whole new way of working has been quite interesting, but just to kind of bring us back to thinking about the examples and how we’ve seen them, Cecilia, you spoke about Domino’s. Lululemon is another company that we spoke about and part of this whole journey has been to see how these companies we profile pre-pandemic, what have they done in a post pandemic environment? And if you think of Lululemon, the RFID tags that they put on all of their clothing, including all of the merchandise that was not just in their warehouses but also in the retail stores, this simple RFID tagging allowed them to shift order fulfillment for an expanded e-commerce channel, not just from the warehouse, but also from the retail store, especially in an environment where a lot of the retail stores were closed.

CE:

Yes, definitely Lululemon’s performance has shown it compared to other companies.

JA:

Yep. And if you think back, many other companies have scrambled to figure out how to truly enable their workforces to operate remotely.

The bare necessities were in place, but we didn’t really plan for this to be a sustained environment of remote operations because, hey, this wasn’t … I mean, nobody planned for how long this might go on. And as the pandemic has lasted far longer than the initial six to eight weeks we anticipated, we are definitely seeing a pretty significant financial impact, which in some ways begs the question of what’s really going to be the role of digital in the whole recovery process.

CE:

Yeah. And that’s interesting, you know, as we talk about recovery, there was a lot of debate. Are we in a recession? Are we not in a recession? Right? Because if you think about a typical recession, there are some business factors, the business cycle has driven the economy down. Well, we didn’t really have that situation. We just shut down the whole economy, which is a really different kind of situation.

JA:

And I think that’s a very important piece of context as we think through the role that digital needs to play in this recovery, which in some ways is going to be a bit of an abrupt one, right? And there’s all this conversation. Is it V-shaped? Is it W-shaped? Are we going to have another wave? We really don’t know, which is why what we wanted to do was to diagnose how you really create structural impact, which can not just give you some short-term relief, but also allow you to, in some ways, future-proof the operating model by leveraging digital transformation to ensure longer term success. So as usual, as we think about it, it’s always important to link digital efforts back to the business objectives. Cecilia and I always speaking about the fact that technology is the easy part of the digital transformation exercise but aligning the business goals is really important.

And what we do know from companies that performed well in the recoveries that followed the last two recessions is that there are specific strategies that deliver winning performance. And the companies that focus on nailing these three business objectives, which we are going to talk about in a minute, have the best chances of recovering well. And in today’s discussion, we want to call these three strategies, smart strategies. So the smart savings, the smart agility, and the smart resilience.

Start with smart savings. Yes, cost savings have been really important, but what are some of the strategies that can allow a company to change the longer term cost base that allows the business to emerge more competitive once we are on the other side of the recession? Last time, for example, we spoke about strategies for increasing productivity. This can have a significant impact on a company’s cost structure when you’re able to deliver more, faster, with less. If you expand that thinking to include efficiency and automation strategies, you start to unlock additional benefits and outcomes.

So, I think the broad message you’re trying to say is, yes, savings are going to be important. You do want to emerge leaner and more efficient, but don’t just think about savings in terms of, “Hey, what can I cut in the near term?” Think also about some of the more structural aspects, which allow you to emerge healthier. So some organizations think of this as an emerging fit for growth. We are an emerging fit for the future. So, it’s not just going to be a simple cut, but thinking about how automation plays in. Process automation, for example, can dramatically reduce the cost of operation, improve accuracy, also free up employees to do higher value activities. So yes, savings are going to be important, but there’s a smarter way to think about those savings. And the smart savings will allow these companies to grow without growing their costs at the same rate.

CE:

Yeah. You know, Jimit, I think that that’s really important because I think the knee jerk reaction of most enterprises when there’s a downturn in the economy is to cost cut. Right? And that’s kind of different than what we’re talking about with smart savings. Cost cutting, that whole idea of we’re going to stop all discretionary spending. We’re going to slash budgets equally across the entire organization. The studies that looked at the past two recessions show that companies that followed that strategy actually emerged from the recessions with the worst performance. They jeopardized their current customer experience and limited their ability to be prepared or ready to serve the customers in the future. Anytime you do a cost cutting measure that inhibits your ability to deliver value, that’s not smart. And so we like to talk about it as smart savings. And those things that you mentioned will actually result in a lowered cost base but will position you well kind of coming out of it.

So, let’s talk about smart agility. If there’s anything that we know is that we don’t know what’s coming up in this whole pandemic. We talked about agility before, but this level of uncertainty in the business market has really taken things to a new height. And the shifts in customer expectations in many instances can vary by week. And that wreaks havoc on a company’s ability to predict demand and channel engagement.

