In the new digital world, tech savvy board members are a competitive necessity

Since 2000, over 50 percent of Fortune 500 companies have been acquired, merged or declared bankruptcy. Any company that cannot or will not transform itself into a digital enterprise faces an existential threat to its existence. The unprecedented waves of disruptive digital technologies including social, mobile, cloud, data analytics and smart devices are redefining how companies engage with every one of their critical stakeholders. Simply put, go digital or go home.

The business landscape is littered with companies who either couldn’t or wouldn’t make the critical decisions to shift their business and operating models to accommodate a new wave of competitive challenges as shown on the slide below:

Is your company a digital leader or a digital laggard?

As I wrote in an earlier blog, the 2017 New Rules of the Digital Age report from Deloitte found that only 5 percent of the companies surveyed said they have strong digital leadership development programs and 65 percent said that had no programs to drive digital leadership skills.

To compete as a digital enterprise requires starting at the top with the CEO and Board agreeing on the right digital strategy for the company and a game plan to implement it. That being said, I found the results of a 2016 Deloitte board composition study very revealing and very troubling. The study documented that even among the highest performing S&P 500 companies less than a third have a technology savvy director as shown on the slide below:

Further the study highlighted that only 3 percent of all public companies appointed a technology savvy director to newly opened board seats in 2016 as shown on the slide below:

Analyzing these results makes a very compelling case for the vulnerability most companies have to digital disruptions that could diminish their competitive viability and ultimately undermine their very existence.

Building board level digital expertise

In a 2015 McKinsey survey, only 17 percent of directors said their boards were sponsoring digital initiatives and only 16 percent said their companies fully understood the impact disruptive digital technologies could have on the company’s performance. For example, it took P&G’s Gillette razor brand over two years of continuous market share loss to online upstarts Dollar Shave Club and Harry’s before they took corrective action.

These statistics underscore the glaring truth that most boards do not have the digital expertise to have meaningful discussions about how the company can and should prepare to compete as a digital enterprise. One challenge is that there aren’t enough “digitally qualified” directors to go around so companies need to look at other alternatives such as digital technology sub-committees and advisory boards as well.

Here are some suggested starting points to build higher levels of digital expertise on your company’s board:

  • Make digital transformation a regular item on the board agenda and use it to help educate board members as to the scope and disruptive impact digital technologies are having across multiple industries.
  • Take the board on a digital road trip to Silicon Valley and other centers of disruptive technologies. Schedule meetings with VC firms and digitally savvy companies so they can see and hear first hand the breadth and scope of these new digital technologies.
  • Start developing a new narrative for the investor community as to how the company will change the way it makes money in a digitally transformed economy. Digital startups are better at convincing investors to postpone earnings per share than well established companies with a long track record of quarterly earnings growth and sustainable dividend payments.
  • Conduct a companywide digital technology talent assessment to determine the current level of digital transformation skills and capabilities. Based on that assessment, gain the board’s support to develop a program to grow your digital expertise through new hires along with the training and development of current employees.

Starting the digital transformation dialogue with the board

There is nothing more compelling to start a new dialogue than an imminent threat to the very existence of a company like the moment Amazon bought Whole Foods or Uber and Airbnb changed the competitive landscape in transportation and hospitality.

Another way to get the boards attention is to provide a stark contrast between the performance of your company and a disruptive competitor. For example, Tesla’s market capitalization is roughly equal to General Motors even though its revenue is one-twentieth of GM’s. Tesla’s digital technology based business model continuously collects data from its vehicles and uses machine learning to improve predictive maintenance, self-driving capabilities and anything else that enhances their customers’ driving experience. Today a consumer can configure and purchase a customized new Tesla from the company’s website in eight minutes. Hopefully this subject matter is on GM’s board agenda today.

Here are a series of questions that I think can serve as a good starting point for a digital transformation dialogue with the board:

  1. How long can the company’s current business model deliver its desired business growth goals and financial results?
    • How sustainable are the company’s revenues, margins and net profits?
  2. How vulnerable is the company’s business model to being digitally disrupted?
    • How quickly could the company respond to this digital disruption?
  3. How well can the company leverage digital technology for increased competitive advantage?
    • How robust is the company’s digital technology pipeline?
  4. How open is the company’s culture to changing the way it does business?
    • How capable is the company at competing as a digital enterprise?

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

In the new digital world, is your brand well past its sell by date?


This October, Prophet, a global brand consultancy, released the results of its third Brand Relevant Index survey. They surveyed 13,500 U.S. consumers about more than 275 brands across 27 industries around four brand relevance measures: customer obsession, ruthless pragmatism, pervasive innovation and distinctive inspiration.

The top ten most relevant brands are: Apple, Google, Amazon, Netflix, Pinterest, Android, Spotify, Pixar, Disney and Samsung. The most obvious conclusion these results show is that all ten of these brands are “driven by technology.” As Scott Davis, Chief Growth Officer at Prophet said, “consumers live, work and play in a connected, digital world, so brands that deliver useful, easily accessible and enjoyable experiences are going to be the most relevant to their lives.”

By contrast some very big-name brands like Comcast, McDonalds, Ralph Lauren, Staples and United showed significant declines in the brand relevancy survey results.

Are you investing to drive your brand value and relevance?

A recent Gartner survey of 353 marketing executives in North America and the UK found that they had spent 22% of their marketing budgets on technology this year down from 27% last year. The report also found that marketing budgets have stalled in 2017 after three years of growth. As a percent of revenue, marketing budgets declined from 12.1% in 2016 to 11.3% this year. One third of CMOs surveyed said they expected their budgets to be flat or reduced again in 2018.

While many companies are investing in online and other digital tools, most have not developed a comprehensive omnichannel strategy to deliver great customer experiences over multiple customer touch points. Legacy marketing mindsets, just like legacy IT mindsets undermine the ability of companies to explore and experiment with all whole new range of digitally enabled customer engagement tools.

