- [Host] It is now my
pleasure to turn the webcast over to Doctor Peter
Hirst, Associate Dean, MIT Sloan Executive Education. Doctor Hirst, the floor is yours. - [Peter] Thank you very much. Good morning, good afternoon,
good evening everybody, wherever you may be in the world, and welcome to the latest
in our Innovation at Work webinar series from MIT
Sloan Executive Education. The Innovation at Work webinar series is the way that we introduce faculty who teach in our executive
education programs and invite them to share
with executive education community around the world
some of their latest research and ideas, many of which
you can find being taught in our executive education programs, and other things that are
often very hot off the presses. Today is very much an example of that. I am joined here today
by Doctor Jeanne Ross, who is the Research Director and Principal Research Scientist at MIT
Center for Information Systems Research, and I
will hand over to Jeanne now to introduce the Center, tell us a little bit more about herself, and then really get into
the meat of today's topic, which is about digital disruption. Doctor Jeanne Ross. - [Jeanne] Thanks so much, Peter. It's an honor to be
here, and I'm delighted to welcome you all to this webinar. To kick it off, I'd like to just mention that I'll be sharing with you research from the Center for
Information Systems Research, which we call CISR. We are funded and supported
by 93 global sponsors. You'll see their names listed here, and as always, as some of
them are on the air now, I just want to thank you for your support. This particular presentation
addresses the research we've been doing on digital disruption, and I have to tell you,
things are so wonderfully disruptive right now that
this is the best time ever to be a researcher. I'm not sure that's as true
about the best time ever to be a business leader, because these are challenging times, and what we're gonna
do in this presentation is share with you what we've learned about all the things that are going on, and the few things that we really need to pay attention to, to
ensure that we're leading our companies in the right direction. Things are very much in flux. We don't exactly know
how things are going to develop from here, but
we do know some keys to success going forward, and that's what I want
to share with you today. First I want to thank and
acknowledge the research team as listed on this slide. These researchers come from MIT's Center for Information Systems Research, from our extended family of researchers, and from the Boston Consulting Group's Technology Advantage Practice. So let's just think about
what's going on right now, and here's how we look at it. First of all, companies
have been disrupted by technology, and here's
what it looks like. There's an evolution of
technologies coming at us. These are social,
mobile, analytics, cloud, the internet of things,
we call this SMACIT, and we call it SMACIT because
that's what it feels like, it feels like we're
being hit beside the head by a constant barrage of technologies, and these technologies, interestingly, all by themselves, one at a time, are not a particularly big deal. They have come to us, we've
studied them as they arrive. So if you take social
or mobile or analytics, when it appeared on the scene, we investigated the
impact and we concluded that all by itself, the
technology was nice, it created some new opportunities, but to be honest, it was incremental, that in the end, it was still about being a great company,
getting the basics right, and then you could take
this new technology and you could make yourself
a little more special. But somewhere along the
way, that recommendation, that understanding of
what was going on changed. What became clear is that it wasn't about these individual technologies, it was about the confluence
of these technologies, and the confluence of these technologies has fundamentally
changed the opportunities that are being created. It changes the way we
think about doing business, and that's because they basically eliminated the technical limitations to how we run business, how much processing power
we need and can use, how much data we can access. Those technology limitations
are basically gone. We are now left with
only human limitations. Our ability to identify clever
ways to use the technology, interesting things that
our customers want from us, how we might best interact
with computers and data to deliver more value to our customers. Those are going to be
the sources of advantage going forward. The individual technologies
are probably best described by the concept of readily accessible. These technologies are
accessible to anyone who wants them. And it's not just the
technology that's accessible. It's the vendors who make them
powerful that are accessible. So anything you can just
do with the technology will afford you no competitive advantage, because what it's going to do is just offer up a new idea
that anybody can replicate. Your advantage is going
to be from using this better than anyone else, and that quite frankly,
is about integration. Now, what do we do to actually
take advantage of this? Interestingly, we would argue that the way companies are going
about this is as follows. They recognize a new
technology and they say, let's have a new strategy. So they introduce a mobile strategy, a big data strategy, a
social media strategy, an internet of things
strategy, a cloud strategy, a BYOD strategy, a biometrics strategy, a cognitive computing strategy. This has been the inclination, but let me assure you this is a bad idea. It is a bad idea, not technically, because it's a good idea
to have technical experts on each of these technologies, especially if they're important to you, but it is a bad idea from
a business perspective because you don't want a mobile strategy, that will not make you successful. In the end, what you want
