Strategic CIO // Executive Insights & Innovation
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3/7/2014
01:50 PM
Chris Murphy
Chris Murphy
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4 Signs You're Being Digitally Disrupted

Accenture exec Mark McDonald offers four not-so-obvious signs you may be falling victim.

Suppose you're a thermostat maker who learns that Google just spent $3.2 billion to buy another thermostat maker. You can be pretty sure "digital disruption" has struck. But most of us don't get that clear a knock upside the head.

"Everyone talks about disruption like it's global thermonuclear war," remarked Mark McDonald, an Accenture managing director who heads up the firm's digital business strategy practice. "None of the companies that everyone talks about being disrupted died overnight. It happens gradually."

Accenture's Mark McDonald
Accenture's Mark McDonald

Here are four subtle signs that digital disruption is coming your way, compliments of McDonald's presentation Thursday at the Fusion 2014 CEO-CIO Symposium in Madison, Wis. What's interesting is that they're not even digital -- there's nothing here about your competitor launching a mobile app, partnering with Facebook, or accepting BitCoins.

1. You're working harder for each additional unit of revenue.

McDonald thinks digital marketing efforts are masking this increased effort as companies overlay digital marketing and customer service efforts on top of conventional marketing and service without removing any legacy costs -- for example, a bank that adds digital services such smartphone check deposits but isn't able to close any branches to offset its digital costs.

2. Your customers as a group are getting older.

"We're on the verge of the single biggest transfer of wealth in this nation ever, as Baby Boomers start to move on to their next endeavor -- off planet," McDonald said (to nervous laughter from the Baby Boomers in the audience).

[Want more from Mark McDonald? He's a thought-provoking and highly entertaining presenter, and he'll be speaking at the InformationWeek Conference March 31 and April 1 in Las Vegas.]

If your customer base has aged more than seven years on average over the last decade, you're already disrupted, because younger customers aren't coming in to replace the ones who leave.

3. Your company's staff-to-revenue ratio is rising.

Beware of "human middleware." If you're hiring people to sit in the middle of transactions and processes -- expediters, customer service people -- you have a problem you don't really understand. "The world is moving too fast to solve it just by adding human middleware," McDonald said.

4. You believe that what worked in the past will work again.

Managers must understand the much faster pace of change in digital business and pick their spots carefully: Where should you hew to tradition and where should you introduce new digital efforts? "If you are chasing your competition, you're actually playing into their game," McDonald said. Trying to drive digital innovation everywhere in an existing organization, he said, will pull the organization apart.

McDonald's parting advice for management: You're the single biggest factor that needs to change to cope with digital disruption. Managers must use digital tools to give more information and responsibility to "the edge" – customers or customer-facing employees -- to respond to what customers want. "The edge is where it's happening," he said. "The edge is where you create customer value."

Engage with Oracle president Mark Hurd, NFL CIO Michelle McKenna-Doyle, General Motors CIO Randy Mott, Box founder Aaron Levie, UPMC CIO Dan Drawbaugh, GE Power CIO Jim Fowler, and other leaders of the Digital Business movement at the InformationWeek Conference and Elite 100 Awards Ceremony, to be held in conjunction with Interop in Las Vegas, March 31 to April 1, 2014. See the full agenda here.

Chris Murphy is editor of InformationWeek and leader of its Strategic CIO community. He has been covering technology leadership and strategy issues for InformationWeek since 1999. Before that, he was editor of the Budapest Business Journal, a business newspaper in Hungary; ... View Full Bio

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jagibbons
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jagibbons,
User Rank: Ninja
3/10/2014 | 4:15:50 PM
Re: An example
My intent is certainly not to engineer people out of every process. The human mind and its insights are still not able to be replicated. Yes, Watson can win Jeopardy, but despite speech nuance, that is still rapid and massive calculations on historical data. Individuals interpret the same data differently from each other.

The goal would be to engineer people away from processes that don't need a human intuition or personal empathetic interaction element. More importantly, don't just throw more people at a problem when the process isn't working.
rradina
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rradina,
User Rank: Ninja
3/10/2014 | 3:46:18 PM
Re: An example
If Star Trek's vision is our future, there is no currency.  By implication people will have their needs met through automation and the state.  People are kept busy improving themselves through personal achievement.  My take on that:  Everyone will be free to do what they love without today's consideration of compensation.
Lorna Garey
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Lorna Garey,
User Rank: Author
3/10/2014 | 3:24:39 PM
Re: An example
I'm not sure how I feel about the term "human middleware" -- at some point in the progression of robotics and AI, that will describe almost every job. Soylent green is ...

OK, that might be overdramatizing the situation. But if our ultimate goal is to engineer people out of every process we possibly can, where does that end, and what then do all the people do? 
Laurianne
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Laurianne,
User Rank: Author
3/10/2014 | 11:09:11 AM
The Aging Customer problem
Point #2 is real, not only for many companies targeting IT industry customers, but also for retail, travel industries, etc. Anyone working at a company where you feel you're making great strides targeting the next generation of IT customers? Let's hear from you about what works.
jagibbons
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jagibbons,
User Rank: Ninja
3/10/2014 | 10:32:56 AM
Re: An example
I'm not so sure it's a fine line. I think the two are very different, although folks probably confuse them all too often. I would place a significant distinction between customer support and what we refer to as operations support. The former is about engaging customers to build loyalty. That's crucial for any people-focused business or business unit. The latter is more akin to pushing paper between systems and processes. This is what ought to be revisited regularly to optimize efficiency without sacrificing the customer experience.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
3/10/2014 | 10:13:04 AM
Re: An example
There's a fine line here between what counts as human middleware and what counts as great customer service that sets you apart from competition. Healthcare is a great example of an industry struggling to figure this balance out, as many people WANT to do more digitally -- make appointments, check their test results -- but they also want the insight and guidance of highly trained people when needed.  
jagibbons
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jagibbons,
User Rank: Ninja
3/8/2014 | 11:12:34 AM
Re: An example
While I've seen it and done it myself, I've not heard the term "human middleware" applied to it before. That is an easy problem to fall prey to and a hard one to solve sometimes. Incrementally, it is often easier to throw more bodies at a problem. If you take a longer view, that gets expensive and doesn't resolve the root systems problems. One solution I've used is to add that human middleware for a transitionary period while the system is reengineered to resolve to root of the issue. There's probably better solutions, but that one has work for me several times.
ChrisMurphy
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ChrisMurphy,
User Rank: Author
3/7/2014 | 5:08:18 PM
An example
McDonald pointed to a great example of putting action on the edge, one we've written about quite a bit as well: Royal Caribbean. Its newest cruise ships use head-counting cameras to constantly know how many people are seated at each of its restaurants. It broadcasts that occupancy to digital signage around the ship. That information lets guests find their own way to the less-occupied restaurants, rather than having staff do it. 

Here's some past coverage we did of the innovation at Royal Caribbean: 

http://www.informationweek.com/it-leadership/global-cio-5-ways-royal-caribbeans-cio-taps-emerging-tech/d/d-id/1090492
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