This speaks volumes to the necessity for CMOs and CIOs to breakdown the silos between their departments and work together to interconnect customer facing systems of engagement and systems of intelligence with the company’s internal systems of record. This triumvirate of systems should now become the top investment priority to drive brand value and relevance.

Millennials are re-defining brand loyalty

A recent study by Deloitte of over 1000 millennials in the US, UK, Italy and China found that 36% of them said they buy what they like regardless of brand. They are more willing to pay attention to brands that are more aligned with their personal values and the values of their social circle.

Brands that represent these new values should be:

  • Inclusive rather than exclusive
  • Individualized and personalized not generic
  • Self-expressive not self-absorbed or narcissistic
  • Democratic not elitist
  • Authentic and functional not pretentious and frivolous

The study identified a number of brands that have been successful in appealing to these new values including:

  • Interior Define – home furnishings
  • Knot Standard – men’s fashion
  • LVMH’s TAG Heuer – watches and jewelry
  • Shinola – watches
  • Canada Goose – men’s and women’s jackets

While millennials represent only one market segment, I think their attitudes, behaviors and actions are a strong future indicator of what brands have to do to deliver value and relevance in a digitally mediated customer engagement world.

How do you market your brand to an algorithm?

Adobe Systems recently announced the launch its global “Experience Business” cross-media campaign which will be solely implemented through a programmatic buying platform. The campaign highlights Adobe’s belief that artificial intelligence and machine learning will be fundamental to creating compelling customers experiences that help brands stand out in the new digital world. Participating brands include Princess Cruises, Franke Group, Pandora, UBS and T-Mobile.

Alex Amado, Adobe’s VP of Experience Marketing said “today’s most successful brands focus their energy on delivering a consistent, unified experience through many different channels. By using this all-programmatic approach, we can now effectively target customers by analyzing their behaviors and actions online to deliver a more relevant and personalized experience across every touchpoint.”

This now begs the question how do brands have a relationship with customers if they have outsourced multiple touch points to a series of digital algorithms and tools like software bots? While you can’t advertise directly to those digital intermediaries, you may be able to “persuade” the algorithm to give your brand more weight in the recommendations it generates. Either way, the old brand marketing rules are being turned upside down in the new digital world.

Getting Started: Some ideas on how you can build your brand’s value and relevance

    1. Use an outside-in approach not an inside-out approach. While it’s always valuable to document and understand your brand’s current state value and relevance, you can’t change its future state value and relevance by just making incremental tweaks to what you have now. The outside in approach begins by addressing three fundamental questions:
      1. What are the key moments of customer engagement that define and deliver your brand promise and value?
      2. Who or what system represents your brand promise and customer experience at that moment of engagement?
      3. How could you strategically intervene with a new system of engagement or system of intelligence to make that moment of engagement more compelling and enduring?
    2. Align your brand’s values with your customers’ values. A recent study by The Global Strategy Group found that Americans are 8.1% more likely to purchase from a company that shares their opinions and values and 8.4% less likely to purchase from a company that doesn’t. This clearly suggests that a strong alignment in views between your customer and your brand can directly influence desired purchase behaviors.
    3. Create “friction-free” customer experiences. To achieve friction-free customer experiences requires that organizations embrace an operating process of rapid iteration that constantly develops and tests new customer engagement ideas and tools. Companies like Amazon, Google, Facebook and Tesla are constantly providing product and software updates that give them real-time feedback and knowledge about their customer experience impact and value. This approach is becoming table stakes to delivering brand value and relevance in the new digital world.
    4. Harness the power of data analytics. Learning faster than your competition about what motivates consumer engagement/purchase behavior is a competitive imperative in the new digital world. To increase your brand’s value and relevance in this digitally mediated environment you will need to fully understand and leverage data analytics tools like A.I. and Machine Learning. Tech savvy individuals are leaving their customer experience footprints across multiple channels both physical and digital. Capturing and interpreting those footprints quickly and efficiently is best achieved by a close partnership between the pattern recognition skills of machine learning with the interpretive skills of insightful human brand stewards.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

In the new digital world, data is the new competitive currency

A recent study conducted by MIT Technology Review and Google found that 60% of the companies surveyed are using big data analytics and machine learning to gain competitive advantage. These companies are looking for multiple competitive advantage returns as shown on the chart below:

Looking forward instead of backwards

Until recently most companies have searched through historical data stored in their systems of record to see if they can better understand and predict future behavior based on past behaviors and actions. This data is typically organized by products and their performance (sales, margins and profits) not by customer segments and their performance (adoption, utilization, and evangelization) and therefore not useful at predicting future behaviors and actions.

The emergence of systems of engagement through mobile applications and omni-channel distribution options is redefining the customer experience and becoming a new source of real time customer data. These new sources of both structured and unstructured data (from social media websites and online search/purchase log files) can now be mined to provide forward looking insights into customer preference, market trends and user adoption. See the recent blog from my brother Geoffrey Moore Digital Systems Maturity Model for a more detailed description of these changing events:

Expanding the data business applications footprint

Not only are the sources of data expanding but the scope and breadth of their different business applications is expanding as well. Simply put, if your company is not using data based analytics to improve its operating performance, its customer engagement skills, its employee productivity capabilities and its supply chain management processes you are at a distinct competitive disadvantage.

The ability to integrate massive, granular data sets with in-database analytics is enabling a whole new generation of business applications as shown from this EMC report below:

  • Multi-Channel Attribution Analysis – attribute credit for sale across multiple marketing channels such as display ads, websites and key word searches.
  • Customer Churn – predict the probability of customers’ attrition based on usage activities, support requests, payment patterns and the social impact of friends.
  • Product Maintenance – predict equipment failures from embedded data devices based upon product usage, maintenance service records and product performance history.
  • Clinical Trial Performance – model different drug outcomes based on clinical trials to understand treatment effectiveness.
  • Yield Management, Merchandising Markdown Management and Price Optimization – build time-sensitive models to understand when and how much to increase or decrease prices given real time demand and supply conditions.  

Some current big data analytics use case examples:

Smart routing traffic data: By 2020 more than 70% of mobile phones will have GPS capability up from 20% in 2010. Current estimates for time and fuel savings from real time smart routing traffic data will be $500 billion by 2020.

