Even with all the changes digital technologies have brought to the way organizations communicate externally, internally they still operate in a fundamentally siloed way.
By Suketu Gandhi and Alanna Klassen Jamjoum
As we arrive at a stage of near infinite interconnectivity, executives are struggling to digitize, gaining the agility to sense and react to changing market conditions, using all available machine and human intelligence. This struggle exists in part because, even with all the changes digital technologies have brought to the way organizations communicate externally, internally they still operate in a fundamentally siloed way, driven by habits disguised as processes and propelled by gut reactions. They have been focused on using social, mobile, analytics, and cloud tools that work well for external communication but do little to advance digitization goals.
Now, companies are about to change how they operate, by turning their attention to using digital inside the enterprise. Some groups of functional expertise will still exist in siloes, but their walls will be more permeable. It won’t matter if information comes from customer service, marketing, or from devices in customers’ homes or on their wrists: data will be used to generate insights for making better business decisions. And these insights will propagate across functions, leading to new competitive approaches.
Now It Starts with the Cloud
We now have a new set of tools for redesigning the way a digital enterprise operates, which builds upon the old set. Whereas until now organizations used social, mobile, analytics, and cloud tools, it now begins with the cloud, and moves through the next generation of technological competencies—from the cloud to algorithms, through design and devices. These provide the speed and accuracy of reaction needed to compete successfully in a globally interconnected marketplace. And these lead to the most important tool of all—insights—to face market conditions that are changing faster than ever before, and to serve customers’ high expectations.
Companies that apply these five tools—the cloud, algorithms, design, devices and insight—are likely to be more successful and grow more rapidly than their competitors. One company finding success with these tools is Chase Bank, which has become a clear leader in mobile check deposit. The retail banking innovator has seen a stunning increase in mobile check deposits—last year they saw more clients deposit a check via mobile and ATM than in branches, and mobile deposits increased by 25 percent over the last year. The innovation leading to success in this channel goes deeper than the simple act of customers depositing a check with their phone. With the use of algorithms and insights, Chase is tackling the heightened risk of check fraud associated with mobile deposit. By better understanding its customers, Chase tailors its check deposit limits based on customer risk profiles, thereby both reducing risk for itself and improving the customer experience.
New Tools to Digitize
The cloud today is evolving to the next stage, becoming a mechanism for sharing intelligence and making it easier than ever to connect with third parties and tap into a shared pool of intelligence. As a result, a company can find the intelligence it needs and leverage it to reconsider its business approach and restructure its operations.
Organizations now have the ability to connect to millions of devices around the world, and enjoy a relatively low cost of computing and storing billions of bits of data. Increasingly, they are turning to algorithms—small, inexpensive pieces of code—to decipher patterns within their vast databases, and use the information to solve problems that formerly were practically unsolvable. Algorithms are available from vendors in the cloud for a small fee, and are in wide use to solve a multitude of problems.
Companies are redesigning their machines, giving them the ability to interact with people and/or other machines while also understanding the context in which this interaction happens—a key consideration in design decisions. Countless machines, from drones to thermostats, now have context designed into them. Two drones talking to each other, for example, know whether one or both are in a war zone or in a protected environment. Thermostats with built-in context not only know our programmed temperature preferences, but have the ability to accurately control the temperature of our homes at all times without human intervention.
Digital devices are proliferating exponentially. Refrigerators, cars and trucks, individual shipping pallets of products, even city lampposts are becoming digital. Some of these products will just be listeners, responding to directions and taking appropriate actions. Others will be both listeners and talkers, receiving information and communicating it back to the enterprise, providing key contextual facts that can be heard, interpreted and used.
For example, GE now adds digital components to its new aircraft engines so it can constantly monitor them while they are in the air. Information from the engines and additional intelligence about the plane’s location, current and forecasted weather, and other relevant factors improve the engines’ performance during flight. Manufacturers of washers and dryers are connecting their machines to sources that track the fluctuating prices of electricity, allowing the machines to advise owners on the least expensive time of day for doing laundry.
The first four tools—the cloud, algorithms, design, devices—gather and analyze the vast information now available. This data allows a company to generate insights about its operations. The key to generating insights, however, is not computers or machines—it’s people. Only humans have the ability to generate the insights needed to ask and answer key questions about the business, such as: Should it stock more of a certain item? Should it raise prices on particular products? Should it add more retail clerks or customer service reps in certain locations?
Together, these five tools—the cloud, algorithms, design, devices and insights, which can easily be remembered using the acronym CADDI—will play a central role in changing the way the enterprise works internally. It will no longer function as a siloed, process-driven, gut-reacting company—instead, it will become a digital enterprise that relies on insights for making better business decisions that change how it operates and competes in the marketplace.
Suketu Gandhi is a partner and Alanna Klassen-Jamjoum is a principal in the global digital transformation practice of the management consulting firm A.T. Kearney. They can be reached at Suketu.Gandhi@atkearney.com and Alanna.KlassenJamjoum@atkearney.com, respectively.