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Can IT organizations be run like a start up?

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A couple of weeks ago, I had discussed about an accelerating rate of change.  Companies are coming out of nowhere and disrupting well-established industries. Consumer expectations are fickle and changing dramatically. Co-incidentally, some of these disrupters are starting to shape up consumer expectations.  When you layer in the power of big data, analytics and mobile – the ability of these disrupters to make fundamental changes to any industry are dramatic.

These days, the entry barriers for disruption are pretty low. No longer do you need huge capital requirements for setting up server farms and buying pricey software licenses. The impact of the revolution unleashed by Amazon and Salesforce is mind-boggling. Anyone with a great idea, and a few hundred dollars, can now start a company. With cloud, they have scale without the capital needed. The operating costs are largely variable –which are very controllable based on their business volume.

Start ups run lean. The Founder, CEO, CTO, Product Manager, are usually rolled into one. The VP of Engineering is also a software architect, a designer and probably a developer. Only as the scale of the business grows, do the roles start to segregate, to provide the much needed focus.

Time to market is critical for a startup.  So you will see incremental development – no long development lifecycles. Development time is measured in weeks and not in months.

Capital and resource allocation is critical – can mean the difference between life and death. So the things a start up will work on – will only be the ones that are critical for getting new revenue (attract new customers), or maintaining current revenue (retain current customers). With maturity, they will focus on efficiency (reducing costs).

In a nutshell – here is what start-ups are doing:

  • Low fixed costs
  • Multi-faceted, multi-skilled resources and flat organizations
  • Time to market – short development cycles
  • Ruthless focus and prioritization on what is critical to win in the market

Now – let’s compare this to a “typical” IT organization. I could almost argue that a  typical IT organization is the exact anti-thesis of a start-up.  If speed to market and agility is the need of the business, is there even a hope and a prayer to make it happen?

I can hear some arguments to these points – some of them sounding something like this. “You don’t understand, we run a very complex business. We handle PII, PHI and are subject to regulations of PCI, HIPAA, and other draconian bevy of legislations. We have legacy systems that these so-called start up’s don’t have to deal with….our systems are so interconnected…” and so on…

Alright – granted. Here’s my question: how do you respond to the market? How do you respond to your executive? What is your choice? If you can’t do ALL of the above – surely, you can do SOME of the above…?

Here is my challenge. Next time in a project review meeting – let us count the number of people around the table and ask – do you need an architect, designer, tech lead, developer, test lead, tester, environment engineer, network lead, middleware lead, security…. (you get the drift) around the table.  As a leader – what can you do?

How can you get past “this is how we do things” to “what can we do in the fastest, most cost-effective manner”?  If you can change the discussion from “no one asked the BA/ tech lead/security/test lead” to “how did we deliver the product in a timely and cost effective manner” – it will be a win.

This means changing the prevailing paradigm. We can’t be thinking of 3-5 year roadmaps – but 9-12 month runs. We can’t be thinking of silo’ed functions – but multi-faceted skills. 

This is not the way of the world – but to make a difference, one needs to start somewhere. Can you start with smaller “Innovation” team? Perhaps, that is the “start up” within the organization – and is allowed the latitude to experiment, and to break rules. This team is given short cycles, a short runway to succeed or to fail. If they succeed, additional resources are provided, and in time, they are “industrialized”. If they fail, they move on to the next thing.

What I am suggesting is that we need to start somewhere. If we don’t start somewhere, we will not get anywhere.

If you are a large/ mid-sized organization, you have a great advantage. You do not have the day-to-day existential struggle of a start-up. There is the luxury of having money in the bank and a paycheck. Use that as an lever – play to your strengths – experiment – break the rules – challenge yourself – challenge your organization – become a startup. It is the most fun you will ever have. And make a huge difference to your business.

Where are you on the consumer engagement maturity model?

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In my last blog, I touched upon the need to have a consumer engagement strategy and a way to measure the consumer engagement maturity model. As an alumnus of Carnegie Mellon, the SEI’s CMM is firmly ingrained in my mind. Here’s my take on levels of organizational maturity for consumer engagement, basing it on a framework similar to that of the SEI CMM model.