Connected vehicle data: A recently completed report from Frost & Sullivan on “Data Monetization in Cars” said that if all the 200 connected car data points were monetized it would generate $33 billion in value. Today the report estimates that only 15% of this data is being monetized.

BMW has partnered with IBM to launch their own data brokering marketplace model called BMW CarData. They have equipped 8.5 million vehicles with built in telematics systems that monitor the car and driver’s habits and performance.

Speech analytics data: Southwest Airlines uses speech analytics tools to gain deeper and more meaningful information from live-recorded interactions between customers and their personnel. This tool has enabled Southwest to anticipate future customer needs and thereby deliver a higher quality customer experience.

Financial markets data:  JP Morgan recently partnered with data analytics startup Mosaic Smart Data to help its fixed-income sales and trading business become more profitable. Their fixed income revenues fell 27% in the three months ended in September and they deployed Mosaic’s smart data technology to help the bank’s fixed income teams “quickly make better informed decisions.”

Operations data: McDonald’s has equipped some of its stores with devices that gather operational data as they track customer interactions, traffic in stores and ordering patterns. They’re using this real-time data to model the impact of variations in menus, restaurant designs, employee training and productivity, as well as, sales.

New business data: A major transport company that plays an intermediary role in its customer’s value chain discovered it was collecting enormous amounts of data and information on global shipments. Sensing an opportunity, it created a new business unit that sells this data to companies who want to improve their business and economic forecasting analysis.

Getting started: Some keys for success

  1. Know what kind of things you’re looking for to help you target the right data streams for analysis. Industry experts say that the biggest reason most companies don’t get the value and insights they want from their data is because they don’t have a clear picture of what they’re looking for. hires “people who know how to query their data and tell a complete and accurate story of what the data is saying.”

  2. Focus on a prioritized set of desired business outcomes. Christina Clark, chief data officers at GE says that “often teams will fail because they are expected to address too many business demands at once, ultimately being stretched too thin to make a meaningful impact.”

  3. Breakdown data silos. Jeffry Nimeroff, CIO at Zeta Global says “every data silo creates a barrier between interconnections that can yield value. For example, think about a rich user profile either connected or disconnected from website activity data. The more data than can be interconnected the better, as those interconnections are where predictive power can be found.”

  4. Create good data hygiene. Building data analytical systems and processes that enforce quality is a major factor in extracting the maximum insights and value from your different data sources. Nimeroff says that ensuring repeatability of processes and auditability of results are critical success factors. He also says that deploying data quality tools including profiling, metadata management, cleansing, sourcing help ensure better results and outcomes.

  5. Recruit executive sponsorship for your analytics initiatives. This will insure that all your analytics initiatives are directly aligned with and in support of the company’s strategic business growth goals and critical business performance metrics.

Increasing the market value and operating performance of your company in the new digital world requires that you harness data analytics as a major contributor to your competitive success. Whether it’s using that data to get faster and better insights into what your customers want, or increasing your speed to market for new products and services; or improving the efficiency of your internal processes success will increasingly be defined by how well your company uses data as a competitive currency.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at 

In the new digital world, you have to improve your organization’s digital acumen


In the age of digital disruption, traditional ways of creating sustainable competitive advantage are no longer effective. The adoption of the new suite of digital technologies including social, mobile, cloud, data analytics is the new competitive imperative for success. Simply put, if you don’t significantly improve your organization’s digital acumen your competitive viability is at risk.

Most companies are lagging in adopting digital technologies

This year’s Harvey Nash/KPMG Survey of 4500 technology leaders found that only 18 percent said their company was effectively using digital technologies to advance their business strategy.

The 2017 New Rules for the Digital Age report from Deloitte found that only 5 percent of the companies surveyed said they have strong digital leadership development programs and 65 percent said that had no significant programs to drive digital leadership skills.

The chart below highlights the breadth, scope and impact of these new disruptive digital technologies:

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Bridge the digital technology gap

In order to improve your organization’s digital acumen, you have to get very good a leveraging digital technologies’ to:

  • Mine and interpret multiple data sources to make critical business decisions faster and more accurately
  • Optimize underlying business processes and functionality and convert them to digital processes
  • Anticipate what you need to do to deliver the ultimate customer engagement digital experiences
  • Provide your employees with digital workflow tools and resources to make them more productive and effective
  • Establish your brand as a pioneer in the new digital frontier

Identify what you need to learn to become a digital technology savvy organization

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Many companies today don’t have any formal process or initiative in place to expand their knowledge and understanding of the competitive impact digital technologies can have on their businesses. As such, they are often caught off-guard by these disruptive changes and find themselves scrambling for survival.

Here are some ideas to consider to avoid this situation:

  • The CEO should engage the C-suite and the Board in a series of discussions to agree upon the appropriate digital transformation strategy for the company and the plan to implement it.
  • Establish a digital technology learning network comprised of internal and external resources that can facilitate ongoing dialogues about when and how these technologies can impact your company’s performance.
  • Conduct periodic briefings and workshops for the Board, C-Suite, Operating Units and Functional Support Groups to introduce and socialize specific digital technology initiatives and programs.

Build a digital acumen roadmap 

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Most successful transformational journeys start with a concise well documented roadmap that highlights the desired outcomes and a timeline for critical deliverables. I think the core framing questions for this digital transformation roadmap are:

  • How does our company become a digital enterprise without compromising our customer relationships, our brand value proposition and our employees’ well-being?
  • How does our company look and operate as a digital enterprise?
  • How open is our culture to changing the way we do business?

Assemble a cross-functional digital transformation team


Once you’ve agreed to the digital strategy, you can then put together a dedicated cross-functional team to develop the roadmap and implementation plan. Unlike most planning exercises, this work cannot be done within vertical functional silos but rather must draw upon a diverse set of skills from across the entire organization. A study conducted by MIT and Deloitte found that 70% of digitally mature companies are organized around cross-functional teams versus just 28% for companies in the early stages of digital development.