is a business strategy that integrates your capabilities using whatever technology
makes the most sense to you. So you don't want these
individual strategies. You want a digital strategy. Now in order to understand that, let me share with you a
couple of definitions. First, let's talk about what
digital disruption actually is. I would argue that digital disruption is the changes in the
competitive environment that result from the use
of digital technology, and this can be by either
new market entrants, some of those startups
we sometimes worry about, or established competitors,
and those could be established competitors that were never actually your competitors before. And what they do is, they
undermine the viability of your product/service portfolio or your go-to-market approach. In other words, they find ways to make your customers happier than you are by either offering them
new kinds of relationships, or a new product/service portfolio. This will disrupt your business. What do you do about it? We argue that you need a digital strategy. That strategy needs to be integrated. It has to look across your enterprise at all the capabilities you have, and then integrate them in a
way that makes you special. That's your goal. And you'll notice, you
wanna be thinking about all these readily accessible technologies, because if you don't, somebody else will, and then on top of it, you
wanna adopt the mindset of a startup, in that
you start to think about exactly what strategy
is a little differently. You think of it as constantly responding to the changing market conditions. This means that our more
traditional approach to strategy, where we might set targets, in fact I would call this
the target setting strategy, where we decide what our earning
per share are going to be, or we decide what markets
we're going to enter, or we decide what companies
we're going to acquire, I would argue that is not
strategy in the digital economy. What strategy is, is the defining of how we are going to make ourselves special. It is operational in nature. It is a discussion of
who we are going to be and how we are going to
deliver value to our customers. Now, that will be a challenge. The good news is that you get to choose from just two options. Here's the basics of digital strategy, and this is what we call
our Mickey Mouse Model. We call it Mickey Mouse
only because it looks like Mickey Mouse, not because
it is Mickey Mouse. There are actually three important things for you to understand about this model. First, you are going to
pick one of two strategies. The customer engagement strategy says you are going to think
about your relationship with your customer and that relationship is going to be built on trust and loyalty. Ideally it's built on passion. Take for example, USAA. If you are a USAA customer,
you are probably aware that on their website,
people write things like, "I love my bank. "I am never leaving my bank." Now who writes things like
that about their bank? Seriously. Or, more to the point,
who wants to compete with a bank who has
customers that feel that way? But USAA have promoted
that kind of relationship. A number of years ago, they said, "We're gonna stop selling
financial services products "to customers. "We are going to start
serving their life events, "like buying a car, buying a home, "getting married, getting retired. "These are their events that
have financial implications "and we should make sure
our members are well served, "that we are there for them, "that they have financial security." And as they started thinking that way, they started thinking
about what a different approach that is to customers. So they started organizing
around life events. So for example, if you
want to buy a new car, and you're a member of USAA, you can go their auto circle capability and kinda walk through a process whereby they will help you pick
out the car of your dreams, they will get you the best
possible price for that through their buying service, they will help you finance it, that will get you insurance for it. You just print out the documentation and go pick up your car. That's the way they're
going to do business with their members going forward. And all along they are looking, they are scanning the marketplace to see what newest
technology has appeared, and what it might mean for
how they can serve you better. If you have homeowner's
insurance with USAA, their goal is to make sure
you are the first person to get your cheque so that you can get, I'm sorry, after a natural disaster, you will be the first
person in your neighborhood with a cheque that lets
you call a contractor and say come fix the damage to my house. As they think about these things, they identify technologies
that will make that easier. So now they're looking at drones. How will drones help
them serve you faster? This is extraordinary customer engagement, and it is a strategy that
guides their every action. If customer engagement is not your thing, perhaps digitized solutions is. Digitized solutions says
I'm not just thinking about the products and
services I'm trying to sell. I'm thinking about my
customer's needs and problems, and how I can solve them. One of the most aggressive
firms in this area has been GE. As they have moved away
from financial services, they've moved back to
their core competency around big assets. Turbines, aircraft
engines, medical equipment, and they're not just selling the asset. That's actually a rather risky thing to do because of they're volatile,
when the economy goes down people stop investing. Instead they're thinking about
the owners of these assets. What do they need? Well, they need very effective
management of these assets. They need for these assets
to make them better, and as a result, they
are looking for ways, what GE is doing, is
looking for ways to service these assets, to help the
companies manage them. So they're collecting data
through an internet of things, just constant sensor data on the assets that their customers now own, and they are analyzing
