Archive for the ‘Digital Business & IT Industry’ Category

The Coming Disruption in Professional Services

Is there a way for advisory service companies, which provide accountants, lawyers, consultants and marketing experts to other businesses, to adapt to changing demands?

Some pundits, such as the Harvard scholar Clayton Christensen, have questioned whether traditional consulting firms will get less work as more innovative business models emerge.

I think challenges bring opportunities and that firms which change with the times will remain relevant and flourish.

Like many other sectors, the advisory service industry has had its ups and downs. Its current slowdown may herald the start of a darker period thanks to three significant trends:

1. Democratization of information

Prior to the Internet, advisory service firms offered clients knowledge and insight, which they couldn’t find elsewhere. Now, a lot of information is available for free, or at low cost on the web, and that includes expertise through freelancer portals like guru.com. To find critical facts and figures on market trends, customer research, or industry costs, organizations no longer need to hire a traditional advisory firm.

2. Fewer intermediaries

It used to be that if you needed top talent to address a business issue, you paid the price and dealt with a blue chip firm or hired a leader in the field. Today, a manager has many more options, often with lower costs and faster turnarounds. The rise of the freelance and sharing economy allows companies to find talent and knowledge as needed on a global basis.

3. The rise of machine learning

Machine learning, also known as artificial intelligence, has the potential to disrupt many facets of the professional services industry. Using machines for rote and even complex tasks can reduce the need to hire firms to do mundane tasks, or for an expert’s analysis, judgment and time. For example, judges and lawyers are increasingly resolving small claims through “e-adjudication” as opposed to using the expensive and time-consuming legal system.

Power of disruption

Despite these disruptive forces, traditional firms aren’t going away any time soon: the fact that they have a wide-range of services and expertise to offer, the changing regulatory and technological environment and fickle customer needs will ensure it. However, they need to evolve if they want to stay relevant to their clients, outflank competitors and maintain juicy margins.

Terry Donnelly, chief marketing officer for Canada of New York-based MDC Partners Inc., an advertising and marketing company, agreed.

“The traditional ad agency model is dying,” Toronto-based Donnelly said. “Marketers want leading edge, unique and practical solutions that drive measurable results and provide a durable and sustaining competitive advantage. MDC Partners recognized the ‘new normal’ early on and built a unique portfolio of agencies that retains the visionary founders as partners, motivated to do great creative work, versus the staid multinational agencies that regularly lose their best people.”

Advisory service leaders who want to better assist their clients and avoid disruption might want to consider these strategies:

1. Become a virtual provider

Companies can leverage their strengths such as client relationships and a trusted brand to create their own, on-demand virtual offerings as a complement to their traditional business. This model could mean acting as an online skills, data or problem-solving hub, and delivering of the best services to suit a client’s needs.

2. Get more involved in execution

While people and expertise may be plentiful, that’s not the case for excellent execution. Advisory service firms can offer follow-through and even take on line responsibilities through a shared service model. This could go beyond being an outsourcer to actually embed adaptable and skilled individuals and tools directly into the client’s workflow process.

3. Focus on capability building, not projects

Advisory services should focus their work on addressing long-term projects and needs instead of short-term contracts that deal with a specific issue. They could help clients build strategic capabilities to ensure competitiveness. One way to do this is to train people to do the work themselves.

As an example, a lawyer would not just draw up a contract based on the client’s needs and then walk away, rather they could give the client tools to become somewhat proficient in their own right.

In addition, companies could provide regular advisory support to make sure long-term goals are met.

Mitchell Osak is managing director, strategic advisory services at Grant Thornton LLP.

Mitchell.Osak@ca.gt.com

Twitter.com/MitchellOsak

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Rebooting wealth management firms

It’s never been tougher to be a wealth manager. A significant growth in assets under management over the past seven years (last week’s correction notwithstanding) has not translated into suitable top and bottom line growth. Many industry observers blame this on structural challenges that belie an easy fix and are not going away in the short term. To reboot profitability and position their firms for growth, wealth managers should go back to the fundamentals and re-examine where and how they compete.

Every company is experiencing strong headwinds including market uncertainty, insufficient scale, poor brand differentiation, fee compression, and rising costs (for regulatory compliance, information technology, etc.). On the horizon is another threat, technology-based “robo-advisers,” such as Toronto-based startup Wealthsimple, which use an automated platform to target specific, tech-savvy segments with a focused value proposition and lower fees.

