Turning the ship toward automation

My recent post about whether the proportion of offshoring in a sourcing portfolio matters anymore got a lot of attention. As I wrote in that piece (“Why Offshoring Doesn’t Matter“), sourcing buyers are eager to incorporate automation into their environments, but some service providers are struggling to adapt to the new digital world, largely because that pivot requires them to cannibalize existing revenue to implement automation and digitization. Not only does the financial impact slow them down, so do their corporate cultures.

Let’s take a look at the obstacles to automation from a service provider’s perspective:

1. The risk of changing. Traditional service providers have built their businesses selling services that are delivered by people. Even if the price of automation was the same as the price of people (which it is not), revamping an entire portfolio is a big job. And selling services that are entirely new to the market is risky. Service providers that embrace automation risk underbidding the solution and losing money or paling in comparison to a competitor that already has it figured out.

Despite the risks, service providers today cannot afford to stick their heads in the sand. Even cautiously adding digitally automated components to a solution at or close to renewal time is not enough to keep up with changing market demand. The fact is, buyers are not looking for service providers that are lukewarm about automation; they are finding and investing in service providers that embrace it.

And many service providers are investing in digital, automated solutions, as I was fortunate enough to see during a recent tour of several campuses. What remains unclear is whether their sales forces and internal bureaucracies are as willing to embrace the change as their technologists.

2. The challenge of changing. Turning the barge is hard. Service providers have built efficient machines that keep hundreds of thousands of people busy day in and day out. Their cultures emphasize safety over risk. Offering cost-effective services by following carefully-laid-out processes (considered safe) is often seen as preferable to investing in innovative, new solutions (considered risky). Service provider management bonuses are tied to profitability, and profitability is tied to keeping big workforces busy. Career paths at these firms have been designed for engineers who graduate from writing and maintaining systems to managing people who write and maintain systems.

We are now at a point where conformity to process can be a barrier to progress. Yet, for most service providers, the prospect of overhauling an entire business model is daunting. How will managers earn bonuses when their clients demand fewer people, not more? What would management even look like if it involves supervising software robots? Knowing the magnitude of this kind of change, and knowing what we know about human nature, it’s easy to see how such an obstacle will not be easy to overcome.

Some argue that demand for advances in internet of things (IoT) technologies, automation, cognitive computing and digitally savvy robots will keep the legions of developers at IT services firms busy for generations — they will simply write different kinds of solutions than they do today.

And while this may be true, most traditional service providers will struggle in the transition from today’s business model to tomorrow’s. They may understand what is happening in their markets, and they may understand the technology that’s required to meet the new demands of their customers, but they are still saddled with an infrastructure built around people-based services.

The nature of the challenge itself is new to service providers. I have no doubt they possess the technological wherewithal to compete in tomorrow’s market. Will they recognize that the barriers are cultural? Or will they try to solve what is fundamentally a behavior challenge with more technology and more people?

In this new era, I give the smaller players the advantage. Changing the hearts and minds of 10,000 people is a lot easier than changing the hearts and minds of 100,000 people.

Source: cio.com-Turning the ship toward automation

Is your digital transformation process truly transformative?

Digital transformation is what big data was for organizations just a few short years ago. Everyone is talking about it, and organizations are scrambling to make sure it is a strategic initiative by having some sort of digital transformation process.

Just like big data, the term digital transformation gets its popularity from the size of its potential impact rather than being a new tool for improving operations. Since the first days of robotic automation in manufacturing, people have been using technology to improve and simplify work. Now, we are shifting the use of technology to a wider array of complex work, such as customer interactions, reporting and decision-making.

There are several reasons for this increased attention to digital: the pace of disruptive technology, the need to do more with less, the need to maintain competitive advantage and, above all, the need to be more customer-centric. Though digital tools and technologies significantly affect the way business is conducted, many organizations continue to struggle with them or struggle to put into place a comprehensive and effective digital transformation process.

Why are organizations struggling?

A report on the 2015 global digital business survey conducted by Deloitte and MIT Sloan Management Review said “maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.”

The root cause of organizations’ struggles seems to start with a key word — transformation — that often either gets overlooked or misinterpreted. Transformation can be defined as a significant organization-wide change that orients the organization in a new direction. This can include a change in its business or operating model. Transformation, however, is not merely an incremental improvement or transition to a new system or application.

Unfortunately, many organizations are not embarking on transformations. Instead, they are solving discrete business problems with digital technologies. This means they are creating one-off solutions for a single business problem rather than looking at an integrated approach to solve multiple business problems. Because these types of projects have digital components, they get mislabeled as digital transformations.

When this occurs, organizations struggle because the digital transformation process lacks an overarching purpose and plan to tie the efforts together. Ultimately, this lack of an overarching strategy results in confusion among those tasked with execution because they don’t know the following:

  1. What’s in. There are often no parameters or criteria to define what parts of the business need digitization projects or to help scope and prioritize efforts. For example, an organization that wants to use digital technology to improve its finance function will have no guiding criteria to help pinpoint which processes should be automated.
  2. What the right solution is. There are no criteria for determining the fit of the plethora of solutions available. Without clear goals, the organization can’t clearly articulate what features it needs, potentially resulting in overbuying or making expensive modifications afterward.
  3. How the pieces will fit together. There is often no holistic perspective on digital projects to help the organization understand the intersections and interdependencies between projects and the work they are accomplishing. This can result in post-implementation integration projects and add-ons.

How to tell if your efforts are transformational

Understanding the difference between a digital project and digital transformation is easier said than done, especially given that digital transformation should be comprised of interconnected digital projects.

However, strategy, rather than technology, should be the guiding principle of the digital transformation process. Additionally, digital transformation tends to hinge on two characteristics: a focus on customer experience and its organization-wide impact.

The purpose of digital transformation is creating value, and that includes for the customer’s experience. Hence, organizations not only need to understand their customer’s journey, but must also use the impact on customers as one of the key criteria and measures of their digitization efforts.

The transformative work of an effective digital transformation process requires looking from the outside in, and that includes value chains and cross-functional, end-to-end processes. To ensure organizations stay focused on the end user, digital efforts must help break down operational silos and improve collaboration for managing customer value.

To categorize the initiatives in its digital transformation process, each organization should ask itself these four questions:

  1. What’s the value to the customer? Is the effort focused on creating customer value, and is that value clearly quantified to measure success? If the focus is on the steps and efficiencies of a business process and not on establishing the customer value, it’s not transformational.
  2. Are we changing how we work? Is the initiative going to change how we conduct business or does it simply apply a new technology to how we’ve always done things? As noted earlier, there is often a misconception that digital tools are equivalent to digital transformation.
  3. Who’s involved? Is the effort limited to a specific business silo — e.g., marketing or finance? Because transformations are organization-wide, they are cross-functional by nature.
  4. Why are we doing this? Transformations are focused on changing how the organization conducts business in an effort to create value. If the focus of the effort is solely on cost reduction, then it’s not transformational.

Though only a high-level start, the answers to these questions can help organizations start to clear up some of the confusion around their digital transformation process.

Source: searcherp.techtarget.com -Is your digital transformation process truly transformative?