We have seen the accelerating impact of technology on a wide variety of industries in the past decade. We have witnessed the impact of internet shopping on retail industries, and seen the impact of digital content and downloads on the full spectrum of traditional media companies across books and newspapers as well as movies and games. Traditional enterprises are struggling to anticipate and stay abreast of the advances and changes. Even in those industries far away from the digital world, where they seem very physical, it is critical to leverage ‘smart’ technologies to improve output and products.
Let’s take logging and sawmills as an example. Certainly there have been physical advances from improved hydraulic systems to better synthetic ropes, but playing an increasingly prominent role is the use of digital technology to assist operators to drive complex integrated machines to optimize the entire logging and sawing process. The latest purpose-built forestry machines operate at the roadside or nearby off-road cutting logs from whole trees combining steps and eliminating manual labor. These integrated machines are guided on-board computers and electronic controls. This enables the operator to optimize log products which are machine cut by skillfully delimbing and “bucking” the whole trees into the best log lengths and loading them onto trucks. Subsequently, the logs are take to modern sawmills, where new scanning technologies and computers analyze each log and determine how to optimize the dimensional lumber cut from each log. Not only does this dramatically reduce manual labor and waste, but it improves safety and increases log product value by 20 or 30% from previous methods. And it is not just digital machinery leveraging computers to analyze and cut, but it is also mobile apps with mapping and image analysis so better decisions are made when and where to log in the field. When digitalization is revolutionizing even ‘physical’ industries like logging and sawmills, it is clear that the pace and potential to disrupt industries by applying information technology has increased dramatically. Below is a chart that represents the pace of disruption or ‘gain’ possible by digitalization over the mid-term horizon (7 to 10 years).
It is clear that digitalization has dramatically changed the travel and media industries already. Digital disruption has been moving down into other industries as either their components move from physical to digital (e.g., cameras, film) or industry leaders apply digital techniques to take advantage (e.g., Amazon, Ameritrade, Uber). Unfortunately, many companies do not have in place the key components necessary to apply and leverage technology to digitalize in rapid or disruptive ways. The two most important ingredients to successfully digitalize are software development capacity and business process engineering skill. Even for large companies with sizable IT budgets there are typically major constraints on both software development and business process engineering. And ample quantities of both are required for significant and rapid progress in digitalization.
Starting with software development, common constraints on this capability are:
- a large proportion of legacy systems that consume an oversize portion of resources to maintain them
- inadequate development toolsets and test environments
- overworked teams with a focus on schedule delivery
- problematic architectures that limit digital interfaces and delivery speed
- software projects that are heavily oriented to incremental product improvement versus disruptive customer-focused efforts
And even if there are adequate resources, there must be a persistent corporate focus on the discipline, productivity and speed needed for breakout efforts.
Perhaps even more lacking are the necessary business process engineering in many companies. Here the issue is often not capacity or productivity but inadequate skill and improper focus. Most corporate investment agendas are controlled by ‘product’ teams whose primary focus is on incrementally improving their product’s features and capabilities rather than end to end service or process views that truly impact the customer. Further, process engineering skills are not a hallmark of service industry product teams. Most senior product leaders ‘grew up’ in a product focused environment, and unless they have a manufacturing background, usually do not have process improvement experience or knowledge. Typically, product team expertise lies primarily in the current product and its previous generations and not in the end-to-end process supporting the actual product. Too often the focus is on a next quarter product release with incremental features as opposed to fully reworking the customer interface from the customer’s point of view and reworking end-to-end the supporting business process to take full advantage of digitalization and new customer interfaces. There is far too much product tinkering versus customer experience design and business process engineering. Yet, the end-to-end process is actually what drives the digital customer experience versus the product features. Service firms that excel at the customer experience utilize the end-to-end process design from the customer viewpoint while taking full advantage of the digital opportunities. This yields a far better customer experience that is relatively seamless and easy. Further, the design normally incorporates a comprehensive interface approach that empowers each of the customer interaction points with the required knowledge about the customer and their next step. The end result is a compelling digital platform that enables them to win in the market.
As an IT leader certainly you must identify and sponsor the key digitalization projects for your company, but you must also build and develop the two critical capabilities to sustain digitalization. It is paramount that you build a software development factory that leverages modern methods on top of discipline and maturity so you have predictable and high quality software deliverables. And ensure you are building on an architecture that is both flexible and scalable so precious effort is not wasted on arcane internal interfaces or siloed features that must be replicated across your estate.
Work with your business partners to establish continuous process improvement and process engineering as desired and highly valued skills in both IT and the business team. Establish customer experience and user experience design as important competencies for product managers. Then take the most critical processes serving customers and revisit them from an end-to-end process view and a customer view. Use the data and analysis to drive the better holistic process and customer experience decisions, and you will develop far more powerful digital products and services.
Where is your team or your company on the digital journey? Do you have an abundance of software development or business process engineering skills and resources? Please share your perspective and experience in these key areas in our digital age.
Best, Jim Ditmore