Would You Follow This Advice?

According to a recent Harvey Nash / KPMG survey, businesses are increasingly looking to CIOs to improve customer experience and to deliver capabilities which grow new revenue from both new and existing customers.

At the same time Gartner is touting a model of 4 strategies to do this, summarised in the diagram below.

However, I have a problem with this as a strategic tool. To my mind, it is very bottom up and not very illuminating beyond stating the fact that you can exploit various tools. It does not actually connect with business value or scenarios that businesses may find themselves in. It would appear to drive the kind of thinking which says "I've got 4 hammers, what size nail do I need to solve this problem", rather than "what is the real problem? do we actually need to do anything? what are our options? how would we best address this quickly, to appropriate quality (& value) and can we do it economically?" Digital Strategy should be about "how do we deliver new and unique value?" not about "here's some solutions, let's find a problem to fix."

Aligning Digital Exploitation with Operational Capability

All Enterprises Are Not the Same

One of the tenets of Digital As Usual (DAU) is that most businesses are not pure play digital organisations. In almost all cases there are operations and activities which are essential to either fulfilling service or delivering a product which need to be managed as well. The Digital Adoption Framework assumes an Industry Categorisation Model as illustrated below.

The Industry Categorisation Model identifies 5 Categories along a continuum of Industry Product Nature. At one end of the continuum are “pure play” digital organisations, whose products are Information and Content based. These consist of Market Platforms like eBay and Compare the Markets.com who provide a platform, through which other organisations and people sell their goods and services, as well as Publishers and Providers of Content who provide videos, e-books, podcasts, news, music etc. At the other end are Extractor and Grower type businesses, such as coal mines and cocoa growers who provide natural unprocessed products. Off course not all businesses fall neatly into just one category. A major energy company such as Shell or Exon may straddle several categories along an Upstream (exploration, drilling and extraction) to Downstream (transport, refining and distribution) activities.

So why is this important when thinking about digital businesses? Well each different type of business operates in different ways, has a different level of dependency on capital assets and has different opportunities for exploiting digital technology to augment its business model. Additionally, the whole concept of Lean Delivery via Design Thinking, Agile Delivery and DevOps may have different opportunities and constraints as well as nature of delivery in each category.

Some Examples of Exploitation

The diagram below looks at the potential for exploiting Artificial Intelligence (AI) technologies according to Industry Category.

The “X”s in the table represent significant opportunity for exploitation against a generic type of Use Case. So for example AI technologies (machine learning, visual recognition, natural language etc.) can be used to provide insight and learning in every type of organisation, but there is very little opportunity for them to add to “customer experience” in say mining or farming. Again there is huge potential to build AI capabilities into consumer products, e.g. Alexa in Amazon’s Echo, but there is little opportunity to enhance a product such as iron ore or tree trunks produced from a Natural Product Extractor or a Grower. 

Alternatively for IoT, see diagram below, the opportunities are pretty limited for an Information publisher, but there are many areas where a farmer could use it to track livestock and monitor soil conditions and crop conditions, as well as control assets such as vehicles and trailer equipment.

This moves us onto exploiting iterative approaches within an organisation. The other night I was talking to someone from a major pharmaceutical company. Drugs take years of research to identify promising candidates for a problem and to test for efficacy and safety, as well as meet regulatory demands. There is little opportunity to exploit Iteration in this type of product development. But for the company overall, there are opportunities around internal processes and with Agile Marketing.

Agile Marketing is a growing area of adoption within industry and works well for consumer driven businesses. At its core is the use of small integrated product teams which focus on market research, product promotion, delivery of marketing and promotional materials, advertising and the information analysis systems used to support marketing data analysis. These teams tend to work in multiple sprints testing out marketing promotion hypotheses and rapidly identifying which approaches produce optimal results, to improve overall revenues. 

Iterative development also its quite different for delivering an oil tanker or a film, to the development used to support a consumer service. In the case of the former, iterative design, development and continuous testing techniques are used to deliver a single integrated complex product over a period spanning many months if not years. In the latter they are used not just to deliver the product, but to continuously keep it fresh, up to date and moving ahead of competition that is playing catch up.

So it's important not to adopt a one sized fits all approach, but to really get down to what can work for your organisation. This is part of what I talk about in my book.

