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Goodbye IT, Hello Digital Business

Delighting customers is job No. 1. Everything else is secondary.

What A Digital Business Looks Like

Becoming a digital business changes how a company interacts with its customers, but it also requires companies to break down old operating silos and bring in new expertise.

A Walgreens app now lets a customer order a prescription refill from home by scanning the bar code on the bottle using an iPhone or Android smartphone. More broadly, the company made a conscious pivot in late 2009 to make mobile central to all its development, CTO Abhi Dhar says. That meant moving one of its most senior e-commerce people to lead mobile development and putting people from mobile engineering, mobile consumer experience and mobile marketing together with financial planning in one location.

Starting this month, Nike is hosting 10 tech startups in Portland, Ore., to spark innovation around its digital platforms, including its Nike+ FuelBand, a wristband that tracks movement throughout the day. Kaplan, the college exam prep company, is using the same accelerator model -- both are run by Colorado-based TechStars -- to attract startup developers to its digital platforms and bring in ideas company developers wouldn't consider. "It's an opportunity to give us a little bit of fresh air," says Bernardo Rodriguez, chief digital officer at Kaplan's Test Prep group. The risk with mobile, he says, is that "we tend to apply our old models to the new experience."

Disney is working on an RFID wristband system it plans to launch this year at its theme parks. Called MagicBands, it will let guests pay for goods, check in at rides to map their day's activity and even send data to characters in the park -- so that Snow White or Mickey Mouse can address a child personally.

Disney's following the work of Vail Resorts, which for the past three years has used RFID in its lift tickets to let people track where and how much they skied during the day and share their achievements on Facebook. Vail CIO Robert Urwiler warns other IT leaders that customer-facing apps face a much higher standard of performance and style than employee-facing apps, and he's had to add talent to meet that standard.

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At United Stationers, the office supply wholesaler, CIO Dave Bent has led IT into digital business by becoming a service provider. It acquired a marketing services company and launched a business to help its retailer customers provide a digital platform to reach their customers. At the same time, Bent added the title of senior VP of e-business services.

The emergence of digital business is even changing how some companies talk to Wall Street. Last month, Macy's stopped breaking out online sales as a separate financial category, saying the channels are too blurred. "It's getting so hard to know what's a store sale and what's a mobile sale and what's Internet," Macy's CFO Karen Hoguet told analysts last month while discussing the retailer's 2012 results. "... Sometimes, it's being bought on a mobile device sitting in a store. So I'm not sure how to define that."

Mobile is the most powerful force blurring business lines (more on that later), but it takes advanced data analytics to make sense of this digital business world. Increasingly, the focus of analytics is on customer understanding -- assessing the sentiment of comments on Twitter, Facebook and Web pages to know if a product is a hit or flop, or using clickstream data to understand customer behavior.

When we asked in our survey what the main opportunity for CIOs is, 32% -- the largest single percentage -- cited using customer or business data to influence new products and drive growth. That's up 8 points over last year, when the data answer ranked second after driving company-wide process innovation.

Procter & Gamble is one of the most sophisticated users of analytics. CIO Filippo Passerini says there's "nothing more important" to P&G than being able to predict the customer response when it launches a new product, package or marketing campaign. Passerini thinks analyzing the online discussion around new products should let P&G predict sales well before actual sales data comes in. While "we haven't cracked this nut yet," he cautions, he considers this type of customer-focused analytics to be the next "breakthrough opportunity."

chart: What is the main opportunity for CIOs today?

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