Tag Archives: digital IQ

Winning With Digital Confidence

Today, if there’s a problem with the heat or hot water in your hotel room, you call the front desk and wait for maintenance to arrive. At some chains, you have the option of reporting the issue using a mobile device. But in the near future, many hotel rooms will be wired with connected devices that report potential breakdowns to maintenance and may even automatically fix them. For example, smart-building technology will turn the heat up when your app’s locator notices you are on the way back to your room.

Of course, such developments have significant implications for hotel staff. George Corbin thinks about them from a scientific perspective. As the senior vice president of digital at Marriott, Corbin oversees Marriott.com and Marriott mobile, and he is responsible for about $13 billion of the company’s annual revenue. He says the “skills half-life” of a hotel industry worker is about 12 years, at least for those working in conventional areas such as sales, operations and finance. In other words, if people leave jobs in these functions, they could come back in 12 years and half their skills would still be relevant. But on the digital side, the skills half-life shrinks to a mere 18 months, according to Corbin.

Virtually every other industry faces similar dynamics. Digital competency is practically mandatory in many sectors; if you don’t get on board, you’ll fall behind competitors that do. And yet the knowledge required for widespread digital competency is often in short supply, and the related skills in agility and collaboration are often difficult to achieve in large companies. In a few years, an 18-month skills half-life may seem like a luxury. As a result, many executives’ confidence in their organization’s “Digital IQ” — their ability to harness digital-driven change to unlock value — is at an all-time low.

That’s one of the main findings from the 2017 edition of PwC’s Digital IQ survey. We interviewed more than 2,200 executives from 53 countries whose companies had annual revenues of at least $500 million and found that executive confidence had dropped a stunning 15 percentage points from the year before. These company leaders said they are no better equipped to handle the changes coming their way today than they were in 2007, when we first conducted this survey.

Back in 2007, being a digital company was often seen as synonymous with using information technology. Today, digital has come to mean having an organizational mindset that embraces constant innovation, flat decision making and the integration of technology into all phases of the business. This is a laudable change; however, in many companies, workforce skills and organizational capabilities have not kept pace. As the definition of digital has grown more expansive, company leaders have recognized that there exists a gap between the digital ideal and their digital reality.

See also: Digital Risk Profiling Transforms Insurance  

The ideal is an organization in which everyone has bought into the digital agenda and is capable of supporting it. What does this look like? It’s a company in which the workforce is tech-fluent, with a culture that encourages the kind of collaboration that supports the adoption of digital initiatives. The organizational structure and systems enable leaders to make discerning choices about where to invest in new technologies. The company applies its talent and capabilities to create the best possible user experiences for all of its customers and employees.

Simply upgrading your IT won’t get you there. Instead of spending indiscriminately, start by identifying a tangible business goal that addresses a problem that cannot be addressed with existing technology or past techniques. Then develop the talent, digital innovation capabilities and user experience to solve it. These three areas are where the new demands of digital competence are most evident. They are all equally important; choosing to focus on just one or two won’t be enough.

Our findings from 10 years of survey data suggest the organizations that can best unite talent, digital innovation capabilities and user experience into a seamless, integrated whole have a higher Digital IQ and are generally further along in their transformation. Our data also shows that the companies that use cross-functional teams and agile approaches, prioritize innovation with dedicated resources and better understand human experience, among other practices, have financial performance superior to that of their peers. It’s time for company leaders to build their digital confidence and their digital acumen; they can’t afford to wait.

Getting Tech-Savvy

“We are now moving into a world with this innovation explosion, where we need full-stack businesspeople,” says Vijay Sondhi, senior vice president of innovation and strategic partnerships at Visa, drawing an analogy to the so-called full-stack engineers who know technology at every level. “We need people who understand tech, who understand business, who understand strategy. Innovation is so broad-based and so well stitched together now that we’re being forced to become much better at multiple skill sets. That’s the only way we’re going to survive and thrive.”

