Answer the tough questions to make digital profits

Answer the tough questions to make digital profits

Buying digital is not enough. It’s up to CIOs to enable better business and customer engagement, not just rehash the business in a new format, Mark McDonald, managing director at Accenture, told executives at the Fusion 2015 CEO-CIO Symposium.

“When we see people express their digital strategy in terms of things they buy… they are expressing it in terms of a noun,” McDonald said. But that’s not the same as knowing the “why” behind it and knowing what it is going to do.

“Digital is an adjective. It’s the application of technology to anything, to any resource, that makes it more information enabled and connected.”

He called for executives to dig into the “why” of their digital strategy and not just get caught up in the what and how. “People feel agile when they have a business case and a roadmap,” he said.

But that’s not all it takes. It’s easy to get caught up in digital as a set of trends or a keep-up-with-the-Joneses necessity. But it’s up to CIOs and their executive partners to find ways to “move the needle” and not put in technology for the sake of technology.

“Strategy is making a set of choices: this, and not this,” McDonald said.

Even though digital is “relatively cheap,” he said, making multiple investments across the enterprise without enough justification is still a waste.

The startup and the giant

McDonald critiqued the way that startups are forcing the hands of larger organizations, with big companies pursuing digital and mobile plans because small startups are and they feel they have to respond. Startups, he said, are “driving the terms of competition, even though they don’t have many customers and many will fail.”

But he didn’t agree with those who say that large organizations will be crushed due to some lack of agility or ability to keep up with technology.

“The Fortune 500 isn’t going to go away. It’s going to reconfigure,” he said.

Part of that reconfiguration will be more business on the customer’s terms, especially in personalization and segmentation. McDonald said traditional thinking could be to segment verticals, including a vertical back-office organization. Now, it’s about horizontal organizations that can deliver last-minute personalization to everyone. Postponement of personalization to the last reasonable moment is part of efficiency in this model.

It’s about precision. Companies need to not just reduce waste, but “deliver exactly the right amount in the right place,” McDonald said.

Eye candy and practicality

McDonald drew a comparison between the front brain, which is attracted to the latest technology and “eye candy,” and the back brain which has to think practically about making money for the business.

He said it’s easy to have people talk about fancy tools and techniques, and “boggle the front of my mind while in the back of my mind I’m just writing checks.” He’s also run into situations repeatedly in which companies have said, “I want to do digital, I don’t want to be disrupted, my competitor’s got one and I want one too.”

But the back-brain practicality especially of larger and more established firms is one of the things he expects to help save them against pluckier startups.

“You need to make decisions about which needle you are going to move and which investments are going to change it,” he said.

Binary possibilities

McDonald encouraged CIOs to embrace binary — not as in code, but as in simple, clear processes that either happen or don’t, and are easily understood especially by the customer.

One example is Berkshire Hathaway’s AirCare travel insurance, which is advancing the idea of claim-free, flat-rate payouts based on measurable outcomes such as delayed flights. This is binary — the plane is either late by the given amount, or it’s not, and the customer gets a payment without an involved process. The program’s web site advertises that it can start finding a few flight before the customer knows they will miss theirs.

Of course there are different possibilities in every business. Whatever the strategy, success will come down to customer experience.

“You have to know why people choose you, and they have to choose you repeatedly,” McDonald said.

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