DevOps 2018 Report

Puppet has published its 2018 State of DevOps Report. This year they have examined the premises on adoption and confirmed that most successful adoptions follow a project by project approach, with a single project pioneering the way and gradual cross poliantion of practice whilst it is matured.

The project focuses on 2 aspects of adoption:

• CAMS - Culture - Automation - Mearsurement & Sharing

• a 6 layer maturity model from 0 to 5, which broadly follows a simplify and Standardise Approach, Followed by Process Practices, then Automation and finally Self Service capabilities.

One of the themes of the report is the gap between teams practicing DevOps and Senior Management. It still appears that DevOps adopters continue to struggle with cultural aspects associated with empowerment and reporting.

Anyway, for anyone interested in the Lean Aspects of Digital Business Models, this is essential reading.

Ethics Takes Centre Stage

Last night I attended an event where Ann Roberts of Badoo and Nick Lisher of Nextdoor were discussing the meaning of enterprise values and their application to governance for Digital Platform based enterprises.

In the wake of the various regulatory issues that Facebook has had with Data Privacy legislation in Europe and Uber has encountered with employment law and regulation of taxis in a number of countries and cities, including London, this was a highly relevant discussion. It was pparticulalry refresshing to hear Nick Lisher say "I find GDPR liberating." as he went on to expound the fact that Nextdoor's values and approach meant that they had not had to alter or adapt their product at all to ensure compliance, which confirms assertions that I made in an earlier post that GDPR forces you to do the things that you should do anyway. It gives a great argument to persuade finance that it is necessary to pay for them.

All in all it boils down the the issue of running a digital enterprise as an ethical concern, which is a pre-requisite that I identified in "The Way of DAU", my take on how to adopt a Business as Usual business model.

Digital Business models amplify the concepts behind customer care theory. Traditionally this has proposed that 70% of sales are repeat sales to existing customers and that it is roughly 10 times cheaper to do something to keep a disgruntled customer, by addressing complaints positively, than it is to gain a new customer. Also if you manage to delight a customer, he or she will tell 10 people and sell your company. If you annoy them, they will tell even more and damage your reputation. Badoo's business model actually relies on this, because if you successfully match someone up with another person, Badoo may lose them as customers, but they will tell everyone that it was how they met and sell Badoo positively. Conversely, there have been significant backlashes over how Facebook uses people's data, and recent slow downs in growth and consequent loss in market value, are not the first time that Facebook has suffere significant customer defections.

Google used to have a great reputation when everyone believed in its "Do no Evil" credo, but is gradually losing mindshare with significant portions of people as a result of failure to translate this into a positive corporate culture where ethical concerns are addressed and seen to be addressed by the people who work there, its customers and increasingly EU regulators.

However, whilst we were discussing this and what happens in many traditional PLCs, a penny dropped. It's not just the the Leaders of a digital enterprise who need to be focussed on instituionalising ethics as a core of company culture, but also the shareholders. The llatter need to align themselves with the long term view and how value is created. There's too much emphasis on quick results and returns and not enough on long term value and scalability. Ethics needs to be seen part of a digital business's scalability, not just the architecture of digital products and operational robustness.

Way of DAU Release 2

Release 2 of the Way of DAU has been released via Amazon and is available as a printed version here  and as an electronic version here. 

This takes into account feedback received for the MVP version and is now in a handier physical paper format.

I would like to thank everyone who took the time to provide comments and feedback.

The LinkedIn discussion forum can be found here if anyone has any constructive comments, suggestions or criticisms to help refine the next release of the book.

Lessons on Innovation

Apparently Singapore has been ranked the 6th most innovative county in the world. Recently 8 innovation leaders in Singapore were asked to share their thoughts and secrets on what works.

One of the strong themes which came out was how much the culture, perceptions and mindset of business leaders affects the ability of a business to innovate.

They used a number of approaches to over come this, e.g. by trying to adopt a learning culture, by evisioning the "bank of the future" or focusing on key objectives and KPIs the business wants to achieve and working out strategies to "move the dial". One company tries to find a unifying principle by exploring key leaders aspirations, fears and "journey" to find something that they all agree to be the guiding principle for their strategy.