In the past, digital talent could lie within the realm of specialists. Today, having a baseline of tech and design skills is a requirement for every employee. Yet overall digital skill levels have declined even further since our last report, published in 2015. Then, survey respondents said that skills in their organization were insufficient across a range of important areas, including cybersecurity and privacy, business development of new technologies and user experience and human-centered design. In fact, lack of properly skilled teams was cited this year as the No. 1 hurdle to achieving expected results from digital technology investments; 61% of respondents named it as an existing or emerging barrier. And 25% of respondents said they used external resources, even when they had skilled workers in-house, because it was too difficult or too slow to work with internal teams.

The skills gap is significant, and closing it will require senior leaders to commit to widespread training. They need to teach employees the skills to harness technology, which may include, for example, a new customer platform or an artificial intelligence-supported initiative. They will also need to cross-train workers to be conversant in disciplines outside their own, as well as in skills that can support innovation and collaboration, such as agile approaches or design thinking. Digital change, says Marriott’s Corbin, is driven by using technology in ways that empower human moments. “Rather than replace (human interactions), we are actually finding it’s improving them. We need the human touch to be powered by digital.”

One way that companies can accomplish these goals is by creating a cross-discipline group of specialists located in close proximity (we refer to this as a sandbox), whether physically or virtually, so each can observe how the others work. Such teams encourage interaction, collaboration, freedom and safety among a diverse group of individuals. Rather than working in isolation or only with peer groups, members develop a common working language that allows for the seamless collaboration and an increased efficiency vital to moving at the speed of technology. This approach avoids the typical workplace dysfunction that comes with breaking down silos: Because business issues are no longer isolated within one discipline but rather intertwined across many, colleagues from disparate parts of the organization are able to better understand one another and collaborate to come up with creative solutions.

Part product development and part project management, the sandbox approach enables your workforce to visualize the journey from conception to prototype to revelation in one continuous image, helping spread innovation throughout the organization. The culture of collaboration can speed the adoption of emerging technologies.

For example, this approach enabled the Make-A-Wish Foundation to bring employees together from across the organization, including some whose role in developing a new tech-based feature may not have been obvious, such as a tax expert and a lawyer. In just three months using this approach, the foundation created and operationalized a crowdfunding platform to benefit sick children.

Investing in the Future

At GE Healthcare, engineers are experimenting with augmented reality and assistant avatars. “Part of my job is to help pull in (great innovations) and apply them through a smart architecture,” says Jon Zimmerman, GE Healthcare’s general manager of value-based care solutions. “The innovations must be mobile native because … our job is to be able to serve people wherever they are. And that is going to include more and more sensors on bodies and, if you will, digital streaming so people can be monitored just as well as a jet engine can be monitored.”

Amid an increasingly crowded field of emerging technologies, companies need strong digital innovation capabilities to guide their decision making. Yet this achievement often proves challenging as a result of organizational and financial constraints. Our survey revealed that fewer companies today have a team dedicated to exploring emerging technologies than was the case in years past. Many are relying on ad hoc teams or outsourcing. Moreover, 49% of companies surveyed said they still determine their adoption of new technologies by evaluating the latest available tools, rather than by evaluating how the technology can meet a specific human or business need.

Equally troubling is that spending on emerging technologies is not much greater today, relative to overall digital technology budgets, than it was a decade ago. In 2007, the average investment in emerging technology was roughly 17% of technology budgets, a surprisingly robust figure at the time. Fast-forward 10 years, and that rate has grown to only about 18%, which may well be inadequate.

It’s time to change these trends.

You’ve identified a problem that existing technology cannot solve, but you shouldn’t just throw money at every shiny new thing. A digital innovation capability must become a central feature of any transformation effort. This approach goes beyond simply evaluating what to buy or where to invest to include how best to organize internal and external resources to find the emerging technologies that most closely match the direction and goals of the business.

Nearly every company is experimenting with what we call the “essential eight” new technologies: the internet of things (IoT), artificial intelligence (AI), robotics, drones, 3D printing, augmented reality (AR), virtual reality (VR) and blockchain. The key is to have a dedicated in-house team with an accountable, systematic approach to determining which of these technologies is critical to evolving the business digitally and which, ultimately, will end up as distractions that provide little value to the overall operation. This approach should include establishing a formal listening framework, learning the true impact of bleeding-edge technologies, sharing results from pilots and quickly scaling throughout the enterprise.