that data to find out how you use it most efficiently, they are providing either the
management of the data itself or feedback on the way the
customer is managing that data, so that the customer is constantly aware of how they get more
value from this asset. And GE is thinking about
this, not just in terms of how they provide new services around asset performance management, they're thinking about a
whole ecosystem of partners who will identify needs and
then deliver on those needs for their customers. So they have more than a
GE, which is a big enough company by itself, beyond
GE there's a whole ecosystem of partners developing solutions. Now, as you think through
which of these strategies works for you, what
you'll want to think about is how you're gonna make it work, because anybody can have a strategy, and here's where the operational
backbone is so important. Our understanding of
the operational backbone is that companies started doing this in the late 90s, early 2000s. They went out, they got
ERPs, they got CRMs, they got product life
cycle management systems, they got HR systems. The idea was to become more efficient, to have end to end transactions, to make sure that they were well run. And so we've been building
operational pipelines and backbones for a long time. Well the moment has arrived
when it's no longer optional, no longer just a good idea. At this point, what we need is
a great operational backbone, because you cannot deliver
on customer engagement or digitized solution without it. Now those of you who are familiar with Michael Tracey's three disciplines, you will see that reformulated here. He talks about customer
intimacy, product leadership, operational excellence. Note what we're saying,
operational excellence is not an option. It is table stakes, and because it's table stakes, if you don't have a great
operational backbone, you need it now. What this operational backbone
is going to do for you is ensure that you have seamless
end to end transactions, that are efficient, reliable,
secure, predictable, and so you have not just great systems, but you have standardized
processes in your company that are great. Then, you reuse these
as you enter new markets or create new products and services, and this backbone is totally reliable. It ensures that basic
things do not go wrong, and because you have this backbone, you know every day that as
you add new digital services, new interfaces with your customers, new solutions to their
problems, they will work, and that is essential. It is, as I say, table stakes
in the digital economy. Now, just to elaborate on this a bit, I wanna talk about two companies and how they have
developed their backbones and made them effective. The first one I'll talk
about is Nordstrom's. This is my favorite store, and there's a reason why
it's my favorite store. It has for years been
known for outstanding customer service. Now the thing you should
know about Nordstrom is that this company was born around 1901. So it's been around a long time. But it was born as a
store, and what's happened over the years is it's been disrupted by the increasing popularity
of online shopping. So here's this retailer, known forever for great customer service,
and suddenly it learns that its customers actually like to do some of their shopping online. Well obviously what's
critical to Nordstrom is that you can get an online
experience with Nordstrom that has all the features
of great customer service that you get in the store, and that becomes their challenge. They become disrupted by
online and they address the challenge by saying,
we will now simply extend the concept of our customer engagement. You'll notice this two by two. They also felt disrupted,
somewhat at least, by the popularity of
off-price discount stores, and so what they have
said is, going forward, they are going to have to
have full-price and off-price, both online and in stores. Now this is what I call a target strategy. It is not their digital service, their digital business strategy. Their digital business
strategy is more like this. This is the way they
articulate what they plan to do and who they plan to be. Their strategy is to
provide a personalized, seamless experience across
these four quadrants, and they have noted
from, this slide is taken directly from their investor presentation. They have noted that
there are three things that will lead to this. One is service, they are
never going to abandon their brand reputation that
rests on great customer service. And to give you a sense of
what it takes to deliver this, I wanna introduce you to Maureen. I actually hate to shop, and about two years ago,
I went to Nordstrom's because I got in the habit
of shopping somewhere where at least they took care of me. I went with my two daughters,
who helped me pick out a number of items, and
as I'm checking out, I say to the sales clerk,
"I'm so glad I brought "my daughters because I can
never decide what I should buy". And she said to me, "Oh,
well my name is Maureen. "I am a personal shopper. "If ever your daughters are not available, "let me know, I will take care of you." I said, "Thank you very much", and then 18 months later,
I needed some clothes and my daughters weren't around, and I said, "Wait a minute,
what about Maureen?" So I emailed Maureen. I said, "Maureen, my name is Jeanne Ross, "we met 18 months ago,
and I need some clothes "for a very professional event, "I want to look professional,
and I need some help". An hour and a half later,
I got an email from Maureen that said, "I have picked out some things "I think you'll like. "Stop by whenever it's
convenient to try them on". Now I said to myself,
wait a minute Maureen. Shouldn't you be asking me
my size and what I like? And then I realized, Maureen knew. Maureen knew everything I'd
ever bought at Nordstrom's. For all I know, she knew
I had two daughters, because she takes notes. So I arrive at the store, she says, "Here are the things you usually buy, "here are some other things