If you think about it a couple of ways, let’s talk about it from the demand perspective. Pants. If you’re an apparel manufacturer, you’ve got models that show based on the season, et cetera, what the demand for pants is going to be. Well, in the last nine months, that demand has plummeted. Lululemon’s doing well because people are looking for leggings and people are wearing sweat pants and things like that because so many people are working from home and dressing just the upper halves of their body for these Zoom and Teams calls that we’re on all day long.

And so that creates this real like fundamental shift. But here’s the deal. What happens when you lift the shutdown? What happens when people are asked to go back into the office? The demand for those pants is going to spike because, remember, we’ve all been eating Domino’s pizza for months so nothing that we have in our closet fits. So, we’re all going to have this huge spike in our business clothes. Right? And so how do you actually plan for that? Because they don’t know how long that’s going to be. They don’t know when it’s going to be. Companies are announcing every day that they’re going to extend work from home to the end of the year, to the middle of next year, or for good. So you have all of these things that really eliminate your ability to predict what the demand is going to be.

If you think about a physical branch of a bank, once this whole thing is over, who’s coming back into a bank? We just don’t know. And I think that a lot of those things around the demand are really going to be uncertain.

And then you have the channels. No one really knows what channel will be used. In the past, many businesses have looked at this kind of generationally. Oh, the boomers are all going to want in-person and we have to tailor to them, but gen X, Y, and Z are going to want to do everything digital. And it was believed that you just kind of slowly do the digital to handle that group as they start to have more buying power. And nobody expected the 60-plus crowd to be digital. Well, in this pandemic, kind of everybody is digital. All of a sudden, everyone has a demand for the digital channel. So that means that companies now need more mature omni-channel strategies. And they have to assume digital-first is going to be the priority across their entire customer base, because that’s the only thing that’s going to enable those enterprises to be able to handle the shifts in channel preferences more effectively.

Our third strategy is really around smart resilience. So, one of the scariest reports that I’ve heard lately, I think Dr. Fauci mentioned this, is that the Coronavirus may just be a dress rehearsal for future such viruses. If you think about that, like, “Oh boy, we keep talking about getting back to normal.” Well, back to normal might actually look a little bit different. Back to normal might actually look like some mix of what we’re doing today, in smarter ways hopefully.

So what that means is that we have an opportunity now to rethink what we know about business continuity. Jimit, you mentioned future-proofing a little bit ago. Future-proofing a business takes on a whole new meaning when the goal is to ensure that your business can keep operating at some level if the world shuts down again. So when we talk about this digital-first mantra, that has to be a must for as many portions, not only of the customer-facing part of your business, but for your business operations in order to keep your employees working through the next inevitable but unknown wave of shutdowns that we are most likely going to face.

JA:

Thank you, Cecilia. That last part really, really made my day. I needed that new report about all future viruses ….

CE:

Sorry about that.

JA:

I think you are spot on. That is that uncertainty is going to be the nature of how business models need to evolve. I think one of the things that we are starting to see, especially as we think about new budget cycles in the technology groups and the strategic planning season for most companies, it’s going to be an interesting year for strategic planning, by the way. What assumptions do you factor in? But the one consistent theme that we are seeing is what we call is the whole concept of “the genius of the AND versus the tyranny of the OR.” In the past when we were thinking about IT, there were trade-offs. So you could choose agility or savings.

You could choose agility or resilience, but one of the beautiful things about digital transformation and the structural changes you make to the cost profile is that you can actually get savings and agility and resilience and business outcomes at the same time. So, the one important thing that we want people to take away as we think through what’s going to happen in the future is don’t compromise. Don’t think of the assumptions as OR assumptions, because, done correctly, digital transformation can enable a lot of these AND attributes.

So like we do with every podcast, we talk about digital reality checkpoints. I already mentioned how the business planning process for 2021 is going to be unprecedented given all of the uncertainty. So, let’s talk through the major checkpoints that we wanted you to take away. One, continue the broader transformation journey for long-term success. Don’t put it on pause. In fact, if you can find ways to potentially accelerate it and see how you can support more immediate business needs.

Second, assume the uncertainty of 2020 will continue and use digital strategies to drive efficiency, productivity, and agility.

And then finally, let’s take the warning in good faith and assume that COVID-19 is just a dress rehearsal for the shocks that we are going to see in global events, which are going to create massive uncertainty and define the playbooks, which allow you to really create resilience in your business.

And finally, remember it’s an END, right? It’s not an OR, it’s an AND.

CE:

Great. Thank you for listening to this episode of Digital Reality. Please check us out at www.everestgrp.com.