Perhaps most importantly, organizations need to have a certain tolerance for risk and failure when evaluating emerging technologies. Digital transformation requires organizations to be much more limber and rapid in their decision making. Says GE Healthcare’s Zimmerman, “One of our cultural pillars is to embrace constructive conflict. That means that when an organization transitions or transforms, things are going to be different tomorrow than they were yesterday. You must get comfortable with change and be open to the differing thoughts and diverse mind-sets that drive it.”

See also: Systematic Approach to Digital Strategy  

In a promising development, signs indicate that companies are starting to focus on bringing digital innovation capabilities in-house. According to the New York Times, investments by non-technology companies in technology startups grew to $125 billion in 2016, from just $20 billion five years ago. The Times, citing Bloomberg data, also noted that the number of technology companies sold to non-technology companies in 2016 surpassed intra-industry acquisitions for the first time since the internet era began. Walmart, General Motors, Unilever and others are among the non-technology giants that made startup acquisitions last year. General Electric, whose new tagline is, “The digital company. That’s also an industrial company,” spent $1.4 billion in September 2016 buying two 3D printing businesses in Europe.

Other companies are engaging in innovative partnerships. At the annual Consumer Electronics Show in January 2017, Visa, Honda and IPS Group — a developer of internet-enabled smart parking meters — teamed up to unveil a digital technology that lets drivers pay their parking meter tab via an app in the car’s dashboard. By “tokenizing” the car, or allowing it to provision and manage its own credit card credential, they essentially make it an IoT device on wheels. “The car becomes a payment device,” explains Visa’s Sondhi. “And taking it even further, we can turn it into a smart asset by publishing information that’s related to the car onto the blockchain. This can enable a whole host of tasks to be simplified and served up to the driver, such as pushing competitive insurance rates or automatically paying annual registration fees.”

Solving for “X”

At United Airlines, Ravi Simhambhatla, vice president of commercial technology and corporate systems, views digital innovation as a way to break free from habits ingrained in his company over nine decades because they are no longer relevant to its customers and employees. The company plans to use machine learning to create personalized experiences for its customers. For example, when someone books a flight to San Francisco, the company’s algorithm will know if that person is a basketball fan and, if so, offer Golden State Warriors tickets.

“What we have been doing is really looking at our customer and employee journeys with regard to the travel experience and figuring out how we can apply design thinking to those journeys,” says Simhambhatla. “And, as we map out these journeys, we are focused on imagining how, if we had a clean slate, we would build them today.”

With the right digital skills and capabilities comes great opportunity to improve the experience of both your employees and your customers. One constant that emerges from 10 years of Digital IQ surveys is that companies that focus on creating better user experiences report stronger financial performance. But, all too often, user experience is pushed to the back burner of digital priorities. Just 10% of respondents to this year’s survey ranked creating better customer experiences as their top priority, down from 25% a year ago. This imbalance between respondents’ focus on experience and its importance to both customers and employees has far-reaching effects. It creates problems in the marketplace, slows the assimilation of emerging technologies and hinders the ability of organizations to anticipate and adapt to change.

Part of the reason user experience ranks as such a low priority is the fact that CEOs and CIOs, the executives who most often drive digital transformation, are much less likely to be responsible for customer-facing services and applications than for digital strategy investments. As a result, they place a higher priority on revenue growth and increased profitability than on customer and employee experiences. However, user experience is also downgraded because getting it right is extremely difficult. It is expensive, outcome-focused as opposed to deadline-driven and fraught with friction.

However, unlike so many other aspects of technological change, how organizations shape the human experience is completely within their control. Companies need to connect the technology they are seeking to deploy and the behavior change they are looking to create.

Making this connection will only become more critical as emerging technologies such as IoT, AI and VR grow to define the next decade of digital. These — and other technologies that simultaneously embrace consumers, producers and suppliers — will amplify the impact of the distinct behaviors and expectations of these groups on an organization’s digital transformation.