you might want to consider, "and you can pick and choose", and as I'm trying them on, she's learning where she doesn't have the right color, where she doesn't have the right size, and she is going to Nordstrom's systems, and she is finding what I
need so that by the time I emerge from the dressing room, they are already ordered and on their way, I will receive them the
next day at my home. This is possible because
of the capabilities that Nordstrom's has
created under Maureen. They have a totally
transparent supply chain. When she needs a blouse
in a different color or a different size, she
simply goes to her system, learns where it is, and
says, "Get it to this address "by tomorrow", and it gets there. Notice that she is not limited
to traditional warehouses. She is looking at every single
inventory item in Nordstrom. And then what I learned, when
I got snowed in last winter, is that same transparency
is available to me as a Nordstrom customer. I can order things no matter where they exist at Nordstrom's, and what Nordstrom's is going to do is find that item and deliver it. I ordered nine items, they
arrived in six different packages from six different
places, and that included individual stores. I know because they
were still on the hanger and they had the price tag on them. When I want to return them, I
go back to a Nordstrom store because of course I want
to return six things, and that's a much easier
way to return six things, and when I look for the
service desk, it's gone. So luckily, Maureen is there, and I say, "Maureen, where's your service desk?", and she says, "That would be me. "Let me return those for you." and then of course,
she can ask me if maybe I need something else
that would serve me better than the item I am returning. So this is the whole
philosophy at Nordstrom, the underlying capabilities that are in their operational
pipeline, are things like the transparent supply
chain, the, there we go, the transparent supply chain,
the customer information file. Maureen has everything
she needs to provide me with extraordinary customer service. Just so you understand how
this whole thing transpires, I want you to understand
that I am showing you a chart that starts in 1998, but
Nordstrom starts in 1901. So for 97 years, this company
is nothing but a store, or a set of stores. Then in 1998, they
recognize the disruption and they say, "We're taking
that service reputation we have, "and we're taking it online". By 2007, they have built
up their capability to such an extent, that they now have multi-channel fulfillment,
and basically transparency into the supply chain. And then they really
started getting excited. They said, "Look at all
those social media tools. "Look at all the mobility,
let's go after it". So in 2012, they introduce
their iPhone app. In 2013, they have mobile
checkout at their Rack stores. By 2014, they're creating
the customer experience around Pinterest. By 2015, they recognize the opportunities to sell through Instagram,
and if you look at that list, all kinds of other things. In 2015 they are simply adding
more and more capabilities around mobility, around social media, and notice that means that any
kind of competitive advantage they build, they just keep
putting on the pressure. If you are a competitor
to Nordstrom right now, you have to run awfully hard to catch up. Nordstrom's concept is, you won't. And notice, all this data in
these mobile and social apps, that's real data. Now they can analyze that, they can learn their customers better, they can extend their transparent supply chain, not just to all of what Nordstrom's owns, they can extend it to partners. They haven't as far as I know,
but notice what is possible because of the capabilities they've built. This is the power of a really
great operational backbone with a clear strategy. Now an alternative
approach, as I mentioned, is digitized solutions. So let's talk about the Schindler group. Now this is an elevator company. The elevator company in this case, is one of the four big ones. Now Schindler is really being disrupted, to tell you the truth. Their other three major competitors are also really interested in digital, but what they are identifying
is the opportunity to disrupt what has been
a permanent annoyance for the major elevator companies, and those are all the thousands
of small service providers that after Schindler goes
through all the trouble of installing an elevator,
these little guys come around and they want generate the ongoing revenue for maintenance. Now of course, Schindler
doesn't want them to do that, they want that revenue. And here's their opportunity. They started to recognize
that they are no longer wanting to sell just an
elevator, an escalator, or even the just the
elevator, the escalator and the maintenance of that. They want to sell
ongoing great performance of an elevator and an escalator. This is their goal. Now they too thought this through, and they said, here's
what it's gonna look like. First, we have built up this
capability over the years. So around 2005, they said,
we gotta clean it up, we have to be the best. And so they started identifying
the processes they used for their thousands of technical
assistants, technicians, who service the elevators, and they said, we have to do everything we can so they can be as efficient
as they can possibly be. And so they do this by building
what they called SHAPE, which is their underlying
operational backbone, and this basically
started with just an ERP. They start with an ERP, and they said, what we learned by basically
following technicians around, is that it's a tough job to do well. There are many, many
versions of our elevators, they come out with new
elevators all the time, and so when an elevator goes bad, they have to figure out which
generation elevator it is, what kind of parts it uses, what kinds of things tend to go wrong, what kinds of parts probably
