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Sep 18

Digital Initiatives Yielding Sour GRAPES? Gaps in Reality and Promises | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

GE’s search for a buyer of GE Digital, its apparent “non-core” business, and UBS’ sale of its Smart Wealth digital wealth management platform are causing the old guard to rejoice and claim that digital businesses are bogus and hogwash. Even Everest Group’s research suggests that 78 percent of enterprises fail to scale their digital initiatives, and don’t realize the benefits they envision.

It is easy to naysay the naysayers. But these developments do merit a discussion. Many enterprises are investing in digital transformation initiatives, and they have a lot to lose if they don’t do it well.

So, what is plaguing enterprises’ digital transformation agenda?

Not Moving the Revenue Needle

Most of the industrial enterprises we engage with as part of our research believe that, even in the coming two decades, 80-90 percent of their business will come from their so called “core” products. Though they acknowledge that their core products are not static and continue to be increasingly connected, software-driven, and service oriented, the incremental impact on revenue is not yet clear. Their business modeling and simulations provide numbers that are sufficient to fund digital initiatives, but are insufficient to move the revenue needle.

Digital Fatigue

Enterprises are realizing they have overdone some of their digital initiatives. Because business impact continues to be hazy, leadership is asking difficult questions. Our research suggests that 45 percent of enterprises fail to get funding for digital projects as the decision makers and purse string holders consider them vanity pursuits. Moreover, even strategic initiatives are struggling as the return on investment horizon is becoming longer as time progresses. Leadership is losing patience.

Challenges in CX to Business Attribution

Our research suggests that 89 percent of enterprises believe digital initiatives improve customer experience (CX). However, they struggle to attribute this improvement to business success. Therefore, business success becomes a secondary metric for such initiatives. Moreover, many enterprises confuse customer service – e.g., contact centers – with customer experience, which thwarts their ability to drive meaningful digital transformation.

We discuss another major reason for the gaps in digital promises versus reality in our research on digital operating models. Various enterprises assumed that digital transformation would create completely different businesses or business models for them. A prime example for comparison was about Google, a search and advertising company, getting into autonomous vehicles. Another was Amazon, an online retailer, getting into cloud services. These enterprises also assumed that they would disrupt their entrenched competition in their own and allied industries, just as Uber and Airbnb did.

Related: Important Lesson For Companies Undertaking Digital Transformation

However, I believe enterprises need such a dose of reality in order to separate the chaff from the wheat. As tech vendors, consultants, and system integrators brand everything digital, enterprises need a solid business case for digital transformation lest they spend precious money on worthless pursuits.

Enterprises’ needs of the hour are to develop a realistic digital transformation plan, rely on incubating multiple projects, be willing to fail fast, and leverage broader industry ecosystem. They must also remember that technology disruption always come with high risks.

Not acting is not an option, as the cost of doing nothing significantly outweighs the initial failures your enterprise may experience. Failing today is better than becoming irrelevant tomorrow.

What has been your digital journey experience? Please share it with me at [email protected].

Jul 02

How Insurers Can Close Their Digital Skills Gap | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Earlier this year, we conducted a research study on how insurance companies are faring in their digital transformation journey. Using our Digital Pinnacle ModelTM analysis framework – which assesses digital maturity – we evaluated 23 insurers that operate globally across 18 dimensions including strategy, innovation, process transformation, organization and talent, and technology adoption.

Our key findings included that:

  • approximately 70 percent of those we evaluated will increase their investments in digital technologies by more than 6 percent in 2018
  • although the digital budget is managed by the CIO and CTO organization, 45 percent of it is primarily influenced and led by the CMO, CDO, and business unit leaders
  • there will likely be a significant increase in demand for some the next-generation technology themes, including artificial intelligence (AI), cloud-based IT infrastructure, Internet of Things (IoT), big data analytics, and robotic process automation (RPA), across the insurance value chain.

While these findings all point to positives in the move to digital, insurers, just like companies in all other industries, are facing significant challenges in finding the right talent and skills to accelerate their pace of digital adoption.

In fact, more than 60 percent of the insurers we studied are facing this major roadblock. We mapped their digital adoption investments against the skills gaps and discovered that they’re in the red zone in cognitive and AI, IoT, RPA, and cybersecurity technology skills.