Companies that focus too narrowly on small slivers of the customer experience will struggle to adapt, but overall experience-and-outcome companies that seamlessly handle multiple touch points across the customer journey will succeed. That’s because, when done right, the customer and employee experience translates great strategy, process and technology into something that solves a human or business need. You have the skills and the capabilities; now you need to think creatively about how to use them to improve the user experience in practical yet unexpected ways. Says United’s Simhambhatla, “To me, Digital IQ is all about finding sustainable technology solutions to remove the stress from an experience. This hinges on timely and contextually relevant information and being able to use technology to surprise and delight our customers and, equally, our employees.”

The Human Touch

When talent, innovation and experience come together, it changes the way your company operates. Your digital acumen informs what you do, and how you do it. For example, Visa realized back in 2014 that digital technology was changing not only its core business but also those of its partners so rapidly that it needed to bring its innovation capabilities in-house or risk being too dependent on external sources. It launched its first Innovation Center in 2014; the company now has eight such centers globally, and more are planned.

Visa’s Innovation Centers are designed as collaborative, co-creation facilities for the company and its clients. “The idea was that the pace of change was so fast that we couldn’t develop products and services in a vertically integrated silo. We want the Innovation Centers to be a place where our clients could come in, roll up their sleeves, work with us, and build solutions rapidly within our new, open network,” says Visa’s Sondhi. “The aim is to match the speed and simplicity of today’s social- and mobile-first worlds by ideating with clients to quickly deploy new products into the marketplace in weeks instead of months or quarters.”

See also: Huge Opportunity in Today’s Uncertainty  

Across industries, company leaders have clearly bought into the importance of digital transformation: Sixty-eight percent of our respondents said their CEO is a champion for digital, up from just one-third in 2007. That’s a positive development. But now executives need to move from being champions to leading a company of champions. Understanding what drives your customers’ and employees’ success and how your organization can apply digital technology to facilitate it with a flexible, sustainable approach to innovation will be the deeper meaning of Digital IQ in the next decade.

“It’s the blend that makes the magic,” says GE Healthcare’s Zimmerman. “It’s the high-impact technological innovations, plus the customer opportunities, plus the talent. You have to find a way to blend those things in a way that the markets can absorb, adopt, and gain value from in order to create a sustainable virtuous cycle.”

This article was written by Chris Curran and Tom Puthiyamadam.

digital IQ

3 Ways IT Spending Is Changing

The technological environment in which most businesses operate continues to grow more complex and competitive, at an ever-faster pace. It’s not just the competition from innovative, well-funded start-ups that causes upheaval. It’s also the response within established incumbents as they feel the pressure of digital technology. Three examples follow.

• New spending patterns. Budgets are shifting to reflect the new realities in IT: lower costs with cloud-based services, digital technology that permeates every aspect of the business and business leaders’ increased awareness of the art of the possible. Business units accustomed to depending on shared functional resources for, say, mobile customer apps now feel free to engage outside resources to develop their own. Departments can opt for pay-as-you-go collaboration services instead of investing in stand-alone systems, and functions such as marketing have their own tools with which to collect, analyze and act upon data. In 2015, the majority of technology spending (68%) came from budgets outside the IT organization, a significant increase from 47% the prior year. Although the democratization of technology across an organization is generally a good thing, it can have such unintended consequences as duplicative efforts, incompatible systems, inadequate attention given to cyber-risks and off-strategy investments.

• New digital leadership. Enterprise technology used to be the sole domain of the IT function, led by the CIO. Now there is a trend toward broader-based oversight. Some companies are expanding the CIO role to foster a more direct connection between technology and strategy. Other companies are creating a chief digital officer (CDO) or similar role to lead digital transformation efforts. In some companies, titles for leaders who oversee digital strategy include the chief experience officer and chief data scientist. This trend focuses C-suite attention on a company’s Digital IQ, which is valuable; however, it also adds to potential uncertainty regarding responsibilities and governance.