To be clear, this work is not about improving the last best version of your old business model, it’s about creating the first best version of your new business model.

The good news is that you don’t have to do everything at once. You can and should identify specific parts of your business that present the best opportunities to conduct a series of pilot experiments where you can learn fast and make changes based on actual customer actions.

Here are some questions to start that process:

  • What part of our business has the highest competitive risk from a digital technology disruption?
  • What do we need to do to mitigate this competitive risk?
  • What resources can we redirect away from our current businesses to develop and launch a digital business?

Clearly a transformative change of this scope and magnitude is not undertaken lightly and requires:

  • The desire and resolve to explore new ways of doing business and letting go of the old ways of doing business.
  • Being willing to assemble a digital learning ecosystem of resources from both within and outside your organization.
  • A commitment to building a culture of continuous learning and experimentation.
  • Making increasing digital acumen a formal leadership competency for hiring and promotions.
  • Complete alignment and support for the new digital game plan from the Board all the way through the entire organization.

I have had the opportunity to work with several CIOs and their C-Suite colleagues on this issue and seen first-hand the benefits increasing digital acumen can bring to any organization. As such, if you are thinking about tackling these issues within your company, please reach out to me as I would be happy to share the approach we’ve taken and the results we’ve achieved.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

In the New Digital World, It’s About Asking What’s Possible Not What’s Permissible

To effectively compete as a digital enterprise requires new ways of discovering what’s possible

The scope and speed of disruption from digital technologies (e.g. systems of engagement and systems of intelligence) is not only turning the competitive landscape on its head but it is also forcing companies to discover new ways to engage with their customers, employees, supply chain partners, and even their competitors. In an unusual partnership, Amazon and Microsoft just announced that they will make it possible for their customers to access both of their voice controlled digital assistants, Alexa and Cortana.

Is it possible to get a 10x improvement in neutralizing competitive disruptions?

One of the major implications of the unprecedented level of digital disruption is that companies must find ways to neutralize these disruptions quickly and effectively. The goal is not to exceed, but to match competitive features and benefits as fast as possible. This requires a strong commitment to rapid iterations of minimum viable products and services, and to make changes based on actual customer adoption and utilization metrics. It also requires the need to harness the power of machine learning and A.I. to gain real-time insights into what’s possible and what’s not possible.

Nokia’s response to the launch of the iPhone is an example of what cannot happen. Four years after the launch they still did not have a comparable product for their customers. As a result, they went from the leading smartphone provider in the world to a second-tier competitor in that timeframe.

By contrast, Google got the Android smartphone to market within a year and is now the market share leader in smartphone sales around the world.

Is it possible to get a 10x compression in time to value?

Many companies are still satisfied with incremental improvements to expand their product and service portfolios. Their new product and service development cadence is tied to their annual planning and budgeting process where everyone asks permission for more resources and more dollars.

In order to compete in the age of digital disruption, companies must find ways to create exponential changes in speed to market and time to value. To achieve these changes, many companies have replaced a “permission based” product development process with a “show the customer what’s possible” approach using new processes and tools including Agile, Lean and DevOps. A core element of this approach is to develop and release a minimum viable product (MVP) and then make upgrades and changes to it based on end-user feedback. This can reduce time to value from 6-12 months to 6-12 weeks to 6-12 days, and in some cases 6-12 hours.

For example, Intel’s mobile applications development team increased the number of new apps from 57 in 2013 to 164 in 2014 to 238 in 2015. They increased the speed of their product design and delivery cycle by 30% through optimizing their global server capacity.

Is it possible to change your business model?

Microsoft has embarked on a transformation initiative to change its core business model from on premise, on desktop to cloud first, mobile first. Two years ago, it began to reboot its high margin Office software business to a subscription model and has also seen its Azure Cloud business grow three-fold to over $15 billion and 15% of the company’s overall revenue.

In 2013, Adobe Systems began a business model transformation from a product/license sales model to a cloud based subscription model. While revenues initially shrank 8% the first year and remained flat the second year, revenues reached nearly $6 billion in 2016 (up from $4 billion in 2013).

Three years ago, Starbucks CEO Howard Schultz, announced the company was 100% committed to “all things digital.” From the company that was known for creating alluring physical spaces to enjoy coffee and conversation, today over 25% of their orders are placed and paid for digitally. Their digital ordering app has also helped them attract over 13 million members to their virtual loyalty program.

Is it possible to outperform hierarchies with networks?

Conventional business thinking has always believed that hierarchically structured, vertically integrated businesses will outperform alternative business structures. Recent evidence suggests that in the new hyper-connected digital world, horizontal, cross-enterprise networks outperform hierarchies.

By example Foldit, an online video game, was developed by the University of Washington to enlist a network of players worldwide to solve difficult molecular problems. There are no special requirements to join Foldit and many of the 250,000 players have little or no background in biochemistry.

Recently this collaborative network was asked to figure out a detailed molecular structure of a protein-cutting enzyme from an AIDs-like virus found in monkeys to arrest this medical malady. A solution to this challenge had evaded the world’s best individual scientists for ten years but was amazingly solved by the collective intelligence of a diverse group of online gamers in ten days.

Another example is Nest which started as a one-product thermostat company and has now morphed into a multiple-Internet of Things ecosystem with diverse partners including Mercedes Benz. This ecosystem approach has enabled them to expand their product portfolio from smart thermostats to smart security cameras and smart smoke/CO detectors.

It’s easier to get forgiveness than permission, so just do it

In the new digital world, if you are still waiting for permission, it’s likely that you are losing market share and diluting rather than enhancing your customer experience. Customer expectations for real-time access to information, products and services mandate that companies reimagine what’s possible to meet these new expectations.

The good news is that customers are increasingly comfortable with MVP’s and are more than willing to help you make them better. They also like to share ideas and information with each other so if you can facilitate those conversations, it will be to your benefit as well.

As the old saying goes, it’s easier to get forgiveness than permission, so just do it.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

In the New Digital World, Good Enough is No Longer Good Enough

“There’s never been a better time to be a great CIO or a worse time to be an average one.”