It is the three “M” wealth management firms — mid-sized, me-too and middling — that face the greatest business risk. They can no longer be all things to all clients or get by merely on the strength of personal relationships. Their best approach would be to go back the fundamentals: re-examine the segments they pursue, choose the best value proposition for the target client and build the capabilities needed to deliver it. While each firm will define their own approach, they may want to consider two strategic opportunities:

The gender gap Most wealth management firms lack the practices, understanding and tools to satisfy and address one large but relatively untapped segment, women. Women create, control and influence a huge amount of wealth — upward of 39 per cent of U.S investible assets, according to research from the Center for Talent Innovation.

The research found that 47 per cent of U.S. female wealth creators (53 per cent globally) and a shocking 75 per cent of women under age 40 do not have a financial adviser. Among the U.S. women that do have an adviser, 44 per cent report they are not understood by their adviser. There is no reason to believe that Canadian female clients are managed or treated any better than their U.S. or global counterparts.

Wealth managers need to gain a deeper understanding of women investors’ needs, requirements and fears using quantitative and qualitative research (advanced tools like ethnography can help here). Insights and lessons can be gleaned from industries such as automobile and consumer electronics that have pioneered female-friendly marketing and product design. Tactics could include: crafting more gender-neutral messages and imagery, employing principles of behavioural finance to remove hidden bias, training advisers in gender-smarts and creating a more collaborative and inclusive client experience.
To best capitalize on this opportunity, consider customizing products and services to suit women, including creating a risk profile that is markedly different (according to a study from consultants BCG) from one created for a man.

“We discovered early on our female clients have unique needs. They look for more collaborative, education-focused advisers with a holistic, long-term approach to financial planning,” said Jennifer Boynton, an investment counsel at Toronto-based RealGrowth, which is growing by focusing on addressing the needs of female clients. “Addressing these needs, while still meeting their investment targets, has enabled us to consistently exceed acquisition, retention, and most importantly, client satisfaction goals,” she said.

Build digital capability Given the wide range of consumer activities that can be done on a smartphone or desktop, it’s surprising that digitization has advanced so slowly in this space. While incorporating new technologies can be difficult, it no longer can be put off. Doing so will help you remain relevant and attract key segments such as high income digital natives or millennials who are very comfortable performing day-to-day activities online.

Furthermore, going digital is vital for streamlining back-office operations, enhancing reporting and improving data and analytics capabilities.

Digital tools can provide clients with mobile, real-time and user-friendly views of their portfolio (including value, costs, transactions) along with self-serve options for research, recommendations, buy/sell and support. Advanced data analytics can be leveraged to proactively tailor your investment advice and content based on each client’s profile, or support internal investment decisions. Finally, many wealth managers can make better use of social media networks to disseminate information, build moderated communities of interest (say around tax planning) and gauge investor sentiment and needs.

When it comes to realizing the digital dividend, the secret is to understand your client’s needs, and build back from there. That requires companies to create a 360 degree review of each client’s assets, requirements and behaviour patterns, an understanding of existing processes and a willingness to re-engineer the client-experience model (including practices, culture and policies), before exploring technology solutions.

The App Economy takes off

Mobile computing is growing so fast and evolving so quickly it is hard to make sense of it all. The most recent leap, which includes sharing platforms, wearables and mobile payments, are based on unique service applications (or apps) that run on a smartphone and seamlessly handle everyday activities.

Although still in its early days, the rise of the app economy will have profound implications on the nature of many industries, the ways consumers interact with businesses and how companies structure their operations.

Since the mid-1970s, the world has gone through a technological revolution roughly every 10 years. It’s then taken between seven and 10 years for the new technology to achieve mass market adoption. However, the app economy is different. Many of the upstarts in this sector quickly started making gobs of money, usurping their competition and expanding globally.
For example, service-sharing platforms Uber and AirBnB are disrupting traditional industry players and are significantly changing consumer behaviour and value expectations. Their rapid growth plus big upside make them worth more than the traditional taxi and hotel companies they compete against. This one example should be a clarion call for more traditional businesses battling it out in the consumer and corporate services markets.

The stakes are huge: Mobile commerce will account for 24.4% of overall ecommerce revenues (which are themselves growing rapidly) by the end of 2017, a study by marketing automation firm Hubspot found. Add incremental revenues from app-based sharing platforms and you are probably north of $100 billion in mobile ecommerce revenues in the U.S. alone.

Among the many facets to consider, I believe leaders ought to pay close attention to these two:

Service apps take over

For most people, life is increasingly centered around a mobile device and the services it enables. Increasingly, apps address your personal needs, often in ways never imagined. Uber and Lyft are replacing car ordering; TaskRabbit is handling our deliveries and dating apps such as Tinder are helping people find a life partner.