• A new digital debate. Every company has its own point of view about the value of digital technology and how it should be managed. Some of the executives we surveyed define digital as activities related only to the innovation of products and services. Others see it as integrating technology into all parts of the business. Still others say digital is merely a synonym for IT, and some use the term in reference to customer-facing initiatives or data analytics activities. Does this splitting of hairs over definitions really matter? It does if the CEO means one thing and members of the executive team hear something else, especially if it isn’t fully clear who is accountable for the digital strategy.

All this fluidity creates a considerable challenge for business leaders intent on capitalizing on digital technology. Thankfully, there are ways of raising your Digital IQ. You can integrate your digital strategy and business strategy, which means getting top leadership directly involved; you can redesign your innovation practices; and you can invest in a few critical forms of digital prowess, including data analytics, cybersecurity and the building of a digital road map.

This piece was written with:

  • Tom Puthiyamadam, a principal with PwC US, based in New York. He leads the firm’s management consulting practice. He also leads its digital services practice and oversees its Experience Center, which helps clients create next-generation experiences for their customers, employees and partners.
  • Chrisie Wendin, an editor and technology writer with PwC’s Thought Leadership Institute, based in Silicon Valley.

The Power of the Right Prototype

I’m a long-time advocate for leveraging prototypes and demos in the enterprise to explore ideas and emerging technologies. And, there’s a particular reason. It’s that precise moment during a prototype presentation when everything in the room changes. Eyes light up. People sit forward in their chairs. The conversation shifts from potential problems to possibilities. Executives become transfixed with ideas of transformation. The power of prototypes to persuade is undeniable.

The practice of prototyping has typically been isolated in certain pockets of the organization. However, as technology purchasing is distributed across the company, more executives can benefit from the prototype’s ability to put an idea or technology into the context of the business. Through a prototype, a technology once considered the latest consumer fad turns into a vehicle to advance enterprise innovation. Prototypes make a big, amorphous idea personal, relatable and feasible.

I was recently onsite with a client who was keen on prototyping, and the first question I asked was: Why? Not because I was skeptical that prototyping would work. Understanding the why behind a prototype is imperative for picking the right prototype for your project. Different business drivers demand different types of prototypes, and prototypes often need to evolve as the lifecycle of the idea or technology matures. Prototypes are more than rough first productions of an object. Prototypes span the dimensions of physical, high-technology and digital and can take various forms; even a workflow diagram can be considered an early prototype.

Prototype-table

For example, PwC used digital story telling via video to communicate our vision of the future of shopping as well as to portend the potential impact of wearables on the insurance industry. In this case, video was the most effective prototyping medium because the technology is already available in the marketplace. The impetus was more on inspiring executives to realize what is possible vs. testing the technology’s capability or feasibility. By contrast, when a client asked us to explore the use of sensors for increasing business intelligence, we built a smart refrigerator to test the feasibility and usability of the technological components in physical form, given that the Internet of Things is a nascent technology. A particular area of focus was exploring the transmission of data via the cloud.

Challenges With Getting Started

As businesses expand their prototyping programs, they will face challenges. Here are some of the obstacles they will need to scale.

1) New Skills. Prototyping requires a combination of creative design skills and rapid iterative development skills. Most companies have yet to cultivate these skills. Our 6th annual Digital IQ survey of nearly 1,500 business and technology executives found that only 19% of respondents rated the IT’s prototyping skills as “excellent.”

2) New Prototyping Processes. Traditional business processes like building a business case and determining an ROI don’t apply to prototyping. Businesses must find new ways to plan, fund and evaluate prototyping initiatives, such as the ability to identify the next new opportunity for growth, efficiency and effectiveness. How many ideas were generated, how many advanced to the next stage and how many ideas were taken to market?

3) A New Understanding. Executives need to understand why prototyping is vital in today’s fast-paced business climate, and the word needs to spread like wildfire across the enterprise. The good news is that it only takes one prototype presentation to turn someone into a believer.

Technology is touching every aspect of our lives, and businesses must constantly explore ways to better engage customers, employees and suppliers. Technology is moving too fast for companies to wait until a vendor hands them the next version of their product or service. Prototyping is no longer reserved for a handful of companies that are considered the kings of creativity. It’s necessary for all companies.