This quote from George Westerman, a leader of MIT’s Initiative on the Digital Economy, sends a clear message that good enough is no longer good enough. CIOs who still feel their primary job is to maintain the systems of record (SOR) that “run the business” are viewed as just average. While CIOs who develop and deploy systems of engagement (SOE) and systems of intelligence (SOI) that “change the business” are seen as making a critically essential contribution to the future competitive success of their organizations as digital enterprises.

To be perfectly clear this is not an either-or proposition but rather a both-and proposition. The key is to reverse the way IT resources are allocated.

What does average look like?

Most IT budgets still allocate 80% of their resources to running the business and 20% to changing the business. The emerging reality is that every dollar invested in SOR-support systems and software produces a diluted return to the company in terms of competitive differentiation. The reason being that 95% of the lifetime value of these investments has already been received. As such, they no longer deliver competitive differentiation.

By contrast, every dollar invested in SOE and SOI systems and software offer a much higher revenue and profit stream because they will be the primary source of future competitive advantage in the new digital era. To go from average to great you have to start by redeploying IT resources away from low value / low return activities to high value / high return activities.

What does great look like?

Historically IT has been viewed as a cost center support function whose primary responsibility is to build and maintain secure and stable platforms and tools that “keep the lights on.” While it is still essential to securely maintain these systems of record, in the new digital era it is now a competitive imperative that IT evolves into a business enablement role that leverages digital technology innovations which deliver increased revenues, margins, and profits. Simply put, IT has to move from the back seat to the front seat to the driver’s seat.

What are some CIOs doing to be great?

Ed McLaughlin, CIO at Mastercard, says “you really have to cease thinking of technology as a cost center. Technology is one of the primary assets of the business. So, you move away from thinking in terms of implementation projects, and more about how to run ongoing programs and get a feedback loop where you’re constantly optimizing those assets.” He and his leadership team are constantly asking two questions:

  • How do you optimize new value creation?
  • How do you optimize processes that make it easier to onboard customers and provide customer support?

Deanna Wise, CIO at Dignity Health, says “partnerships with the business, being innovative and seeing how you can drive a better customer experience does translate into revenue. There are a lot of forward-thinking CIOs who ask …what new programs and new initiatives can we use to drive revenue throughout the business?” According to Wise, “CIOs who fail to ask these questions do so at their peril. If IT is perceived as a cost in your organization and you do nothing to change that…you’ve made IT a commodity, and commodities can always be replaced.”

Jim Fowler, CIO at GE, thinks that if you want to turn enterprise technology into a source of monetary value and not just an expense, data is a great place to start. He says that monetary value “in the next ten years is going to come from connecting the value stream of information in a business, information about products, all the data coming off machines, and turning it into signals that will help automate work.”

Vijay Sankaran, CIO at TD Ameritrade, says that for him and his IT team “…design thinking is huge. It has become a critical tool in the pursuit of roboadvisers, chatbots and other customer-facing technologies intended to drive revenue growth.” Design thinking has helped Sankaran’s team visualize the client experience for applications they are building so they can fully understand their value along all the different customer touch points.

Wayne Shurts, CIO at Sysco, says “the burden is on the CIO to make the case that IT is concerned with more than cyber and risk management and it’s more than a cost center. The role of the CIO isn’t to go to the board to discuss every project. It’s to talk about how technology should operate across the organization and how investments support that.”

What can you do to assess where you stand today?

A good starting point to assess where your IT team stands today is to conduct a trapped value audit. This audit starts by determining what percentage of your IT resources and budget are allocated to run the business functions in the left-hand column in the chart below versus change the business functions in the right-hand column. Once you’ve established your resource allocation baseline, you can then begin a systematic review of how you can redeploy resources and budget from the left-hand column to the right-hand column. I am currently working with a CIO and his senior leadership team who have made very measurable progress moving their resource allocations and budgets from 76% – 24% to 60% – 40% in just one year.

What do you want the IT brand to stand for in your company?

As the examples above clearly illustrate, CIOs who aspire to be great have identified very specific ways to demonstrate the impact and value technology brings to their organizations. They have embraced this era of digital disruption as a new leadership challenge and an opportunity to redefine what the IT brand stands for in their companies, including:

  • A higher percentage of IT resources allocated to change-the-business outcomes
  • A significant improvement in time to value and throughput for all development initiatives
  • A strong alignment between future technology investments and critical business outcomes
  • A direct contributor to delivering increased revenues, margins and profits

While each CIO’s journey from average to great may take different paths, it seems clear that they all start with the recognition that good enough is no longer good enough.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

In the New Digital World, Technology is the New Work of Business

What business are we in? The technology business.

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“The real issue is that every business is now a tech business – whether it wants to be or not – and that means not just new skills and experiences, but a new outlook on opportunity and strategy.”  This quote is from a recent Forbes analysis of the different business models companies can deploy and how each one is performing in the new digital world.

  • Asset Builders who produce and sell physical things are usually priced at .5 – 2x revenues
  • Service Providers who offer professional services are usually priced at 1 – 3x revenues
  • Technology Creators who develop new technologies are usually priced at 3 – 7x revenues
  • Network Orchestrators who manage social, business and transactional networks are usually priced at 4 – 11x revenues

What is driving these different performance levels is the emergence of new, more profitable business models that deploy new digital technologies like social, mobile, cloud, analytics and platforms.

A recent Harvard Business School study documented that “leading digital companies generate better gross margins, better earnings, and better net income than organizations that have not adopted a digital-first business growth strategy. Early digital adopters delivered a three-year average gross margin of 55 percent compared to 37 percent for digital laggards.

Most companies are behind the digital technology adoption curve

This year’s Harvey Nash/KPMG Survey of 4500 technology leaders found that only 18 percent said their company was effectively using digital technologies to advance their business strategy.

The 2017 New Rules for the Digital Age report from Deloitte found that only 5 percent of the companies surveyed said they have strong digital leadership development programs and 65 percent said that had no significant programs to drive digital leadership skills.

