Digital technologies are changing the way enterprises run, with arguably greater, and deeper, impact than previous waves of IT transformation. The convergence of social, mobile, analytics, and cloud (SMAC) capabilities to maturity is redefining how many companies do business and perform. Yet, unless companies dive deep into their own operations in order to apply the art of the possible where it matters (and only there), all the "SMAC talk" about such transformation will remain just that—talk.
New technology paradigms inevitably send disruptive shockwaves reverberating around the C-Suite, and the current hoopla surrounding digital disruption from technologies such as SMAC suggests we are likely again entering the familiar cycle of hype and disappointment charted by previous IT waves. Indeed, a growing body of research indicates that many enterprises haven’t derived full benefits from new technologies, and our own recent study found that more than 50% of operational executives saw at best "some" benefits from the digital technologies they implemented. Given the little-understood interplay between new technologies, client behaviors, and—most importantly—legacy systems and processes, still more waste should be expected in the future.
Clearly, many established companies aren't fully prepared to embrace digital technologies that deliver measurable impact, nor to address the value chain beyond the front-office "veneer." In those firms, the complexity of legacy technologies and processes (and sometimes people) seems insurmountable.
How the best companies will run in 2020 will be quite different from how they do now
Many leaders have begun asking, "How do our enterprise operations get into 2017 with tangible results, and get prepared for where we'll need to be in 2020?" The question reflects the complex demands leaders face—"I need to have a story for my stakeholders that proves our company isn't at risk of becoming a dinosaur" at the same time that the organization must meet the business necessities of the next two years.
This shift in thinking has profound implications for the business models of companies aiming to avoid extinction. SMAC technology promises to change everything. It will allow tech-genome-rich (i.e. "software-defined") companies to make inroads into a number of fields previously off limits, where they will successfully compete with analog incumbents. Take GE as an example. Right now, GE is out to transform itself partly into a software and analytics company. Why? Because it knows it has more of the industrial machine data essential to harnessing the rapidly rising “Internet of Things" than anyone else in business today. Or consider what has happened in online retailing over the last 15 years. Specifically, ponder how Amazon, after pretty much obliterating mega- book retailers from the brick- and-mortar landscape, so quickly segued to taking out other merchandisers across almost every retail sector.
Then, of course, there is the impact of IT infra (cloud services) to consider. Think Uber and taxis. Think of consulting firms that are increasingly losing point engagements to non-traditional on- demand consultants who use better social and collaboration tools to find each other and work together. Think of the "exponentially scalable organizations" that harness technology and smart resourcing (sourcing, outsourcing, crowdsourcing, open innovation) to trump scale and incumbency.
Our (mine, your) businesses are next
We are witnessing a moment in history in which a massive redefining of competitive spaces is taking place. Competitive forces in every industry are being reshaped by technology's ability to change front and back offices, creating a landscape in which you either get disrupted or are disruptor. At the same time, scale is no longer the force that it was—smaller competitors today can greatly pain big companies. Think of insurer Ironshore leveraging new operating models and technology to expand specialty insurance segments almost from scratch. So what's the impact on your company's back-to-front-office execution chain? For instance, what is straight-through-processing (STP) in an age of machine learning, or even deep learning? Computers are already better than doctors at detecting certain kinds of cancer from complicated images, jeopardizing the future role of the basic human radiologists. What does level 0, 1, 2, or 3 client support mean in this sort of world? For that matter, what do such operating models become when predictive and prescriptive analytics are able to realize 95 percent accuracy for simpler, or more data-intensive, recommendations, such as with tech support, choosing an insurance policy or dealing with a claim, or giving wealth management advice to clients in real-time? What happens now that we can have real-time customer sentiment detection or automated personal assistants? When virtual reality can make your desktop the size of your office? Or when you can get real-time voice translation (as Skype will do a beta on later this year)? What happens when Google Glass-type technology gets deployed at scale in field operations (rest in peace its fashion use...)?
Today's challenge is not digital technology, but the ability of enterprises to reimagine how businesses run—at scale—by harnessing digital's power to adapt and compete. But without critical foresight, organizations will simply digitize the wrong processes, or reshape the way their recursive action-data-insight-action flows are built while thinking within obsolete paradigms.
Practical solutions exist that build on business domain expertise, portable methods, and advanced technology
When planning a digitally powered transformation, leaders must build on these guiding principles, borrowed from classic Lean management practices:
- Spot the unnecessary in the design phase. Ensuring that complexity is identified before the beginning of digitization is an investment that pays off many times over. For example, unnecessary process steps—steps that don't add a client or increase overall business value—are singled out at this stage, and respective functionality is placed out of scope. Lean can be combined with Design Thinking methods to ensure sharp and consistent visibility between customer experience/value and the digital transformation design. This relationship can be measured, and inconsistencies can be dealt with early on to avoid cost and time overruns.
- Simplify the build phase. Support a simpler transformation, one that displaces less legacy technology, people, and processes, or eliminates them altogether, seamlessly. This not only helps things move faster, and with fewer risks of surprises, but also permeates the agile software development that powers the new operations. Remember: the wheel of innovation does not spin at the same rate across front, back, and middle office, yet all must come together to deliver superior customer outcomes. Lean can materially simplify the kinds of information and insight flows that complex legacy technology, people, and processes typically support—without waiting for that ideal end state.
- Enable the running of a tight ship. Operating Lean processes and organizations, including infrastructure and legacy technology maintenance through Lean IT, makes enterprise operations more cost effective and agile, at the same time freeing up resources for investment in future evolution that otherwise would be locked down for maintenance. Coexistent Lean and Six Sigma practices also ensure that lower defect rates or marginal cost reductions—Six Sigma hallmarks—aren't actually won as trade-offs for the organization's ability to evolve.
Conclusion: Lean puts SMAC to work for more tangible impact
SMAC technology is equally as likely to be a source of digital disruption as it is to be a major distraction for leaders and managers. However, a practical Lean management approach—one that harnesses advanced technologies and analytics, architects advanced organizational models, and leverages these to deliver enterprise-wide impact—can result in a more rapidly attainable, yet scalable and cost- effective, business process platform, built to adapt.
Authored by Gianni Giacomelli, Senior Vice President, Head of Genpact Research Institute and Chief Marketing Officer. This article1 first appeared in Outsourcing Gazette's October 2015 issue