 

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EmpowerCX 2020 | October 14-15 | Virtual Event

Everest Group CEO Peter Bendor-Samuel will deliver the keynote address at EmpowerCX 2020 virtual event hosted by Sitel Group. Peter’s keynote address is titled I Can’t Get No Innovation! in which he will discuss the past, present and future of innovation and its impact, why you should invest in it and what you can expect from your service provider as you move through digital transformation.

Learn more and Register

When

Thursday, October 15, 11:00 AM – 11:55 AM EDT

Where

Live, virtual event

Presenters

Peter Bendor-Samuel
CEO, Everest Group

Learn more and Register

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.

Read more in my blog on Forbes

How Changing Demographics and the Pandemic are Influencing Wealth Management | Blog

Millennials and Gen Xers currently account for a majority of the earning population worldwide. As a result, the largest demographic cohort looking to manage wealth or create retirement income is shifting from baby boomers to these population segments (see the exhibit below), which are generally more involved, aware, and digitally oriented than preceding generations. The new investor generations demand information at their fingertips, anytime, anywhere – something impossible to achieve with traditional wealth management methods.

Exhibit: estimated shift in wealth from baby boomers to Gen X and millennials from 2016 to 2046

estimated shift in wealth from baby boomers to Gen X and millennials from 2016 to 2046

The impact of COVID-19 on wealth management

The COVID-19 outbreak has brought some key challenges in wealth management to the forefront. First, it has highlighted gaps in traditional wealth management methods, accentuating the pressing need for digital transformation. COVID-19-induced restrictions have severely impacted agent availability and as well as customers’ ability to visit advisers. Firms that can leverage digital tools to balance business continuity challenges with customer expectations will be able to differentiate themselves from others in the current climate.

Second, revenue erosion resulting from the COVID-caused recession, combined with an increase in business costs, may drive consolidation in the industry, as smaller firms will find it difficult to stay afloat. We are already seeing a shift in asset classes’ preferences. High Net Worth Individuals (HNWIs) and Ultra HNWIs (UHNWIs) will be impacted, as the wealth managers’ diverse portfolios are impacted. More than half of respondents to a UBS Group AG survey of wealthy investors said they feared not having enough liquidity in the event of another pandemic, and a similar percentage expressed worry about leaving sufficient money to their heirs.

What wealth managers need to do

Wealth managers need to increase their focus on services such as workforce management, operations continuity, customer communications, digital, goal-based planning, and portfolio impact advisory to persist through the current challenging situation. At the same time, they shouldn’t lose sight of the perpetual risks to business, such as cyberattacks, money laundering, and other security threats. Wealth management firms will need to ensure – even in the absence of physical interaction and with limited agents – that leadership maintains the confidence of both customers and employees.

Digital will remain the overarching theme to address these challenges. In recent times, Business-Process-as-a-Service (BPaaS) for back-office operations and robo-advisory have gained traction, though the solutions’ scale and magnitude continue to remain low. While BPaaS helps firms bolster their critical operations,  technology leverage can be increased further via more digital products, automated cybersecurity systems, smart portfolio creation, trade analytics, and trade simulations for efficiency improvements, productivity gains, bandwidth creation, and customer satisfaction in the next normal.

As wealth management firms look to achieve these objectives, they will require support to quickly and efficiently adopt digital, set up the required infrastructure, move workforce interactions to virtual mediums, revamp operations and traditional workflows to minimize human intervention, and hedge location-based risks. They will have to carefully prioritize tasks and implement digital step-by-step, so as not to abruptly overhaul traditional methods and processes. For this, they could opt for off-the-shelf products or customized solutions, or choose an external provider to do it all.

To tide themselves over the crisis and prepare for what’s to come, we recommend that wealth management firms:

  • Instill confidence in their clients and employees and shield themselves against other risks to survive this unprecedented situation. It will also be vital to take additional precautionary measures to maintain investor confidence. Given investor loyalty to certain firms, it would be useful to focus on maintaining the customer base rather than acquiring new customers
  • Align themselves with and adopt emerging digital industry trends, including robo-advisory, automated workflows to close sales, remote due diligence, and subscription-based advice models
  • Ease the pressure on their bottom lines by focusing on reducing cost-to-serve; automating their middle and back offices could serve as a starting point
  • Continually assess their investment philosophies; while COVID-19 is a crisis like no other, firms must draw lessons from previous crises to diversify their assets and maximize their investments in passive funds that make reasonable margins

At present, digital transformation is no longer a strategy to cater to a specific customer segment but the very means to survive. It will help meet customer experience standards and preferences in relationship management, query resolution, and communication. For employees, digital tools will enable more robust decision-making and goal-based planning for portfolios, as well as help monitor them real-time to enable faster turnarounds and higher returns.

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.

Read my blog on Forbes

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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