Five Lessons to Build Competitive Advantage in the Digital Age
To succeed in today’s dynamic digital world, organizations need customer-focused processes designed through a human lens, powered by new digital tools and optimized by a hyper-connected and digitally acculturated workforce.
Ubiquitous digital technologies and tech-savvy customers present profound implications for businesses in the form of disruption and dislocation and, importantly, opportunities for transformation. With data fueling the digital economy, traditional companies are repositioning themselves by reimagining their value proposition. As digitization amplifies information flows, companies are shifting their focus beyond the goods and services they sell to the value they can create, build on and offer through digitized workforces and intelligent engagement with customers.
It is becoming increasingly clear that when organizations are confronted by digital technologies and new customer expectations, changes need to be made to their underlying business, IT operations and services to fully leverage the upside of more flexible, frictionless and intuitive ways of working.
However, digital technologies such as social, mobile, analytics, and cloud share a common characteristic: they are easy to access for any company. On a level playing field such as this, maintaining the digital advantage is a challenging task, and companies that fail to understand this are unlikely to maintain any competitive advantage. In a recent study by MIT Center for Information Systems Research, the researchers postulate that a select few companies will successfully engineer a digital strategy, and they’ll do so by seamlessly weaving digital technologies into business processes to fulfill a clearly defined purpose. In our view, this is the digital Holy Grail that winning companies will master. Proactive companies will use the following lessons to stay ahead:
Lesson 1: Transition from analog to digital over time
Organizations succeeding with digital are reimagining their entire business, process by process, around clearly articulated principles and integrating traditional business processes with new technologies and approaches. Kaiser Permanente, an integrated provider of healthcare and not-for-profit health plans, for example, has established a customer engagement-focused digital strategy, with the goal of creating personalized customer experiences that foster customer loyalty. Companies choosing this approach work toward developing a seamless omnichannel customer experience and establishing a personalized customer relationship based on a deep understanding of their motivations and behaviors.
Viewing healthcare as a partnership between care providers and its members, Kaiser Permanente uses a variety of digital tools to provide low-cost access to providers and to facilitate the delivery of both preventive and curative care. To deliver on this value proposition, Kaiser Permanente is working to:
Bolster patient interactions with care provider teams through digital channels.
Apply analytics to identify the need for personalized medical care and the optimal method to provide it.
Use social media to develop patient communities with similar needs and interests.
As a result of Kaiser Permanente’s digital customer engagement outreach, 70% of the company’s members are actively engaged in managing their health online. The company’s in-house research shows a positive correlation of this online behavior with better health, improved adherence to medication and treatment programs, and higher member satisfaction and retention.
Lesson 2: Ensure competitive digital operations
Schindler Group, a global provider of elevators, escalators and related services, pursues a digitized solutions strategy that has transformed the company’s business model by reformulating what the company actually sells. With this strategy, Schindler seeks to:
Integrate disparate products and services into solutions.
Complement products and services with data and expertise to solve customer problems.
Add value through the lifecycle of products and services.
The company uses an Internet of Things (IoT) solution to collect data (e.g., temperature and speed) from sensors planted in its installed base of elevators and escalators. The sensor data — as many as 200 million-plus messages — is analyzed, and the relevant information is passed onto the company’s more than 10,000 technicians who install and maintain Schindler’s products.
Schindler’s use of the IoT, big data analytics and mobile technologies has enabled it to rewire its core operations. The sensor-generated data is processed with robust business rules and machine-learning algorithms to generate actionable insight. The solution has improved the customer experience, as the company can now preempt equipment issues, prioritize work and update maintenance schedules continuously, based on a real-time data feed.
Lesson 3: Empower a connected workforce
Schindler’s field technicians today are a connected workforce. Armed with an iPad or iPhone loaded with custom-built apps, each technician’s typical day is orchestrated by a steady flow of information, based on analysis of data streamed from sensors embedded in escalators and elevators. The app prioritizes the work, allocating it to the technician who’s geographically closest to the customer, and suggests the fastest route. If the real-time data feed from the asset in question suggests a change in priority, the app automatically reconfigures the technician’s workflow.
Based on the information provided by the asset, the app suite also reveals a list of tools and parts that will be required for repair work. Once on the job, the technician can order spare parts from a 40,000-item catalog or watch video tutorials on specific maintenance work.
Lesson 4: Build an agile process engine
Data is the distinguishing feature of a successful digital operation. It enables analytics — both descriptive and predictive — to nudge a business into a proactive mode of operation. In a digital operations context, data is both an input and an output, resulting in a positive feedback loop, which continuously optimizes business processes. Ideally, a digital operation is built around:
Data, streamed from a single reliable source (e.g., transactional data, financial data, customer data).
A seamlessly architected end-to-end business process, which feeds off the single source of data to process transactions.
A robust continuous process improvement capability (Six Sigma and Lean) that uses this digital data stream to drive efficiency and effectiveness.
For this reason, it’s critical for organizations to have cost-effective tools that capture the necessary data, and digitize it for delivery in any format. Once the provision for data capture, storage and access is enabled, a combination of traditional and big data analytics can be applied to make meaning and optimize business operations.
Lesson 5: Build a digital foundry
Building a digital foundry is the first critical prerequisite for fostering an ecosystem in which a thousand apps can bloom. In our experience, the digital foundry must include:
Technology capability. Beyond the potpourri of custom-built applications, digital also involves an array of technologies and models, including social, mobile, analytics, cloud, the IoT and artificial intelligence (AI). To accommodate this ever-expanding suite of technology applications, companies need a robust IT backbone that is agile, resilient and flexible.
Business process redesign and design-thinking capability. Design for Six Sigma (DFSS) and design thinking principles provide a structured methodology for redesigning new systems and processes. DFSS is a customer-centric design approach with a repeatable methodology that fosters creative process design.
DFSS is the most appropriate toolkit to use when:
The business needs to replace, not repair, a system or process.
Improving the existing process will not meet the business’s needs.
The business is offering an entirely new product or service.
Design thinking tackles complex problems by:
Empathizing. Understanding the human needs involved.
Defining. Reframing and defining the problem in human-centric ways.
Ideating. Creating many ideas in ideation sessions.
Prototyping. Adopting a hands-on approach in prototyping.
Testing. Developing a prototype/solution to the problem.
Looking ahead: Adopting a digital operations code
As the future unfolds, it’s critical to understand that creating robust digital operations requires seamlessly integrating relevant technologies with business processes to forge sustainable competitive advantage. This requires adopting a new code of engagement between businesses and service providers. In our view, there are seven key components to a high-performance approach to digital operations and business services:
A well-defined customer-focused digital strategy that advances the business’s value proposition.
A secure and a reliable platform, automated with the latest robotic process automation (RPA) and intelligent process automation (IPA) technologies, enabling transactions efficiently.
Use of mobile and analytics technologies to deliver insights to stakeholders, enabling the business to continuously improve business outcomes.
A digitally empowered, skilled and connected workforce, with real-time access to data, insights and expertise, and an unrelenting focus on delighting customers at every touchpoint.
A new set of digital-age metrics that go beyond traditional output measures of process efficiency and effectiveness.
A shared digital culture that fosters a collaborative environment that embraces change and the right behaviors to drive joint outcomes and success.
All of the above must be supported by a flexible customer engagement model, with the strategic ability to anticipate and respond to rapidly changing business needs.