have to be replaced. There is a lot, and then when
they figure out the parts, they have to find it in our
catalog, which is massive. So the first thing we have
to do for these technicians is come up with a simpler
catalog that lets them use an iPad or an iPhone
or some simple technology that just lets them pick the item that we can help them pick out. Over time they just
incrementally improved this. They go from helping
them pick out the item to getting more and more sensor data that helps them diagnose
what's likely to be wrong with the elevator, then
they diagnose what part is most likely to be needed, and most recently in Switzerland, they actually say now
that we've figured out what part you most likely need, we will have a partner of ours deliver it to the trunk of your car, technician, so that basically, you
can just tell the company you will arrive in the morning and you will fix their problem. Obviously, they can build on this. Now they can tell customers more and more, as the elevator breaks,
before the customer even figures it out, they can tell them that the elevator is broken, and that it will be fixed
by a given point in time. And as they collect more
and more sensor data, they'll do an even
better job of identifying the possibility of the
elevator breaking down, and alerting them to the need for service before it breaks down. But that is just a beginning. That is operational excellence. From there where they want to go is to recognize that they could be the urban mobility solutions provider. That's the digital strategy, and that's about going
beyond providing elevators, and it started with the port technology that many of you have probably seen. The port technology says, I'm
not gonna have these people get in an elevator and pick a floor, and then hope it's an efficient ride. We're gonna tell the people
what elevator to go to to get to their floor the fastest. And then they said, well,
we can go beyond that. When somebody's visiting
one of our customers, we can actually set it
up so that the visitor does not have to stop
at the visitors' desk. Rather they can be authorized
on their mobile phone, to go straight through
the security system, right over to the port technology, just scan their phone
and be told what elevator to get into get to their
host's appropriate floor. And then, they can move onto things like, well if get things more and more efficient within the building, what
are the possibilities beyond? How do we get you to your
subway ride, your bus, whatever it is you need next, how do we connect that
so that we're not only moving a billion people a
day, which is what they do, we are moving a billion people a day as efficiently as they can be moved through any urban environment. That's quite a goal. So that is where we are
with digital strategy. Now I want to just pause a moment and ask you to think about
what's your digital strategy? So I have a little poll here, where I ask you to tell me, what do you think will
work for your company? Will it be digitized solutions? Will it be customer engagement? Both? Neither? Can I ask you to just pick
one of those four options, and give us a sense, so
what's going on out there in the minds of the people
who are participating? Okay, Janine, can we see
the results of the poll? Well there we have it. Oh dear! 61.5% of you have chosen both. Oh my goodness. This is a disaster. Shall I explain why? It turns out the single
most important thing you have to do with
your strategy is focus. If you decide you are going to do both, you will succeed at neither. Let me make clear that if you
go for customer engagement, it's not that you can't
digitize any solutions, indeed you must. But you have to understand what the thrust of your strategy is, or you will build two separate and competing strategies right within your company. If you choose digitized solutions, you absolutely must
deliver those solutions in a way that works for your customers, but if you don't decide
whether you're going to focus on the great designer solutions, you are going to be creative,
you are going to do things no one ever imagined before, much as Apple has done, then you have not decided at all. You simply don't have a strategy. Think about what Apple has done. They have amazing customer
engagement, right? But it is very clear where
Apple is coming from. Apple has decided to have amazing products that solve their customers' problems, and so they are going
to get that out there and then they are going to
make them very easy to use, very nice to go to an Apple store, but this is driven by the product. It is not driven by the
customer engagement. You go to USAA, and they will tell you they want to have extraordinary products, but it will be driven by the engagement. If they can't figure out
how to engage the customer, they won't produce the product. These are different
strategies that in the end, actually enrich both sides, but you need to declare the
winner before the fight begins. You have to know what is going
to dominate your strategy. One example of this being done brilliantly has been done by Federal Express and UPS. UPS went after package data
and package efficiency, delivery efficiency from the beginning. Federal Express went after
customer relationships. Do whatever the customer needs. If you look at these two companies today, they do not look that different. They respond to one
another's competitive moves, but you'll notice that
they have decimated DHL, because they were both so
good at their strategy. It did allow them to
respond to one another. So let me just urge you to be serious about actually picking a strategy. Do not do what we all want to do, which is to say, well
one of these will do. I mean both of them are necessary, it is true enough, it just doesn't work. Pick which strategy is more important. Okay, so we have just a few more minutes and I wanna just lay
one more thing on you, and that is that after