So too are people’s professional lives poised for change. A recent job-matching app, Switch, allows candidates to thumb through job listings: flick left if uninterested and right to register for a potential work match. Another swipe-if-you-like competitor, Jobr, uses information from LinkedIn to recommend jobs that candidates might find interesting. Since its launch last year, Jobr has submitted more than 100,000 job applications for its members each month.

Businesses are also jumping on the bandwagon, using apps to re-engineer traditional but important practices. Last year, Zappos, an online retailer based in Nevada, scrapped formal job postings and replaced them with a new site encouraging candidates to engage with each other and the firm in a way not dissimilar to online-dating forums.

Although the service apps business is growing rapidly, there is still plenty of upside left. Existing providers can drive higher usage and fees by adding new functionality, entering new geographic markets and retuning their service to appear less like a standalone, phone based-app. As well, there are many opportunities for a high-quality model in unexploited personal and corporate services categories.

Tightening the relationship

Apps are now the focal point between the customer and company. Companies can now engage deeper and longer term with its customers to create a 1:1 relationship, and with it higher revenues, loyalty and satisfaction thanks to three symbiotic forces: ‘always on’ connectivity via smartphones; advanced data analytics and; collaborative social technologies.

To fully leverage this opportunity, transaction-orientated businesses will evolve into service subscribers requiring them to engage throughout a customer’s or product’s life cycle irrespective of channel. In retail banking, for example, you might receive a message on your smartphone with your daily account balance, personalized RRSP advice in January, or ways to spend your credit card’s loyalty points.

To make long term engagement a reality, companies will need to redesign their service/product model (i.e. what and how they deliver value), pricing strategy and marketing programs, not to mention their technology infrastructure. Moreover, their apps will need to evolve beyond transaction-based functionality to include personalized content, multi-platform integration, location-based services and recommendation engines.

To avoid disruption and to capitalize on opportunities, companies should already be exploring and investing in apps applicable to their market and relevant to their customers. But they will also need to be mindful of getting it right: thoroughly understanding customer needs, designing a seamless customer experience, building practical data analytics capabilities and delivering compelling and relevant content. However, to truly take advantage of the app economy, leaders will also need to be mindful of the impact of emerging technologies like wearables and mobile payment services.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Overcoming the pain of Technical Debt

Many businesses are hamstrung by expensive and inflexible information technology. To wit: The average firm’s spend on IT has swelled to the equivalent of between 4 percent and 6 percent of revenue, thanks in part to neglect, poorly executed integrations and the breakneck speed of technological change.

While the exact toll of lost productivity and hampered innovation for any given firm is difficult to quantify, it’s safe to say that the true cost IT is greater than what appears on a company’s ledger. Research firm Gartner estimates the total cost of poor systems architecture, design and development will reach US$1 trillion in 2015. Put another way, that’s an average of US$1 million per organization, according to analytics firm Cast Software, and US$3.61 per line of code.

This hidden expense is referred to as “technical debt.” Reining in technical debt is an ongoing challenge for IT leaders because the cost of lost opportunities is tricky to peg while the cost of modernizing legacy systems is immediately tangible and often significant. But understanding technical debt is vital for organizations angling to improve performance through new technologies, improved agility and tighter cost controls.

I first encountered the dangers of technical debt when I did consultant work for a medium-sized manufacturer. In our search for savings, we found that maintaining one legacy system was consuming nearly 85 percent of the firm’s IT maintenance budget while rendering the integration of new applications difficult and risky. Worse, support activities were diverting scarce resources away from growth-enabling automation initiatives.

In that instance the firm was able to successfully phase out the old system while phasing in a new, more effective and cost-efficient replacement. But the question remains: Why did the firm’s IT leaders run up so much technical debt in the first place?

“The challenge is twofold,” explains Mike Grossman, founder IDI Systems, an automation development firm that regularly confronts technical debt in the course of infrastructure projects. “First, how can you economically and practically support current processes and business capabilities with existing — and potentially deteriorating — code, tools and processes? And second, how and when are you going to transition these old systems to support your new business objectives?”

Think of a legacy IT system as an old clunker. The driver understands that buying a new car is cheaper and easier in the long run, but either doesn’t have the down payment on hand or can’t spare a day without wheels. So instead of efficiently getting where they need to go, they’re stuck trying to keep an old car running by repairing old parts and adding new ones.

Where the metaphor falls flat, however, is in underscoring the value proposition of abandoning the old. The difference between a messy legacy IT system and a modern, fully integrated and efficient one is greater than the difference between an old car and a new one. While either vehicle will get you where you want to go, a world-class IT system can take your firm places that your current infrastructure would never allow. This is due to the opportunities for innovation that arise from a top-notch system.