Now, consider the impact of these skills deficiencies. Cognitive and AI are the future of data and analytics, they will enhance the way insurers operate as well as reach out to consumers. RPA is creating impact by reducing the overall cost of operations, it will help drive significant bottom-line results for insurers. Lack of skills in these areas shall hinder the digital transformation journey for insurers since they are intertwined with each other. For instance, automation is expected to the bedrock for the increased adoption of cognitive technologies in insurance. The lack of cybersecurity skills will hamper insurers’ digital adoption efforts, as security is one of the key demand themes that will provide increased robustness and resilience to their technology architecture.

Insurance Firms' Digital Skill Gap

We recommend a four-fold approach for insurers to succeed in bridging these significant skills gaps.

Adapt

Insurers must adapt to the digital-first talent mandate by prioritizing digital literacy through investments in training, re-skilling, and up-skilling efforts. Insurers must harness the power of technology to bring about change in their business processes. Also, as the playing field in the insurance industry is rapidly evolving, business responsiveness and agility has become a focus area for insurers. Digital Pinnacle Enterprises™ in insurance have prioritized digital learning, and infused areas like intelligence, data, design, and agile with highly skilled resources. They are in a far better position to leverage the investments and manage the trade-offs required in the digital age.

Invest

Insurers must invest in building a talent pool ecosystem through acquisitions or partnerships with niche technology firms (InsurTechs), set up innovation labs, and solve problems using the wisdom of crowd through hackathons and crowdsourcing platforms. One good example of open innovation for lacking digital skills is Allianz offering parts of its Allianz Business System (ABS) through APIs to other insurance companies. Another is Lemonade’s launch of its public API, which allows seamless sales of insurance products on digital media. Still another is AXAs’ use of KASKO’s platform (KASKO is an InsurTech offering digital middleware services) for its travel insurance products, all of which have been branded under the AXA Travel umbrella.

Partner

Insurers need to partner with IT and consulting services providers, and staffing firms, to gain access to a pool of specific next-generation technology talent that will accelerate their time-to-market and time-to-digital-success. Many providers are investing in building solutions/accelerators and assembling digital adoption best practices to partner with insurers on their digital transformation journey. Because of their domain knowledge, the providers can also deliver significant support in identifying redundant processes that could help optimize insurers’ overall IT portfolio.

Cultivate

As talent with digital skills is in competitively short supply, tapping new university and college graduates with digital training is an important way for insurers to fill in gaps. In fact, insurers can partner with universities to drive research and innovation. For example, in 2017, Allstate Insurance Company partnered with the Intelligent Systems Laboratory at Stanford University to better understand the implications of connected cars and autonomous vehicles. Collaborations like these can help foster talent at a very early stage and deliver benefits later.

Digital talent is one of the critical prongs of a viable, sustainable, competitive digital strategy. It will drive the difference between the leaders and laggards, and the survivors and non-survivors, in the rapidly transforming insurance industry.

If you’d like insights on how mature your firm is on its digital journey, please feel free to reach out to [email protected] and [email protected].

Jun 01

Crucial CIO Skills for Digital Transformation Success | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

What do CIOs making the most progress with digital transformation have in common? They know how to nurture cross-functional collaboration.

All companies are vulnerable to the threat of a competitor’s ability to create new value for customers. That’s why most companies today are considering the opportunities for creating new competitive advantage through digital transformation and virtually all CIOs view digital transformation as a top priority. However, Everest Group’s Pinnacle Model research of more than 200 leading companies finds that only 10 percent of CIOs and their IT organizations are in a state of readiness for digital transformation initiatives.

Through our investigation into these companies’ digital journeys, we identified Pinnacle Enterprises – those that were best prepared for digital change and achieved superior business outcomes because of their advanced capabilities. The outcomes are compelling. Consider these examples:

  • In 86 percent of the Pinnacle Enterprises, the IT organization enabled the enterprise to serve a new market or new customer segment, versus 43 percent of the “unready” enterprises.
  • In 95 percent of the Pinnacle Enterprises, employee productivity increased between 10-30 percent, versus 54 percent of the other enterprises we studied.
  • Of the enterprises implementing Robotic Process Automation (RPA), the Pinnacle Enterprises achieved 4X more ROI (100 percent) than the other enterprises (40 percent) and achieved implementation 3X faster.

Our research also identified the enablers and capabilities of Pinnacle Enterprises to achieve desired outcomes and accelerate timeframes. A notable enabler: We found 95 percent of Pinnacle Enterprises (vs. 58 percent of the other enterprises we studied) built a culture that is effective in collaborating across functions in an organization.

Read more in my blog at The Enterprisers Project