Digital Technology – The New Work of Business

As the McKinsey chart bellows highlights, there is no escaping the evidence that digital technology is converting the way businesses operate and compete albeit at varying rates of impact. As such, it is no longer a choice of whether companies are going to adopt and deploy digital technologies but rather a choice of when.

Image result for mckinsey chart digital is penetrating all sector but to varying degrees

Leveraging Digital Technology for Competitive Advantage

Uber reinvented the business model for the transportation industry by leveraging digital technology advances in smartphones, GPS sensors, and networks while Airbnb did the same to the hospitality industry business model.

In 2016, restaurants crossed a “digital milestone” when digital orders using smartphones or tablets (6.6%) exceeded telephone orders (5%).

Starbucks, an early adopter of “digital ordering” in the food & beverage business, says that 25 percent of their orders are now placed and paid for digitally. The digital ordering app has also helped them amass a loyalty program of 13 million active users in the U.S.

Domino’s Pizza has reported 24 consecutive quarters of increased sales in their U.S. stores and state that “technology has clearly been a big part of what’s been driving our business over the last five years.”

Charles Schwab, Goldman Sachs, and Morgan Stanley are deploying digital technology to deliver automated wealth management services to investors with as little as $5,000.00 to invest.

Image result for robo advisors

These new “robo-advisory” services make it economically feasible to serve markets that were previously cost prohibitive by the traditional wealth advisory business model.

Apple’s Research Kit is using digital algorithms to gather so much clinical trial data that it could eventually disrupt the pharmaceutical industry by correlating the effectiveness of the medications we take.

Image result for apples' research kit

Disney Resorts has developed a suite of digital tools to help customers visiting their theme parks have a better experience.

Image result for disney's magic band

These new tools include the FastPass+ service which allows visitors to reserve access to specific attractions, and the MagicBand, a digital technology enabled wristband that facilitates reservations and customer routing at Disney World.

Lowe’s recently launched a new Innovation Lab with a mandate to work with outside organizations like Google and Microsoft to “develop technology that will improve store operations and customer experience.” Early experiments include:

  • LoweBots: self-guided robots that lead customers to specific products they are looking for, pull up information about different product options and check inventory for in-store product availability.

Image result for lowe's lowbots

  • Holoroom How To: a virtual reality tool that teaches customers how to do basic home renovations.

Silicon Valley Startup Blue River Technology manufactures robotic farming machines to help farmers manage their fields more efficiently.

Image result for blue river technology robotic farm machines

The traditional approach was to spray an entire field with weed-killing chemicals. Blue River robotic sprayers combine computer vision and machine learning algorithms to spray only those parts of the field that need it thereby reducing herbicide use by a factor of 10.

What does a digital technology business model look like for your company?

Short of facing an existential threat from a disruptive competitor, most companies are reluctant to engage in substantive discussions about modifying or changing their business model. Let’s be clear, not every business is standing in the middle of a burning platform but as the examples above suggest they should all see smoke on the horizon.

Here are some questions that will hopefully help you get the discussions started:

  1. How long can our current business model deliver our desired business growth goals and financial results?
    • Revenues, Margins, Net Profits
  1. What are the biggest threats to our current business model?
    • How quickly do we need to respond to these threats?
  1. What are the most attractive opportunities for us to leverage digital technology for increased competitive advantage?
    • What do we have in our digital technology development pipeline today?
    • How can we most efficiently and effectively test and validate new digital technology tools?
  2. How open is our culture to changing the way we do business?

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

In the New Digital World, Success Starts With a Clear and Concise Statement of Intent

A Clear Statement of Intent Drives Desired Business Outcomes

Over the past two years, I observed a very distinct pattern between companies that successfully navigate the new digital world and those that fall behind. As it turns out, those who are emerging as the early leaders in the age of digital disruption share one thing in common – a clear statement of intent. In the illustration above, I have summarized what I think a statement of intent encompasses. What follows are some examples that have helped shape my thinking on this issue.

While Steve Balmer was in the last few years as CEO of Microsoft, he and his leadership team talked about the need to figure out how to migrate their offers to the cloud and mobile devices to better compete with Amazon, Google, Apple and Facebook. What they didn’t do was to make a clear and concise statement of intent to prioritize that outcome. As a result, cloud and mobile revenues languished.

On his first day as CEO, Satya Nadella sent an email to all Microsoft employees saying from that day forward “Microsoft is a cloud first, mobile first company.”

Under his leadership, the company began a systematic rebooting of each of their core businesses to catch the new cloud and mobile waves.

Two years ago, they migrated the Office software business which provided an on-device license for personal productivity software including email which was supported by an on-premise Exchange business to run the back end. They diverted the high margin earnings from the current business to fund the launch of Office 365 on a cloud-based subscription model.

As you can see from the chart below, Microsoft’s Azure Cloud business has grown three-fold in the last two years following Satya Nadella’s clear statement of intent. The $14.8 billion from the commercial cloud businesses represents more than 15 percent of the $96.24 billion in overall revenue that Wall Street expects from Microsoft this year. That’s up from a ratio of about 10 percent in the previous year.

Microsoft: Commercial cloud revenue to jump 55% to nearly $15B this fiscal year

Ford vs. Tesla

When Mark Field was installed as the CEO of Ford three years ago, he talked about a variety of new business growth initiatives including electric and self-driving cars. While sales increased significantly over that three-year period, Ford’s stock declined by 40% as the majority of vehicles sold were the traditional cars and trucks the company has always built. What he didn’t do was to clearly declare his intent to make electric and self-driving cars the business growth priority. As a result, he was recently removed as the CEO of Ford.

At Tesla, CEO Elon Musk, has clearly communicated his desire to develop and deliver new software- enabled electric cars that can ultimately drive themselves. While Tesla’s sales are far less than Ford’s, the market rewarded the company with a higher market valuation in part because they believe in Musk’s statement of intent and the results he has produced thus far.