That’s not to say that eliminating technical debt is as simple as hiring a team of developers to rebuild your infrastructure from the ground up. Before any such decision is made, consider the following steps:

  • Calculate your existing technical debt. To do this, compare the capabilities of your current software and hardware to industry-leading versions.
  • Determine your firm’s goals. Consider both the extent to which your current activities depend on your legacy system and what new functionality you will require for future, growth-generating activities.
  • Identify and align around the priority areas for remediation.
  • Find and deploy talent to replace or redesign legacy systems.
  • Measure and track progress at a senior level along the way.

And remember: Even after you’ve successfully upgraded your IT systems, the threat of running up technical debt remains. This is due both to the changing nature of technology and of business. While senior leaders ought not to obsess over technical debt, keeping a vigilant eye on the efficiency and capabilities of IT operations can be the difference between running in place and forging forward.

For more information on our work and service, please visit the Quanta Consulting Inc. web site.

The Internet of Things is here

We are entering the age of the “Internet of Things,” where sensors, computers and devices are connected in a self-managing ecosystem. At home, this could mean your alarm clock communicating with your coffee maker or your thermostat communicating with your window blinds. In business, this could mean your barcode scanners communicating with your suppliers or your assembly lines communicating with to your repairmen.

In other words, the Internet of Things automates an entire activity, such as building management, medical diagnostics, logistics or manufacturing.

For example, Apple has developed an Internet of Things ecosystem that enables various devices to communicate with each other with the express goal of one day “owning the living room.” Google is also aiming to enter the space by developing driverless cars and increasingly sophisticated remote home monitoring systems.

Some of the technological drivers behind The Internet of Things include: the rise of affordable, high-performance computing, the availability of inexpensive and accurate sensors, widespread access to high-speed wifi, the emergence of sophisticated algorithms and the ability to tie everything together through software interfaces.

The Internet of Things affords tremendous opportunities for increasing productivity, inventing new services and freeing up human capital to re-focus efforts on strategic rather than menial initiatives. Firms that are first movers in the space and that are able to develop the right business models will not only resolve big customer problems and cut costs but also recast the markets in which they operate.

In short: The Internet of Things is coming to every market that has been — or can be — digitized.

Case Study: Sahara Force India Formula One

Competing in the Formula One circuit is one of the most challenging and technologically advanced undertakings in the world. Increasingly, advantage goes to the team that can better leverage insight drawn from data generated in practice and during races to execute real-time enhancements to the car and provide critical information to the driver.

That’s why Sahara Force India partnered with Univa, a cloud-technology vendor, to create an integrated, closed-loop platform of sensor feedback, advanced data collection and analysis and on-the-fly hardware and software optimization.

“Sahara Force India is second-to-none in pushing boundaries to achieve speed, innovation and capability,” says Gary Tyreman, chief executive of Univa. “Leveraging the Internet of Things enables SFI to reduce development engineering time and money, and take in-race performance to levels which once were considered impossible.”

Here’s how it works: The Sahara Force India analytics team monitors and models car performance in race conditions, generating more than one terabyte of data over the course of a typical race. Trackside engineers and the driver then use insight derived from this influx of information to adjust things such as brake sensitivity and suspension, thereby improving car performance and informing seasonal development plans.

This raises an important point. The Internet of Things requires more than an investment in connectivity-enabled hardware and software. It also requires developing the human knowhow to manage, draw insight from and optimize the system based on the data that’s being captured.

How you can benefit from the Internet of Things

For many firms, the Internet of Things poses a significant threat due to its disruptive nature. For others, it stands as a significant opportunity to outflank the competition. But regardless of how each firm reacts to the rise of the Internet of Things, the fact remains: every company will be affected. This is because the need to serve customers better, faster, with greater ease and at a lower cost will invariably spur Internet of Things investments and strategies.

With that in mind, here are five things you should consider before implementing an Internet of Things strategy:

  1. List the current and emerging needs of customers, suppliers and distributors that your firm is not currently equipped to provide.
  2. Identify how an Internet of Things offering might address those issues and generate value within your enterprise and market. For example, you may want to improve your understanding of customer behaviour in order to improve service.
  3. Think more broadly about an Internet of Things offering than bottom line impact. How could it position your firm for future competitiveness?
  4. Consider your potential Internet of Things offering in terms of its key components: software, hardware and people. Can you leverage existing resources to cut costs?
  5. Analyze how your organization would need to be restructured in order to deliver a successful Internet of Things offering.

For more information on our services and work, please visit the Quanta Consulting Inc. web site

Internet of Things offering than bottom line impact. How could it position your firm for future competitiveness?

Consider your potential Internet of Things offering in terms of its key components: software, hardware and people. Can you leverage existing resources to cut costs?
Analyze how your organization would need to be restructured in order to deliver a successful Internet of Things offering.