you've picked the strategy, after you've identified what is critical in your operational backbone
and really cleaned it up, you will need one more thing, and that is your digital
services backbone. What we learn is that
as Nordstrom's collects all this social data, they collect more and more public data, as GE collects data from its sensors, they have to do things with data they've never had to do before. Analyzing big data, processing big data, staying connected,
extending their ecosystem, and this requires an agility
that an operational backbone does not give you. So you can add things and add things to your operational backbone,
but at some point in time, you will need a new backbone, and that is what we're calling the digital services backbone. The digital services backbone
will give you the agility, it will give you the power to analyze enormously big data about
your product and services or about your customers. It's an analytics
engine, it's a processor, it's a way of connecting
to your ecosystem. This is going to be the next thing. I will admit to you we
don't completely understand the digital services backbone, because companies are so
early in developing this. We do know that it has to be aligned with or connected to the operational backbone so that you can still
complete your transactions in a seamless way. So we know this is really important, and we know there are things, like the GE Predix Cloud, and
that is how they're going to basically store all their services, and there are people will go to the store and meet the needs of their customer by picking services that work for them. S0 the digital services
backbones are going to emerge. We can tell you that the
essence of that backbone will be connectivity, it
will be reusable services like authentication, it
will capabilities like big analytics and powerful data storage, but we do think this will
emerge a little differently for every company, and this what you need to be thinking about. If you don't have a digital... Sorry, if you don't have
an operational backbone, you really have to get
that in place first, you have to become
operationally excellent, but this is what you
should be thinking about as you start to recognize the limitations of these solid platforms
that you've put in, and their inability to
adapt to more product-driven strategies or more
customer-engagement-driven strategies. So this is what we've learned,
let me just tell you that what's gonna happen now
is you're going to have to recognize that it's a new world out there. In the pre-digital economy,
we designed our companies for efficiency, and
this meant we could take a divide and conquer approach. So we could have our functional leaders or our line of business leaders focused in on their business and do a great job. This will not work in the digital economy. In the digital economy, what we need to do is design for agility. That's about empower,
collaborate, synchronize, partner, in a word, integrate, and that is hard. The fact that it's hard
is what make it possible to gain competitive advantage from it. So we would urge you to think about how you're going to pull this off. I would tell you that the
digital strategy part of this is actually the easy part. Executing that strategy
is going to be hard. So to do this, think about
your challenge like this. Going forward, you're
going to try to build a solid, integrated operational backbone, and then also develop a
loosely coupled set of services that comprise the capabilities of your digital services backbone, and you will do that while implementing a clearly articulated
but constantly evolving digital business strategy. I appreciate that this is
an extraordinary challenge, and it's what makes
these times so exciting. I think my time is up. I wanna hand the floor back over to Peter. So let me wish you well with that. We will continue to do
research in this area, so please feel free to follow
us at http://cisr.mit.edu, and we hope you'll stay in touch with us. We look forward to following
your journey with you. - [Peter] Thank you very much
Jeanne, this is fascinating, and we have some time now, the
generation judges have aside to take some questions. We've got many coming in already. Please do feel free to keep
asking questions on the site, and I will try to sample some
and pass them on to Jeanne. So just to get this started, perhaps, I was interested in the poll
that we just did earlier on. Not only did 61.5% of
people, according to you, choose a rather feted approach
to their business strategy, 0.4% said neither. Is that, do you think, realistic? - [Jeanne] Actually, the
0.4% is probably right, because we have observed some industries where operational
excellence is still plenty. Those industries are behind,
I'm tempted to name one, but I don't wanna offend anyone, so I'm just gonna say you probably know if you are an industry
where operational excellence has been a struggle, and any
improvement in your operations affords you some competitive advantage. I actually think those
companies are not well advised to be too aggressive in
the digital services piece. I think go after operational excellence if that's all it takes, in the short term. You just have to keep your eyes open, because someday you're gonna
wake up and you're gonna say, "Oh look, one of my competitors
is doing really cool things "for their customers that has
now made them passionate." - [Peter] And perhaps that's
one of the alternative definitions of radical disruption, that somebody's going to
use a digital capability to come in and have a very
big impact on something that appears to be a very
sustainable business model. - [Jeanne] I think that's exactly right, and I know, some people are saying, "Well, I just don't
think you're helping me "recognize the thing that's
gonna totally disrupt me", and I would disagree actually with that. I think if we say we are going to have the most amazing products,
and then we make sure we are constantly
scanning and understanding what products are available,
