Highlights from a Recent APC Meeting (October 2017)
Advanced Practices Council members discovered additional ways of approaching a number of their current challenges:
How can we gain deep levels of customer insights that can lead to innovative systems and business models?
How can we organize to enhance agility, speed, and top-line growth?
How can we attract and retain young talent?
How can we make successful business cases for digitization projects?
As the application of technology comes closer and closer to mimicking human behavior, success will require deep knowledge of such behavior. Design thinking can help.
Clearly there are things we know about customers (e.g., products and services they buy) and things we don't know about them (but maybe don't have to). We need to recognize that our knowledge might not be correct or complete - and that can impede our ability to innovate. Design thinking can help if design teams immerse themselves in the client and customer contexts and bring significant levels of empathy to the immersion.
Empathizing is, in fact, the first step in the design thinking model created at Stanford University, where design thinking has become a specialty. Other aspects of the model are more familiar to designers: define, ideate, prototype, and test. But the importance of focusing on empathy first is the valuable new idea in design thinking. Empathy involves understanding and sharing the feelings and needs of others.
Tools for creating empathy include observing others, interviewing users, videotaping experiences, and capturing stories. When interviewing users you can increase the opportunity to develop empathy if you elicit stories. David Sutherland of the University of Georgia asked us to work in pairs, the first person using single words to describe getting lost and the second person telling a story about getting lost. The difference in empathy generation in the latter case was noteworthy.
Kelley Reed described her experience as part of a design team helping a grocery retailer find ways to leverage cognitive computing in order to stay relevant to an increasing population of millennial shoppers who have other sources of obtaining groceries and meals. In addition to other research methods, the team moved into one of the company's grocery stores so they were on tap to talk with and observe shoppers. They shopped in the store as well.
The results were very useful to the grocery retailer. It reduced labor costs by optimizing labor to reflect customer traffic patterns. It also increased top-line growth in several ways: by structuring incentives for customers who don't normally come into the store by offering experiences such as wine tastings; and by using a cloud solution that reduced IT staff and leveraged data to identify where investments could be made with greater potential for increasing revenue.
David recommended that development teams incorporate design thinking into their processes to ensure that customer experiences are fully understood, especially when looking for radical change in your users' behavior.
Double Exponential Organizing Opportunities
The combined capabilities of artificial intelligence and micro-services create new business opportunities that can lead to increased speed, agility, innovation, and top-line growth. Nigel Melville of The University of Michigan refers to organizations that leverage both capabilities as double exponential.
Micro-services are software networks that treat data and apps as publications to be subscribed to for re-use and recombination within and outside the enterprise on an as-needed basis according to pre-specified rules. New micro-services for internal and external customers can be generated quickly as and where they are needed.
Artificial intelligence (AI) networks, such as IBM's Watson, continue to become more intelligent over time. Wave 1 entailed using information and algorithms fed into the machine (e.g., early chess wins). Today's Wave 2 entails machine learning in real time. Current AI applications include natural language processing, speech recognition, simultaneous translation, autonomous vehicles, industrial internet (IoT), blockchain-based smart contracts. These applications learn by absorbing ever-expanding lakes of data. In wave 3, the output will not only be decisions, but also explanations of why the decisions were reached.
Amazon provides a good example of organizing around micro-services. Jeff Bezos mandated in 2002 that all teams expose their data and functionality through service interfaces (APIs) that were registered and findable by others. He insisted that these interfaces be the only way that teams, processes, functions, and external partners could conduct inter-process transactions and communications. AI modules used internally were opened to outsiders. These systems promoted reuse and supported more effective and less costly system development. And systems designed for internal use could be easily converted for external revenue-producing services, thereby enabling Amazon's $10 billion cloud services boom.
Siemens, a global supplier of energy metering, is another example of organizing around micro-services enabled with AI. Siemens recognized that customers with more information about their energy consumption may want enhanced abilities to control their energy use to leverage off-peak prices. To facilitate meeting customer expectations quickly, it created a center for enablement to support business units in writing their own APIs and services, a portal to make available services transparent by publishing functionality and interface specifications, and data management approaches to enable re-use and self-service by business units.
Recruiting the Next Generation IT Worker
The war for talent is intense, especially for entry level workers who are increasingly seen as the source for new ideas and digital innovation. Munir Mandviwalla of Temple University shared his research on 2140 graduates across 58 universities. APC members were interested to learn that the major factors that influence graduates to accept job offers are hiring process fairness, perception of job fit, and organization reputation. Least important factors include compensation. There was general agreement among APC members that carefully-organized and managed internships can be a powerful way to attract top young talent. In addition, they recognized the value of ensuring that the recruiting process is viewed by potential staff as fair. The discussion also highlighted the value of motivating millennials to accept offers by emphasizing the organization's purpose.
Framing Digital Investments in Terms of Capital Realization
IT executives are most successful when they successfully frame proposed investments in digitization. They start by framing the investment in terms of capital creation, the language of business. We invest capital, often economic, and convert it to other forms of capital that are valuable to the enterprise and its customers. Rick Watson, APC's research director, organized the many forms of capital into six useful categories:
Natural capital - natural resources, living systems, and ecosystem services
Economic capital - financial, physical, and manufactured capital resources
Human capital - skills, knowledge, and abilities an individual can use to generate income or other useful outputs
Organizational capital - institutional knowledge and codified experience stored in databases, routines, patents, manuals, and structures
Social capital - an individual's or group's social connections
Symbolic capital - the honor or prestige possessed within a given social structure; includes reputation, legitimacy, authority, status, brand, and rank.
Organizations create a competitive bundle of complementary capital and capital conversion processes. A car manufacturer offers economic, symbolic, and organizational capital for transport, prestige, and service.
New digital technologies have the potential to disrupt favorably an organization's capital creation system. For example, Goldcorp, a Canadian gold miner, opened access to 400 Mbytes of geological data (natural capital) and offered $575,000 in prize money to those who could provide a method to estimate the gold available. Responders identified 110 targets, which led to the mining of $3 billion worth of gold. The company's value increased from $100 million to $9 billion. One company used sensors to reduce electricity usage (economic capital) from 300 kwh to 100 kwh per m2. Other companies increase economic capital through electronic billboards that change the ad based on temperature and time. Amazon increases human capital through Amazon mechanical Turk and Apple pays EUR 0.50 per task to French freelancers to check the accuracy of map searches. Former President Obama enhanced his social capital through social media in 2012, doubling Internet users, growing Facebook users tenfold, and increasing tweets one thousand times. JPMorgan raised social capital by hosting a Twitter chat on careers and leadership.
Rick concluded by quoting Gail Fairhurst in The Power of Framing: "The primary work of leadership involves managing meaning through framing...The way leaders use language to frame people, situations, and events has important consequences for the individuals to make sense of the world and their actions." How you frame leveraging digitization to enhance desired forms of capital can help you to get desired approvals needed to thrive in a increasingly volatile and competitive market.