Grow by assembling an ecosystem

The software industry is hyper-competitive, with thousands of global firms jostling for “winner-take-all” market share and financial returns. What separates the winners from the also-rans and failures? Increasingly, the differentiator is less about the software itself and more about business practices.

Many CIOs are realizing that high-performance IT is about more than serving customers better, improving product quality and driving higher operational efficiencies. Increasingly, it’s also about accelerating software development cycles, integrating disparate systems and delivering a consistent “omni-channel” customer experience.

To satisfy these needs, an increasing number of firms are adopting an “ecosystem strategy.” In the natural world, an ecosystem is an interdependent community of living and non-living things. In the business world, an ecosystem is an interdependent community of producers, suppliers and stakeholders.

An ecosystem strategy better delivers on customer needs and shareholder value by focusing attention on a single core offering, and then bringing in partners to provide secondary products and services that support, and are supported by, the core offering. Some well-known practitioners of the ecosystem strategy include Apple (third-party developers, accessory suppliers), Facebook (third-party developers), IBM (third-party developers, hardware suppliers) and Amazon (third-party book vendors).

Case study: Perfecto Mobile

Perfecto Mobile provides cloud-based quality assurance testing for mobile apps. The Israeli-based multinational’s strategic pivot in 2013 offers a good example of how a firm with startup-level resources can thrive by constructing a healthy business ecosystem within a staid market.

The traditional approach to software quality assurance is to test new code at the end of each development cycle. This approach, however, can prove too slow, risky and expensive in the faster-paced, higher-risk world of mobile computing, where devices, networks and tools change on a regular basis.

“The rapidly-evolving market is driving organizations to deliver better apps faster, while managing quality and reducing risk,” says Eran Yaniv, chief executive of Perfecto Mobile.

Perfecto concluded that the only way to meet the market’s needs would be to provide customers with an end-to-end, flexible, on-demand solution that embeds quality assurance testing throughout the entire development cycle. The problem: Perfecto did not possess the resources to provide this level of service while still keeping up with technological and market trends.

Going it alone, Perfecto’s choice was: either/or.

So Perfecto opted for an ecosystem strategy to provide what Mr. Yaniv calls “continuous quality.” “Perfecto’s continuous-quality strategy leverages not only our unique technology but also an extensive ecosystem of partners, from global system integrators to regional services providers,” he says. “We empower these partners with the expertise and knowhow of utilizing our Continuous Quality Lab to expand their business as well as ours and provide true value to our customers.”

Perfecto’s Continuous Quality Lab includes everything required to test mobile applications quickly and effectively — specialized testing practices and standards, infrastructure, automation and multiple device support — all delivered through the cloud. It has helped catapult the firm to market leadership, winning Red Herring’s Top 100 Global award for business innovation in 2014.

Takeaways

An ecosystem approach makes great business sense for software vendors for the following reasons:

  1. It fully delivers on customers’ bespoke testing and product needs on a “when needed, as needed” basis.
  2. It enables rapid operational scalability and flexibility.
  3. It deploys best-in-class capabilities that minimize integration concerns that come with working with unrelated vendors.

However, completely reimagining how you structure client-facing and operational IT can be a tall order. Legacy systems, operational complexity and cultural stasis are just a few of the potential roadblocks. To help address these problems, firms must develop certain competencies and cultural norms, including:

  • Ambition: Companies need gumption to tackle big business problems and address persistent customer demands.
  • A medium-term vision: It takes time to identify, attract and integrate the right technologies, practices and partners.
  • Open interfaces: Software companies need powerful APIs (application protocol interfaces) and methodologies to seamlessly connect their technology with complementary applications and protocols.
  • A partnering mindset: Striking partnerships is good. Cultivating them to maximize their benefits is better.
  • The right systems: Deploying and managing an ecosystem strategy requires strong IT and business processes, including: good reporting, trouble-shooting and collaboration mechanisms.

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

 

Digitally disrupting your company

Disrupt or be disrupted. This is the stark choice with which many senior managers are faced as emerging technologies and corresponding behaviours continue to reshape the marketplace.

Given the choice, most would understandably choose the former. The problem, of course, is that many organizations are crippled by organizational inertia. Market leaders and public companies are particularly vulnerable, as they tend to possess deeply entrenched operational structures, revenue models and cultural values. Either they don’t see the change coming or, more likely, can’t muster the organizational willpower required to do anything about it.

Case study: OLG

Five years ago, Ontario Lottery and Gaming Corp. found themselves in this position. Senior management observed that Millennials are less interested than previous generations in gambling the old-fashioned way. Natives of the Internet and accustomed to the conveniences afforded by smartphones, many were turning away from corner-store kiosks and toward online poker and other “casino-style” games that can be found easily, if illegally, on the Internet.

