ADVANCED PRACTICES COUNCIL (APC) INSIGHTS - JUNE 2022 MEETING HIGHLIGHTS
Advanced Practices Council (APC) members – senior technology and data executives across industries – met in Cambridge, MA in June to continue learning from exemplary researchers and practitioners (including themselves) on topics they voted as high priority for their future success.
The overall meeting theme was digital transformation, an overused term used more for marketing than elucidation. But even those with academic credentials differ on what distinguishes digital transformation from other IT-enabled transformations.
Digital-First Strategies Leveraging Digital Resources
According to Dr. Gabriele Piccoli of Louisiana State University, digital transformation can be a game-changer. It focuses on creating digital-first organizations that enable unprecedented levels of agility, responsiveness, and execution speed – all capabilities needed to gain and maintain organizational competitiveness. Digital transformation relies on creating, reusing, and recombining digital resources, which are modular assets or capabilities that are exposed via a digital interface. To succeed at digital transformation, an organization creates a digital infrastructure, architecture, competencies, and culture to support pervasive reuse and recombination of digital resources throughout the organization. Using these modular data assets requires minimal information about the assets’ inner workings so that third parties can use and reuse the assets without specific knowledge about their native technology, data architecture, or other structural elements.
Google Maps is an example of a digital data asset that exposes map data that is used by thousands of companies. Google sells ads served alongside mapping results or charges a fee each time Google Maps is accessed. Estimates are that revenue from Google Maps map will soon exceed $11 billion. Uber, one user, paid Alphabet about $58 million during 2016-2018 to enable mapping services reliant on Google Maps in Uber’s mobile applications. In 2020, the Google Maps modularity enabled five billion Uber trips.
BBVA, the global Spanish financial services group that offers diversified financial services to more than 70 million corporations and private customers in over 30 countries, restructured its internal services as digital resources. The center piece was Accounts API, a digital asset that exposes customers’ account and transaction data (e.g., debits and credits, their value, description, status) via a programmatic interface. Accounts API enables internal and external stakeholders to treat customer account data as a modular component. The data is accessible by simply conforming to the digital interface of the module, regardless of the location of the data. Previously, solutions providers such as mobile app designers had to establish ad hoc connections with legacy systems containing different aspects of the customer banking experience. Once re-architected as a digital asset, Accounts API became reusable internally and is now available to third-party providers upon customer request.
Auto Loan, another digital capability created by BBVA, is used to process car loans. Given information about a specific vehicle and buyer, it values the vehicle and credit risk of borrower. If it accepts the loan, it provides a repayment schedule. As a digital capability, it can be seamlessly orchestrated by such partners as car dealers, who want to integrate the loan application workflow into their offers.
Another example of digital transformation enabled by digital resources is McDonald’s meal preparation digital capability. The quick-service restaurant chain with 37,000 locations in 120 countries created corporate-wide meal-making digital capability for order taking and fulfillment via a digital interface. Each order, which goes to a cloud service customer built on AWS infrastructure, is evaluated and routed to the correct restaurant. The module manages all aspects of interaction with the customer (payment, delivery estimate). Specifications of the order are communicated to the appropriate restaurant’s POS system. This meal-making digital capability encapsulates assets that include software, physical (kitchen equipment), and human labor.
Digital First Strategy Enables Turnaround
Dr. Lynda Applegate of the Harvard Business School provided another example of taking a digital-first approach to transformation. Newsweek was on the verge of bankruptcy due to the collapse of print-only news subscriptions. Yet CEO Dev Pragad believed that Newsweek was poised to transform both the company and the industry. He announced a new vision for Newsweek – to put data and technology at the heart of the business and the newsroom. His digital first strategy encompassed producing the core product (content) for digital consumption (mobile and laptops) and distribution (on social media, search, and on newsweek.com).
Pragad engaged his people in defining a new vision, mission, and core values that emphasized the critical role of journalism, especially characterized by fairness and diverse views, in a democratic society. He and his new executive team identified three phases of action for Newsweek to execute with a digital first strategy: (1) pivoting to a profitable business model; (2) building an efficient and sustainable operating model; (3) building a loyal readership and brand based on trust, relevance, and uniqueness; and driving profitable growth through partnerships that helped launch new offerings such as Newspeek, Newsgeek, and World’s Best Hospitals as well as deliver quality recommendations to readers (via Google AI).
Monitoring the Digital Transformation Journey
Dr. Stephanie Woerner of MIT shared research that confirmed that companies that use dashboards effectively to monitor their transformations gain significant internal and business value. She presented Schneider Electric’s use of dashboards to monitor its digital transformation. Schneider, which provides automation digital solutions for efficiency and sustainability, created EcoStruxture, an IoT-enabled plug-and-play customer engagement system delivering energy efficiency as a service for use in places such as buildings, factories, and data centers. The EcoStruxture system translates data into actionable intelligence by collecting structured (from sensors) and unstructured (from logs completed by maintenance people) data from the set of Schneider Electric products at a customer site and analyzing the data. This produces a set of real-time instructions that the system sends back to the customer site. ExoStruxture and other capabilities have enabled Schneider Electric to move from selling products to selling more services.
Schneider recognized that achieving its transformation leveraging EcoStruxture required that everyone understand the organization’s goals, metrics, and business logic and how they fit together. It created the Digital Flywheel as a tool to help drive the transformation.
Digital Flywheel not only captures financial performance for the four components of ExoStruxture (connectable products, edge control, digital and software, and field services) individually and combined, but shows how the four components work together to produce higher value and sales for the company and increased value for clients, often measured as energy efficiency improvement.
Schneider learned several lessons in establishing effective dashboards: (1) combine both what the company should measure with the business logic of how the value is created; (2) use the dashboard to manage the company; (3) communicate to the entire company how to use the dashboard; and (4) automate, with drill-down capabilities.
Several conclusions can be drawn from our speakers and their research:
To gain and maintain competitive advantage might mean adopting a digital-first strategy even if you don’t consider your company a software company.
A digital-first strategy can enable agility, responsiveness, quick execution, and future-readiness.
Achieving digital transformation requires a different mindset, culture, structure, architecture, measures.
Focusing on your company’s customers and adopting a digital resource approach could lead to new products, services, business model – or modifications of current ones that add additional value.
Don’t forget the power of measurement.