The other key theme which came across was how much they relied on experimentation, prototyping and piloting to help align people and test hypotheses, proving what works and learning from failures.

This is a great vindication of the approach set out in the Way of DAU or Digital as Usual,

Enterprise Digital Adoption

Last Year's CIO survey by Harvey Nash and KPMG pointed to the resurgent role of CIOs in taking responsibility for driving enterprise digital agendas. This goes with rising acceptance and adoption of Digital As Usual (DAU) or Digital as the New Normal.

Yet a recent article from MIT Sloan business school (by Gerald Kane) pointed to the blindness that appears to exist in many large corporations. 4 times as many CxOs see the opportunities as those who recognise the risks that digital poses to them. They don't seem to recognise the competitive risks or the erosion of brand loyalty which is much more volatile amongst digital customers.

Interestingly enough, nearly 90% of CxOs appear to believe that digital disruption will affect their businesses, but less than 50% believe that their businesses are properly prepared to address the challenges.

So there is an apparent disconnection between CxO understanding and reality, when it comes to addressing digital challenges.

Another survey, this time from Deloitte, may provide some diagnostic context. This survey show that CIOs basically operate in 3 different modes: Trusted Operator, Change Instigator, and Business Co-creater. 55% are still locked into the Trusted Operator model, whilst a third claim to be operating in Business Co-creator mode. This number needs to double, if CIOs are genuinely going to help lead digital adoption.

In another diagnostic produced by the survey the top 5 priorities were listed (in descending order of priority) as Customers, Growth, Performance, Cost and then Innovation. Showing that priorities are starting to move towards a digital friendly model, but are not quite there yet. As TQM gurus such as Demming said, focusing on Growth and Cost above quality (which is not really mentioned) leads to higher costs and lower growth. Also, Digital Customers expect Innovation, Experience and Ethics above everything else. Note, previous surveys had put Customers lower down the priority list, so this does represent some gradual cultural progress.

Interestingly enough the survey identified a number of CIO capabilities as core to success: Strategic Alignment, Execution, Vision and Strategy, Innovation and Talent & Culture, which at least recognises the criticality of culture to positive digital exploitation.

Putting this together, what does it all mean. One diagnosis would be that existing enterprises will gradually learn to adapt, but they are not quite there yet. So whilst they will survive, they are still leaving room for innovative companies to enter their market places or create new market places and grow rapidly to become competitors. So the composition of the FTSE 100 and definitely the FTSE 250 is going to change significantly over the next few years.

The Way of DAU - The best a business can be

Just to let you know, The Way of DAU is now available from Amazon as a paperback. (click on Amazon to see) and the e-version should be available soon. 

This is a deliberately simple book on the quite complex subject of how to adopt a sustainable digital business model. It was inspired by my personal frustration with incomplete models and advice available for Digital Business.

Digital operations have now replaced traditional Business As Usual business models. The Way of DAU promotes 10 basic principles, an iterative Framework (the DAF or Digital Adoption Framework), and positive cultural values to achieve the behaviours needed in successful digital businesses.

The book is based on a mixture of personal experience (in an organisation struggling to reinvent itself) as well as collected best practices. The current edition represents an MVP version. I hope to collect constructive feedback via a LinkedIn Group to drive future releases of the book. (see: The Way of DAU Group ).

The Way of DAU - The New Digital Philosophy

For those of you who have come to accept that Digital has become the new normal, it it is not surprising to know that there is a new acronym DAU or Digital as Usual. This replaces the old one BAU or Business as Usual.

There is even a philosophy known as The Way of DAU (pronounced Dow). This is built around 10 guiding principles which encapsulate current best practice in the Digital world.

For those getting started, the principles are useful for driving adoption and practice of Digital. They are:

1.       Understand the Market;

2.       Identify what Changes Rewrite the Rules;

3.    Select High Priority Opportunities;

4.       Build Product Focused Culture and Teams ;

5.       Walk in your Customers’ Shoes;

6.       Embrace Opex;

7.       Go Lean;

8.       Cherish Information;

9.       Nurture Partnerships;

                    10.     Harness Fear of Obsolescence.

Although there is an assumption of a continuous iterative loop to be followed when applying them.

That's all for the weekend.