Other CEO’s are Getting the Message

A number of CEOs now see the value and benefit of clearly stating their intentions and business growth goals.

Two years ago, then-Starbucks CEO Howard Schultz said he was transferring all his operating responsibilities to his President so he could “focus solely on all things digital.”

Google’s new CEO Sundar Pichai declared that going forward “Google is an A.I. Company first.”

Facebook CEO Mark Zuckerberg has said that “Facebook will be a video first company.”

Committing to the J Curve

The reason most well-established companies are still struggling with navigating this new digital world is that they don’t have the resolve and discipline to redirect scarce resources away from funding their current businesses in order to launch and scale a new digital business.

Venture capitalists call this investing in the J Curve to catch the S Curve as shown below:

As the Microsoft example above illustrates, in order for the company to migrate its Office business from on premise and on desktop to the cloud and mobile devices meant sacrificing short-term revenues, margins and earnings for the promise of long term competitive gains. But their recent results suggest that if you have the resolve to stay the course the rewards are significant.

In 2013, Adobe Systems embarked on a major transition from a product/license sales model to a cloud -based subscription model. Revenue shrank 8% in the first year and was basically flat in 2014. The skeptics’ and naysayers’ voices rang loud and clear.

Fortunately, the senior leadership team at the company along with the board stayed true to their intent and Adobe’s revenues reached nearly $6 billion in 2016 up from $4 billion in 2013. Eighty percent of those revenues came from subscriptions and other recurring sources.

By contrast, the recent financial performance of IBM, Hewlett Packard, GE and Ford seem to validate how hard it is for well-established companies to free their company’s future from the pull of their past.

Short-term earnings performance vs. long-term competitive advantage

As these examples illustrate, the single biggest challenge facing CEOs and other C-Suite leaders in well established companies is how to find the right balance between funding the businesses they have versus making significant enough investments in next generation businesses so than can deliver material revenues and profits to the company. Said another way, this challenge pits the demand to deliver short-term quarterly earnings against the desire to create long-term competitive advantage.

Making a transition of this magnitude and impact not only requires strong leadership and intestinal fortitude but increasingly a leader willing to put a stake in the ground and make a clear and compelling statement of intent. It will ultimately redefine the winners and losers in the new age of digital disruption.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at 

In the New Digital World, What Are the Metrics That Matter?

Realigning metrics to measure the new work of IT

Less than 30% of companies have a process in place to measure the return on investment of their emerging technology projects according to a recent survey of 150 CIOs and CTOs. Too many companies still measure the performance and business value they get from IT based on the old work of IT rather than the new work of IT as shown in the chart below:

 While still important, traditional metrics like uptime, service availability, and meeting project deadlines and budgets don’t accurately reflect the new business value IT must bring to the table. For example, instead of just measuring the reduction of technical debt, it’s time to measure the amount of trapped value recovered and redeployed toward higher value activities.

How you can use the 4 Zones Model to segment the new metrics that matter

In my earlier work with several CIOs, we have found it very helpful to segment the new metrics into the four zones as shown on the chart below:

Productivity Zone metrics include:

On average 80% of most IT budgets is spent on running the business with 20% spent on changing the business. This presents a great opportunity to identify and redeploy resources (trapped value) from maintaining systems of record to creating and deploying systems of engagement and systems of intelligence.

  • Set a target percentage shift for each year and report out results on a quarterly basis.
  • Identify and quantify the savings from automating the maintenance of systems of record and other employee tasks.
    • AIG recently deployed five “virtual engineers” inside its infrastructure to collect and analyze system performance data. A typical network device outage would go into a queue and take engineers 3.5 hours to address. Using virtual assistants most outages are fixed in 10 minutes. To date, this new automated process has resolved more than 145,000 incidents and returned 23,000 hours of productivity back to the employees.        
    • Fannie Mae is using machine learning to analyze terms and conditions in mortgage contracts and experimenting with image recognition technology to help estimate the value of a home. Early results have shown major improvements in the speed and accuracy of these tasks.
    • At SpaceX, CIO Ken Venner measures the signal-to-noise ratio for every new application they provide to ensure that it accelerates the manufacturing process and increases employee productivity. The goal is to achieve a 9 to 1 ratio.

Performance Zone metrics include:

Traditional IT investments in systems of record were funded out of the company’s capital budget and depreciated over a multi-year time period. New investments in systems of engagement and systems of intelligence must be funded out of operating budgets and be held accountable to near-term business outcome deliverables. The core question to ask is what can IT do to effectively help business units increase revenues, margins and profits? For example:

  • At a large state government agency, a $650 million innovation project is returning $4.7 billion to the state in additional tax revenue – a 7:1 return on investment – by enabling self-service access on the web and becoming more adept at using taxpayer data.
  • At Microsoft, the IT team now gets measured on whether they increased the volume and quality of leads along with the incremental revenue those leads produced.
  • At Intel, former CIO, Kim Stevenson, issued an annual report that documented IT’s performance over the previous 12 months. The 2015 report documented these results among others:
    • Increased revenue by $185 million through personalized campaigns
    • Forecasted the right product mix and demand to drive $265 million in revenue uplift over previous two years
    • Customized the reseller customer engagement process to deliver 2500 new customers and $200 million in incremental revenue

Incubation Zone metrics include:

As I said in an earlier blog, one of the major implications of the unprecedented level of digital disruption is that companies must find ways to get a 10x compression in their product/application development release cycles. Simply put, how can they go from 6 to 12 months to 6 to 12 weeks to 6 to 12 days. The rewards are high as today SaaS is growing at 30-40% per year while traditional perpetual software licenses are growing at 3-4% a year.