we're gonna be fine. There shouldn't be any surprises if we're really paying attention, and the same thing on the
customer engagement side. If that's what we're going after, how could we possibly be caught asleep if we are connecting with
those customers all the time? So I think it's a bad job of delivering on what you're saying. I do not think it is possible
to be caught unawares, if in fact you are
connecting on one of those two dimensions. - [Peter] Does it matter whether
you think of your business being in a B2C or a B2B space, and historically we've often thought that those are very
different business models and require very different strategies. As I listen to these ideas, it seems like they're kind of merging almost, because even in a B2B space, the concepts you're talking about seem like they would be relevant. - [Jeanne] Yeah, it's really interesting. As were studying this
phenomenon, one thing we learned is that it's no longer B2B or B2C, it's B2B2C or B2B2B2C, so what we're identifying
is all those different layers of customers we have. We do find that there is a
tendency for B2C companies to favor the customer engagement strategy, and for B2B to favor digitized solutions. I think there's a logic to that, but I definitely think
companies should not feel constrained that way. They definitely do need to
know who their customers are, so the B2B, B2B2C, B2C, all
those things are still relevant, but I think this idea
of customer engagement and digitized solutions is another thing they need to think hard about. - [Peter] And what about sectorially, or in different industries? You have a few questions
coming from people saying something like,
oh I'm in manufacturing, what'll this mean for me? What do you see about that? Is there any particular lessons? - [Jeanne] Well there
are certainly tendencies. So if you're a big asset company now, it looks like you are headed
towards digitized solutions. If you're financial
services, there's a tendency towards customer engagement, but I would encourage individuals to think about whether
that is important for them, because we have for example
seen a company like iGuarantee, which is a bank, say no,
we're gonna redefine banking. We're not gonna think of
ourselves as a provider of mortgages and loans
and checking accounts. We're gonna think of ourselves
as your financial advisor, and we're gonna be at your
side, and we're gonna tell you when your favorite stores have sales, and we're gonna tell you're
spending more than you should, and so we're gonna
rethink banking for you, and I think they've taken very much a digitized solutions approach. One could argue that, but I think that there's a tendency, and then it's worth disrupting that by saying, oh let's make
sure that's where we belong. - [Peter] Interesting, that leads actually to what used to be one of
the most asked questions that we're getting today, which is, if we accept this
premise, how do we choose which of these strategies
is right for our company? If we research, could you
see what the companies that have been successful had in common that enabled them to make
good choice, and tools? - [Jeanne] Yeah, so I think actually, hopefully you've built
capabilities over the years, and I think the companies that
are in the biggest trouble are the ones that say, well,
can't think of any, really. Those companies are in trouble, and they can probably
pick either strategy, it does not matter, they
just have to get started. But I think you will tend to
look at your capabilities. So I mean it would have
been crazy for Nordstrom's or USAA or Kaiser Permanente to say, well let's see, why don't
we do digitized solutions, when what they're known for right now is their ability to understand
the needs of their customers and just understand them
better than anybody else, to have built up that trust. Why would they do anything but just say, we are going after it. And if you have great engineers, and you have hired them
and they are great, why would you suddenly
say, hey wouldn't it be fun to do customer engagement? So I think most companies are gonna look at what's in place and they're gonna say, this is where we belong. Now we just have to leverage it, we have to make is stronger, and if you look at your
operational pipeline, I think it is going to indicate for you where you're stronger. If your operational backbone is weak, then I think this is where you're more comfortable committing. Where do you think you've got the talent, or could get the talent, and interestingly, I kinda
look at the two strategies and say, it's not picking
the right one that matters, it's delivering on it. And so whichever one you
pick, and get past it, right, pick one and move. Just make sure you do this
better than anybody else, and that is your challenge. So it's not the picking. I don't think it's the picking. It's about once you've picked, make sure everybody's on board, you are defining every
day what that means, you have a vision, and you
are evolving that vision over time. - [Peter] That makes sense. Let's assume that we can do that. (Jeanne laughs) And you talked a little bit there about some companies might be facing a situation where they don't even feel they have a strong operational backbone yet, and yet they need presumably
to work very quickly to build a digital backbone. Can they do this in parallel? - [Jeanne] (chuckles)
We actually don't know the answer to that question. They probably will be forced to, so it is suboptimal but,
depending on their industry, I mean again, if your industry is nowhere on operational excellence, I
would say you don't have to and you shouldn't. Go after the operational excellence. But if you're in an industry
where you're looking at your competitors and you're going, oh my goodness, there they
go into digital services, you probably have to go there with them. I would certainly get help. I mean, there are great vendors out there. So go after the software
