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Insights from the June 2017 Advanced Practices Council (APC) Meeting

 

ADVANCED PRACTICES COUNCIL INSIGHTS - JUNE 2017

 

So many of today's articles, blogs, and presentations at conferences focus on the strategy of
digital transformation - how to rethink your company's business model to leverage emerging
technologies and tools such as sensors, cognitive computing, and predictive analytics. We can
continue to learn from these successful examples as we explore ways to emulate their success
in our own companies. We hear very little about companies who didn't succeed, despite
innovative strategies, due to lack of disciplined and creative execution of the strategies.

 

At the most recent Advanced Practices Council (APC) meeting, IT executive members learned
from leading researchers about the latest thinking and practice in both strategy and execution
of digital transformation.


DIGITAL TRANSFORMATION STRATEGY

 

Cognitive Computing Strategies
According to Haluk Demirkan, organizations face three strategic challenges: inefficiency,
demand, and innovation. In the near-term, cognitive computing can improve asset utilization,
reduce operational costs, and improve working productivity, thereby improving ROI. The next
wave of cognitive computing applications can help create new products, services, and business
models. Demirkan described five strategies, beginning with those that address inefficiencies:
Tools: Intelligent tools can assist people to work more efficiently by collecting, packaging, and
transporting data. For example, Watson can identify cancer-causing DNA mutations much faster
than humans, resulting in faster decisions about treatments, insurance companies use smart
tools to predict fraud; and surgeons can operate remotely.


Personal Assistants: Siri, Cortana, and Google Now organize online documents, calendars and
emails; determine the best way to communicate with others; and automate legal document
review. Macy's provides a Watson-enabled shopping assistant to answer yes or no questions.
Collaborators: Collaborators alert humans to possible fraud, support smart call centers or help
desks, and provide personalized dashboards. Lowe's has an autonomous robot retail service for
its stores to help customers find what they seek.

 

Coaches: Coaches understand and help to solve problems. A robot suit analyzes and helps
improve a wearer's golf swing. The Oregon Track Club uses Watson to combine physiological
test data, biomarker data, and data on nutrition and sleep into an individualized training
program for athletes.

 

Mediators: Mediators elevate interactions between entities at multiple scales. For example,
John Deere, which originally provided machine maintenance services for its farm machinery,
created a digital product line with more intelligent and sensing farm equipment; remote
diagnostics and optimization services; and analyses of soil, plan, and equipment. This led the
company into a new market segment where it partners in an agricultural information service
marketplace.

 

Transforming for Digital Ubiquity
Domino's reformulated its strategy to focus on facilitating digital pizza ordering because of
consumer preferences. It built digital capabilities, mobile technologies, and analytics to
enhance innovation and meet consumer expectations regarding service, transparency, and
speedy delivery. By doing so, same store sales increased by 14%.


According to Karim Lakhani, digital technology is driving every company to become a software
and services company. To facilitate such a transformation, product companies must shift their
strategies to products and services, cultivate platforms and ecosystems, and develop new
revenue and business models. He cited GE as an example of this digital transformation strategy
at work. The current GE has transformed itself from one that produces advanced industrial
products and captures value through sales and service to a company that produces advanced
industrial products with sensors and leverages data analytics based on sensor data while
capturing value not only from sales and service, but also by getting a share of resulting
customer cost reductions and revenue increases.


DIGITAL TRANSFORMATION EXECUTION
 

Governing the New World of Analytics of Things (AoT)
Michael Goul developed frameworks for applying effective governance related to predictive
analytics for APC members. These frameworks address such governance issues as:


 Risks of outdated models and data
 Model update latency exposure
 Bad data risks
 Lack of employee skills to build Analytics of Things (AoT) solutions
 Adherence to data and analytical model contracts.

 

Goul extended his research to help CIOs manage emerging contexts in which ecosystems must
function with multiple stakeholders from different industries that come and go as "smart"
changes over time. Contracts are the glue that holds these ecosystems together in multi-tenant
platforms. Such contracts must address data and predictive model ownership and consider:

 

 Data exclusivity vs. non-exclusivity
 Co-mingling vs. no co-mingling of analytic models
 Data use after a data owner leaves a partnership
 Analytical model after a model owner leaves a partnership
 Duration and fixed monetary exchange
 Value-based compensation.

 

There are already a number of lawsuits related to data ownership in these ecosystems,
especially regarding indirect access to data. According to Goul, it is best practice not to own all
the data. Goul suggested that CIOs take a major role in guiding their organizations on data and
analytics sharing contract terms, helping stakeholders to understand that data sharing can
foster innovation and such ecosystems are more than the sum of their parts.

 

Building Operational Capabilities
Essent, a Dutch state-owned energy organization, was steadily losing significant amounts of
money until Patrick Lammers, Chief Commercial Officer, articulated a clear vision (becoming the
undisputed commercial leader) and a strategy for achieving it. He asked leaders to get on board
or leave. He then posed the following questions at regular leadership meetings to those who
stayed:

 

 What is your gap to target?
 What are the root causes?
 How much does each root cause contribute to the gap to target?
 What mitigating actions have you taken?
 When are you on target?

 

At the same time, Lammers expected such performance dialogues to take place at all levels of
the organization.

 

The new CIO, Hein Muskens, fired his department's 15 top managers, explaining, "The fish
smells from the top"; and then created a new organization with fewer layers. People were told
to apply for jobs in the new organization. About 40% of staff left.


Lammers set the expectation that all new IT changes should generate 375,000 Euros per year in
extra operating results or allow Essent to reduce five FTEs.

 

Crowd-powered Organizations
Dirk Ahlborn, co-founder and CEO of Hyperloop Transportation Technologies (HTT), described
the crowd-powered organization he has created to build a hyperloop that will transport
passengers from Los Angeles to San Francisco in 36 minutes. The crowd consists of passionate

engineers, designers, marketers, videographers, government transportation agencies, research
and development labs, universities, engineering firms, and citizens around the world. HTT is
structured around agility and teams. According to Ahlborn, there are huge advantages to having
distributed teams. By not expecting people to devote 100% of their time, HTT can attract better
talent who can learn from each other. The model works because many people want to be
entrepreneurs, but also need a day job.

 

Unlike traditional ventures, Dirk doesn't require large funding for salaries of full-time
employees. Crowd members use free or low cost software to collaborate and are compensated
by earned stock options as well as the excitement of working on a new venture.

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