  • At Intel, the mobile applications development team increased the number of new apps from 57 in 2013 to 164 in 2014 to 238 in 2015.
    • They increased the speed of their product design cycle by 25-30% by optimizing their global server capacity
  • Some companies are experimenting with crowdcoding which takes large-scale IT projects and breaks them down into microtasks that can be accomplished by many individuals in a short period of time.
  • At ICANN, CIO Ash Rangan and his senior leadership team have embarked on an initiative to get a 10x improvement in their time to value on critical technology projects. To achieve that goal, they have:
    • Redefined roles and responsibilities between product management and engineering
    • Developed a series of demand management/capacity planning metrics
    • Streamlined the project approval governance process
    • Limited product development timelines to 90 days or less

Transformation Zone metrics include:

Transformation initiatives require the total alignment and commitment from the C-Suite, Board and key implementation stakeholders to have any chance for success. The core challenge is does the company have the resolve and persistence to redeploy critical resources away from current businesses that are delivering quarterly returns to a new venture that may not yield any measurable returns for 18 – 36 months.

The initial metrics to decide whether to make this commitment include:

  • The new business will scale to generate a 10% or greater increase in the current revenue and profits of the company.
  • There can only be one transformation initiative done at a time.
  • 50% of the discretionary compensation of all critical stakeholders is solely based on the success of this effort.

Measuring the business value of IT

Early adopters of the 4 Zones model have found it very helpful to start the process by identifying and implementing a new set of metrics that better demonstrate the impact and value of the new work of IT. That work can have measurable impact on the company’s infrastructure model, operating model, and business model as shown on the slide below:

If you have developed and implemented any new metrics to measure the performance and impact of the work of your IT team, I would be very interested to see them to build a more robust portfolio of examples than the ones I’ve used above. Please send them to me at the email address below.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at 

In the New Digital World, it’s Time to Write a New IT Charter

Finding the right balance between operational excellence and business innovation

The 2017 State of the CIO survey found that 72% of respondents said they were struggling to strike the right balance between operational excellence and business innovation. 87% of respondents also said that “juggling transformational and functional responsibilities has become a permanent job requirement, not a short-term challenge.”

To effectively manage this multifaceted workload will require CIOs and their leadership teams to think very differently about how the IT function is organized; how their project prioritization process can accommodate ever-increasing demand; and how they can recruit, develop and retain the relevant skills and capabilities needed to carry out the new work of IT. As Phil Potloff said when put him in the CIO role several years ago, “one of the reasons they asked me to be CIO was to bring new thinking, new processes and new ways to get work done.”

Rethinking the IT organization model

Traditional IT is organized around the functions it carries out and the services it provides instead of the constituencies it serves and the business capabilities it enables. What would your organization look like if you structured it around the 4 Zones Model to serve multiple constituents and enable a multitude of business capabilities that deliver a variety of desired outcomes, as shown on the slide below.

The 4 Zones Model is designed to provide and new organizational framework that helps CIOs and their leadership teams find the right balance between:

  • A need for innovative approaches to enable their organizations to deploy five disruptive technologies: Cloud, Mobile, Social, Data Science and Internet of Things.
  • A need to evolve from lengthy waterfall-based technology implementations to the more rapid agile development approach. The Plan, Build, Run model will be displaced by a Co-Develop, Assemble, Consume model.
  • A need to embed a trapped value assessment process to identify opportunities to shift resources and funds from maintaining legacy systems of record to developing new systems of engagement and systems of intelligence.
  • A need to utilize new methodologies and tools to recruit, develop and retain the relevant new skills and capabilities necessary to lead and manage a digital enterprise.

It is also designed to better enable IT to enhance the critical business capabilities needed to effectively operate in each zone. For example, in the performance zone, this outcome-based approach with internal business partners starts with the question: How can technology better enable the customer engagement or revenue-generating capabilities of your business? The answers to that question help to align future IT investment priorities with critical business outcomes.

Rethinking the IT project prioritization process

In most traditional IT organizations, the project prioritization process is tied to the annual planning and budgeting process. It is driven primarily by resource capacity and funding constraints that ultimately determine which projects make the cut and which don’t. This results in a high level of frustration for those internal customers who can’t get what they need and want for their businesses or support functions.

By contrast, early adopters of the 4 Zones framework and tools as shown in the chart below have started the prioritization process by segmenting potential new projects in the following way:

  • Are they sustaining innovations or disruptive innovations?
  • Are they enabling systems productivity and cost optimization?
  • Are they increasing business unit performance and revenue growth?
  • Are they enabling business model transformation?

Each project has its own time-to-value cadence and metrics but all of them require IT to be fast, adaptable and bring an enterprise-wide perspective to the priority-setting process.

In addition, rather than using resource capacity and budgeting constraints to make project prioritization decisions, IT Executives and their internal partners should start their prioritization discussions by asking three key questions:

  1. Should we do it? Does it align with and support critical business outcomes?
  2. Can we do it? Do we have the relevant skills, capabilities and tools to achieve the outcome?
  3. Did we do it? Do we have the right metrics to measure the achieved outcome vs. the desired outcome?

This new approach moves project prioritization from a budget exercise to a business value creation exercise.

A new charter for the new work of IT

IT’s current charter is primarily built around the old work of IT as shown in the left-hand column of the chart below. While much of this operational excellence work must continue to be done, it does not reflect the new technology-enabled innovation work shown in the right-hand column that companies increasingly expect IT to deliver.

The new work of IT also calls for a complete reassessment of the relevant skills and capabilities the IT team needs to manage this multifaceted workload. For example, the skills needed to deploy an inside-out user interface design approach are very different from the skills needed to deploy an outside-in user experience design approach. As the survey validated, finding the right balance between operational excellence and business innovation is now a permanent job requirement for IT.

As such, I think it’s time to write a new charter for IT. A charter that properly reflects the new and expanded role that IT brings to any organization. A charter that:

  • At the strategic level, defines IT’s role in enabling the transformation of a company into a digital enterprise
  • At the operating level, defines IT’s role in co-developing the business and functional capabilities with its internal partners to enable a company to successfully compete as a digital enterprise
  • At the functional level, defines IT’s role in recruiting, developing and retaining the new skills and capabilities needed to support a digital enterprise

Unfortunately, left to my own devices a task of this magnitude is well beyond my reach. Therefore, I am looking for any brave souls who would like to embark on a collaborative venture to achieve this goal. If you are one of those people, please let me know.

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at

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