At the same time, the OLG found itself struggling to hold on to its existing customers. Not only were fewer Americans visiting their casinos, U.S. competitors were also making inroads in luring Canadians south of the border. Both trends spelled a slow slip into irrelevance for the crown corporation.

So they decided to do something about it.

Rather than merely mitigate risk, senior management sought to develop a digital strategy that would enable them to capitalize on these trends. They began by asking the following questions:

  1. What business are we in?
  2. What business should we be in?
  3. How can technology facilitate this transformation?

What they concluded was that they are in the lottery and gaming business, not (merely) the casino and scratch-card business. “OLG’s goal is to provide the games our customers want to play where they want to play them,” says Tom Marinelli, OLG’s acting president and CEO. “As we transform, our advances in technology are giving us a new opportunity to continue to be relevant to our customers.”

In response to changing customer needs and demands, the OLG began work on an online lottery and gaming hub. Set to launch this year, PlayOLG.ca will provide online gaming and sell digital lottery tickets. The idea is that by matching or exceeding the experiences offered elsewhere on the Web in a manner that is both secure and legal, the OLG will be able to attract younger adult customers and fend off illegal international competitors.

The execution strategy for PlayOLG.ca was informed by paying close attention to how the Internet and mobile technology are affecting the gaming and lottery business at large. In doing so, they identified and implemented a set of best practices. Here’s what they came up with:

  • Place technology-savvy leaders at the forefront. For the OLG, this meant selecting Mr. Marinelli, who has a background in both IT and operations, to lead the transformation.
  • Consider change holistically, involving all stakeholders. Because the lottery and gaming industry is highly complex and regulated, all aspects and implications must be considered when implementing any kind of change. The concept of “responsible gambling,” for example, must be applied to all customer-facing products.
  • Communicate plans regularly to employees. With up to 30% of the OLG’s 8,000 employees unionized, poor communication could very well spell disaster.

Even with these pivots, the future of the OLG is uncertain. Currently they’re seeking new ownership, with both Bell and Rogers rumoured to be potential buyers. But whether the OLG stays public or goes private, going digital will surely go a long way toward ensuring the long-term viability of the organization.

Takeaways

Many of the lessons learned by the OLG can be of value to other organizations similarly faced with disruption. To undertake a digital transformation initiative of your own, you should begin by asking yourself the following questions:

  1. How can a new technology help improve operations or better serve customers?
  2. How difficult will deployment be, and at what long-term cost?

To answer these questions, you’ll need to develop a 360-degree view of both your organization and the market in which you are situated.

  • Where are we going as a company?
  • What capabilities and organizational model do we need to adopt in order to capitalize on the new technology?
  • How will customers and other channels be affected by the new technology?
  • What is the potential economic impact of the new technology?
  • What can we learn from other firms’ experiences?

Regardless of what your answers are, any digital transformation of a scope similar to that of the OLG will require the following: support from the board, enterprise-level expertise in adopting and managing emerging technology, a clear understanding of where profitability comes from and a functioning capital and resource allocation process. Above all, however, a successful digital transformation requires just two things: strong senior management and a willingness to change.

For more information on our services or work, please visit the Quanta Consulting Inc., web site.

4 rules for running a business

Many companies in mature sectors have been known to embrace the latest management thinking (or fad) to help cope with low market growth, margin compression and lack of differentiation. Examples of these “big ideas” include lean management, outsourcing, business process re-engineering, offshoring and, lately, social business and cloud computing. Despite considerable effort and investment, most of these firms have been unable to outperform their peers over the long term, often due to weak strategic fit, poor planning or flawed execution.

In fact, only 344 of 25,000 public companies analyzed in the Harvard Business Review by Michael Raynor and Mumtaz Ahmed of Deloitte consistently produced above average return on assets from 1966 to 2010.

What made these firms special? Two rules identified in the study — noteworthy for their simplicity, reliability and practicality — helped drive the extraordinary business performance. Below them, I’ve included two other rules for achieving exceptional performance well worthy of consideration.

Better before cheaper

Companies need to focus first on service, quality, design or distribution — not on being the lowest-price competitor. Non-price differentiated brands tend to command richer margins, which can support further product and marketing investments, which, over time, further sustain the firm’s competitive position and profitability.

Revenue growth before costs

Leaders should prioritize top-line revenue by driving volume gains, competing in growing categories and taking advantage of every opportunity to maximize pricing. Volume increases also bring other benefits, including scale economies and channel optimization, which help drive down operating costs and block out competition.