as a service companies, stop thinking about building internal technology capabilities, put all of your attention
onto changing the culture, the understanding of what
a standardized process is, why it is important, how you reuse it. Get all of your management
bandwidth on that, and bring in partners to take care of the other part of this for you. They're very good at that. The partners are brilliant at that, but they cannot change your culture, and that's what you should
be spending your time doing. - [Peter] Well it's very interesting that you should finish on that note, 'cause we've been getting
a lot of questions about that as well, which
is people pointing out that it's all very well
to talk about technology, but ultimately we need people, whether they're our customers, but in particular our employees to be able to make these kinds of changes. So the questions really
come in three kinds, is, how do people need to change,
and how do we achieve that, and actually, what does it mean
that we need of our leaders? - [Jeanne] Yes, oh my gosh,
those are great questions. I guess the two magic words
appear to be user design, and that can mean so many things, but I'm struck by some of the things that Schindler described when they said we were making our
technicians lives easier, and my question for them, of course, is, I bet they didn't really like this, right? Didn't they find this miserable, didn't they say, "Ah, I
don't wanna touch that "piece of technology",
and their answer was, no. They were very happy. They loved it, and at first you think, ah, they're just being naive. Here's why that worked. Because they sat with these people, they went on the job with them, they watched their
struggle, and they said, so if we could do this for you, does your life become easier? And they said, oh my goodness, yes. Oh yes, it becomes easier. So this is what they're trying to deliver, and I would argue that that's the way we need to think about it, not off in some other room, we say I know what the process ought to be, but rather with the people
who are doing the work. And I think if we get around it, that's the way we have
to design processes. We need to understand the people
who are already doing them, and how do they make things easier? I think this is very
doable, it's just that it's not the way we tended
to do things in companies. So we think about user design. - [Peter] So you have
people, you meet people who attend our executive
education programs, they come as individuals. You also worked with some companies to really help them to think through, develop their strategies and
then implement and execute, you talk about their forms
of strategy execution. Are there any, sort of
what people should be thinking about next, I
see that we just put up some featured reading
- Ow, I did. - [Peter] for example? - [Jeanne] Sorry! - [Peter] It happened by magic. (Jeanne laughs) But as we're just sort of drawing towards our closing remarks, what
could people be thinking that they should really
do towards this incident? Let's say you got them very excited and they need to do something. What on earth do they do? - [Jeanne] So, here's
the thought I would leave everyone with. How do you become an
evidence-based person? And ideally, every company
needs to adopt this culture, but I actually think
that every single person can take responsibility for this. Now, our inclination is to say, well, I just don't have good enough data, I can't be evidence=based
because I don't have the data. But take that a step further. What data is it you don't have, and what would it take to get it? Just ask for it. What we find is, companies
are growing this analytics platform, an analytics capability, and bring in a data scientist, and nobody actually knows
what data they want, what kind of analytics they care about, and what they're gonna
do with those insights when they get them. And if every single person
starts thinking that through, you actually can start
to foster that culture throughout the company,
by asking the right kinds of questions, by pointing
out what's possible. But when something goes
wrong, our tendency is to find someone to blame. When something goes wrong, say,
I'm gonna own that problem, because I wanna fix it. I don't care whose fault it was, I think if I have certain kinds of data, or certain kinds of empowerment, I can fix that problem,
and here's what I need. I think every individual can own that, and people in leadership
positions can encourage that, and I think that's really step one. We have to become evidence-based. - [Peter] So data-driven,
solution-oriented, and empowering people. - [Jeanne] Easy! (laughs) - [Peter] That sounds very easy. Well thank you very
much, Doctor Jeanne Ross, this has been fascinating,
on behalf of the thousands of people who signed up for this webinar. As we're drawing this segment to a close, I'd just like to also remind everybody that I mentioned earlier,
Doctor Jeanne Ross does teach in some of our
executive education programs on these themes, and if
you're in a large company that has thousands of
people who you would like to get this word out to as well, please do feel free to
get in touch with us and talk about that. And we're now moving, I
think, into the Facebook chat. If we could push the next slide, please, a component of this experience. So we'll say goodbye to everyone who has to leave us now
from the voice webinar, and be moving over to the Facebook chat. You should get a link pushed
up on your page right now. So please, I hope many of you will be able to join us and continue this
fascinating conversation, and thank you all, and
thank you once again Doctor Jeanne Ross. - [Jeanne] Thank you. - [Host] Ladies and gentlemen, thank you for joining us today. And you should see the link
to the Facebook discussion with Doctor Ross appeared on your screen. We hope you found this webcast
presentation informative. This concludes our program,
and you may now disconnect. Have a good day.