Brands matter

“Brand equity might be the only asset that consistently generates differentiation, higher margins and long-term revenue streams,” says Jerry Mancini, president, Dole Packaged Foods Company. “Dole’s focus on value, quality and brand-building has helped deliver almost 100% brand awareness in close to 100 countries. This allows us, for example, to provide transient consumers around the world with the same quality and unique products they are familiar with, wherever they go.” This strong brand equity has enabled Dole to more easily tap new markets and categories — and drive higher volumes.

Maximize human capital

“Competition, technology and customers are never static,” says Paul Bruner, a partner with McCracken Executive Search. “The key to long-term success is attracting and developing leaders of exceptional character, with the brains, passion and resourcefulness to adapt to and lead through changing circumstances.” Organizations need to focus on recruiting and training the right employees and reinforcing positive behaviours through innovative training and compensation programs.

To be clear, the above four rules suggest a direction, not specific strategies and tactics; it is up to management to make the tough strategic choices and back them up with good plans and sufficient investment. Leaders still need to understand where they should compete (i.e., which markets with which value proposition) and what they are especially good at (i.e., organizational and asset fit). They’ll also need to support their mission by assembling the right capabilities and cultivating them through a culture of continuous improvement and adaptability. Finally, the company and shareholders must recognize they are playing the long game — they will need patience and resilience as well as management systems that reinforce long-term thinking.

For more information on our services or work, please visit the Quanta Consulting Inc. web site.

The crowd makes the decision

Watch out Howard Stern: your role as judge on America’s Got Talent could be in jeopardy, thanks to Crowdsourcing — a proven, web-powered way to raise money and troubleshoot problems. And, this may be just the beginning. Research published in the K@W newsletter (a Wharton Business School publication) shows organizations can now gain significant value by leveraging the crowd to make important decisions on which projects to focus on or which creative execution to choose.

Crowdsourcing is the online process of obtaining needed services, ideas, or funding by soliciting contributions from a large group of people outside of an organization or its supplier network. Raising money, in particular, is very popular. One of its leading platforms, Kickstarter has raised more than $1-billion in pledges for 135,000 projects from 5.7 million donors, a Wikipedia posting notes. Offering an alternative to bank or venture financing is one thing, but can the wisdom of the crowd compete with experts to decide which projects to pursue or talent to back?

New research Professors Ethan Mollick (Wharton) and Ramana Nanda (Harvard) looked at this question by analyzing how theatre projects get funded, and later performed in market. Studying these types of decisions is a good test of crowdsourcing’s potential because they require both a subjective (i.e. artistic taste) and objective assessment (i.e. determine the long-run success of the project). Importantly, the U.S. arts world is a good test bed for evaluating crowdsourcing decisions. Since 2012, more money has gone to the arts through crowdfunding than the government-run National Endowment of the Arts.

The researchers compared the funding decisions by theatre experts and the crowd on six projects. The experts were experienced judges who worked for the NEA. The crowd was participants in a Kickstarter campaign. The findings were thought-provoking. The decisions of the experts and crowd were very similar with a 57% to 62% concurrence on the choices. Yet, decision alignment does not automatically translate into good decisions.

To measure the quality of the choices, the researchers also analyzed the economic impact of the successful theater projects. They found that many of them evolved from a one-night only event into recurring performances that, in some cases, provided dozens of employment opportunities not to mention long-term revenues.

Implications for companies Crowdsourcing decision-making is an appealing tack for many companies. Many decisions, especially ones with subjective criteria, can benefit from multiple lenses that remove the bias of internal experts (e.g., the ‘not invented here’ syndrome), or produce additional opinions when expertise is lacking. Tapping the crowd can be faster and less expensive than finding subject matter experts or using consultants. Finally, relying on the crowd could avoid the internal politicking that comes with high-stakes choices that lack objective data.

A variety of decisions can be made by the crowd. For example, marketers can use it to help them choose the brand messages or advertising creative that best resonates with their target audience. Furthermore, venture capitalists can leverage a community of technologists or consumers to help them decide which startups to fund. Importantly, tapping the crowd does not negate the importance of internal experts, who can still be used to make sure the crowd’s choice passes the ‘common sense test’ and that decisions incorporate all the data.

Tapping an external community, however, will not be ideal in every situation. Many leaders will be unwilling to outsource major decisions given their egos or risk aversion. Furthermore, using the crowd for smaller decisions like picking advertising creative could be impractical and demotivating to staff. Finally, leveraging the crowd may lead to poor results if not properly executed.

Starting out While this research is encouraging, its conclusions should be validated for different situations and industries. One way to do this is to compare the internal decision with the crowd’s choice. To do this, it is best to begin with a pilot. The pilot would have a clear objective with well-defined and articulated choices. To maximize the crowd’s value, the target decision should integrate both subjective and objective evaluations. Managers should also carefully pick the community they want to leverage, within the right online platform. Special attention should be paid to maintaining confidentiality and intellectual property requirements before reaching out publicly. When the pilot is finished, managers should compare the results of each decision and the impact of each process.

For now, Howard Stern can rest easy. Crowdsourcing decisions will never replace thorough analysis, time-tested judgment and gut feel. However, these qualities come with a price, which is often high in terms of cost, time and hassle. If crowdsourcing can be validated for other use cases, then tapping wisdom of the crowd will become an important decision support tool.

For more information on our services and work, please visit the Quanta Consulting Inc., web site.

How winning companies go digital

Whether it is creating a winning online experience or enabling mobile commerce, digital marketing is a hot topic, with most companies either revamping or implementing new strategies.

Through consulting experience and research, Quanta has uncovered some industry and technology-wide learnings that can improve your odds of market and financial success. Consider the following best practices in your digital design and planning:

Power to the people

“In the next five years, traditional marketing will shift to digital channels to capitalize on the ‘power of the people’ phenomenon to displace brand-centric strategies in favour of buyer-driven everything,” research firm Gartner says. Buyers can control the marketing messages they receive and are only a click away from a competitive product.

That means the onus is on companies to provide a digital experience that powerfully delivers on their customer’s needs. All technology choices must be driven by customer needs and their desired experience as opposed to organizational or IT considerations.

This buyer-driven world requires personalization and location-based services. Consumers want to be treated as an individual with bespoke interactions and services based on their past experiences with the firm, the device or platform they are on, and the information they require at the moment.

Social not transactional

The buying journey is no longer linear — i.e. build awareness, generate interest and trigger purchase. Now, consumers rely more on peer recommendations, are less iterative and more information-driven.

Knowing that, companies should carefully consider what information, tools and functionality are needed. For example, to leverage the power of word-of-mouth endorsements, marketers need to understand how and when their customers are using social media and target them differently by platform at each stage of the customer life cycle — from awareness building and information gathering to seeking out peer recommendations and finding timely support.

One brand, many channels

Market researcher Forrester reports that companies in 2014 “overwhelmingly plan to continue investing in DX [digital experience] technologies, with a clear emphasis on multichannel delivery and analytics.”

New technologies, applications and platforms have dramatically increased the number of channels between customers and firms, and the potential for misaligned strategies and programs. Marketers are challenged to offer a compelling omni-channel experience that delivers a consistent and competitive brand message, price and service experience. This requires management to view their businesses in non-traditional ways, master new skills sets and define new organizational structures.

Structure follows strategy

From the outset, senior leaders will need to acknowledge the traditional marketing model may no longer be ideal for a digitally driven organization. Where the function is going is difficult to say. IDC, a research firm, contends that “by 2020, marketing organizations will be radically reshaped into three organizational systems — content, channels, and consumption [data]. The core fabric of marketing execution will be ripped up and rewoven by data and marketing technology.”

The best practice marketers we see are: team-focused incorporating a variety of skill sets including data analytics; tightly integrated with other functions including IT and operations and; are intrapreneurial in nature with free-flowing data, flat decision-making and rapid experimentation.

One common barrier to going digital is the need to satisfy the traditional business case. It is often difficult to generate sufficient return on investment when quality market and costing data is unavailable, revenue and usage is unpredictable and senior managers lack the technical confidence to place important bets.

In a recent survey, roughly one-quarter of respondents named “inability to prove ROI” the top barrier to budget increases, outpacing other concerns such as lack of overall revenue (18%), lack of buy-in from management (15%), and lack of clear strategy (15%),” web research firm Marketing Charts said. Digital pacesetters, on the other hand, make greater use of lower-risk market experiments, as well as employ more advanced approaches to evaluating strategic, time-sensitive investments.

Get it right and fast

In high-stakes industries such as banking, airlines and retail, the days of introducing beta-level technology and fixing it on the fly is quickly coming to an end. Most consumers will not tolerate shoddy products or a confusing online experience; product alternatives are often well-known and immediately available and; serious threats such as cyber crime are no longer rare. To cope, firms are adopting a variety of methods to improving digital quality, performance and agility including co-creating products with customers, integrating development and testing activities and; bringing in-house strategic parts of the value chain.

There is no magic bullet to digitally enabling marketing. Successful firms are choosing their technologies and channels based on consumer needs and habits, leveraging the power of social influence, developing the right organizational alchemy and learning from their pilots and other’s experiences.

For more information on our services and work, please visit the Quanta Consulting Inc. web site