Level Characteristics
1: Initial/ Adhoc
  • Consumer engagement is purely reactive – dependent on customer query/ contact
  • A culture of customer service and engagement is spotty and not pervasive through the organization
  • All customers are equal – “you don’t know who you’re talking to”.
2: Managed
  • Consumer engagement is reactive. Customer databases are available for marketing/ promotions and consumer outreach
  • Consumer communication is primarily mass email/ direct marketing
  • Customer transaction history is available to front line employees
  • Each interaction is viewed as a separate episode
  • Loyalty programs exist in basic forms (e.g.: store card, membership card)
3: Predictive
  • Organization has customer segmentation available, and has a sense of their buying patterns
  • Consumer engagement is still “mass” – with marketing communication targeted by segments
  • Loyalty programs and rewards well understood (e.g.: cash back, airline miles)
  • Ability to reference customer value and longevity (e.g.: has been a silver member for 3 years)
  • Ability to create consistent outcomes based on customer category
  • Integrated view of customer across lines of business
4: Adaptive
  • Consumer engagement starts getting proactive and targeted
  • Marketing programs and outreach based on customer value/ customer segment
  • Marketing programs designed by customer segment/ loyalty
  • 3600 view of the customer (“stage in the life of…”)
  • Personalized offers and content based on buying patterns and history
  • Adaptive pricing based on customer loyalty/ value
  • A culture of consumer engagement is pervasive front office/ customer facing roles
  • Relationship view vs. transactional view of the customer (customer value vs. single transaction)
5: Anticipative
  • Consumer engagement is proactive and personal
  • Marketing programs based on narrow segments
  • 1:1 personalization: products, prices, promotions
  • Predictive models based on buying patterns
  • Integrated view of customer based on public profiles, social media, and buying history
  • Personalized marketing and communication based on buying history, patterns
  • A culture of consumer engagement is pervasive throughout the organization
  • Paradigm defined by customer lifetime value and relationship

©Abhijeet Pradhan Nov 2013

Most of the businesses today are probably in a combination of levels 2 and 3. The challenge for everyone is to get to the next level – where we can get to an Adaptive engagement model. This is where there is significant potential to leverage the power of big data/ analytics to segment customers based on demographics and buying patterns. Organizations start narrowing the broad segments and instead of sending out that generic email blast to inviting everyone to view their fares, organizations can send selective communication based on loyalty tiers.

Organizations could now start piecing together information from their loyalty programs, customer service calls and sales systems to create a complete view of consumer experience.

Maturing consumer engagement and loyalty at Level 4 could very well be the foundation for moving on to Level 5 – where organizations can start having 1:1 conversations and a very immersive consumer experience. In my opinion, we’re still a way out from getting there.  My take is that it might take us a while to settle in and mature at 4 – and in about 2-3 years from now, we might see some of the leaders take early steps in Level 5.

So where do you start? Lets start by figuring out where you are on the maturity scale. What changes do you need to make to systems and processes to get to the next level? How do you align these into meaningful initiatives? What is the value, benefit and the ROI of doing this? And finally – how do you get these prioritized and funded? This could provide you a framework for where to start and how to proceed.

As I said in my last blog, a lot of this is not easy. In fact, it can be pretty difficult. But as we all know, every company is trying their best to improve loyalty through effective engagement. Chances are that if you don’t do this – your competition probably will.

What I learnt from my shopping trip to Barnes & Noble…

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When it comes to reading books, I am a hold-out of the past era. I have tried reading books on Kindle, iPad and a couple other formats – and have always reverted to reading the old-fashioned way…with a  book in my hand. I made it a point to go to Barnes & Noble today, and buy a book from the local store. This is my first purchase from the store in over 2 years. I have been a “member” with them in the past, and used to buy regularly, but in the last two years, I have been buying with the one-click convenience on Amazon. But today was different. I wanted to buy it from the store. 

Why? Because we would like them to survive. Our 18-month old goes there for toddler story-time a couple times a week. He looks forward to that play time with other kids and the stories that Rose reads for them. We appreciate the investment that Barnes & Noble is making in our community – and we want them to survive.

We all have our preferences and idiosyncrasies. Some of us want to buy local from neighborhood stores/ farmers markets, while others want to go organic (Trader Joes/ Whole Foods); while others believe in a flat world and the survival of the fittest (Walmart/ Target). Whether we realize this or not, a lot of us end up doing business with a bank, auto insurance, health insurance – who aligns with your values and provides a good value proposition.

This got me thinking.  I went to Barnes & Noble because I wanted to buy there. But what if Barnes & Noble wanted me to buy there? Here are the facts:

  • They knew a child from our family goes there twice a week (he is registered)
  • The family had a membership and purchased a reasonable number of products in the past
  • The family had dropped off the radar and are no longer shopping here

What if B&N had been able to piece this information together? What if they had sent out an email asking us to return? What if they had sent a coupon with the toddler with a welcome back note?

The paradigm would have shifted from being reactive to being proactive.  So what does this mean for consumer oriented businesses?

  1. How do you piece information that resides within your siloe’d organization to win customers? How do you move from a transactional oriented world to a relationship-oriented world? Wouldn’t it be great if an airline were able to look at a loyalty club member at check in and provide an upgrade because their bag went to a different destination last time round?
  2. We are all leaving digital footprints as we live our lives today. How do you piece together this information so that you can provide a unique value proposition that makes you an integral part of your customers’ lives?

These are new things – and to be sure, pretty difficult to accomplish. However, the ramifications can be winning and retaining customers…or losing them. Building this infrastructure will be a journey – one that will mean defining a strategy, and making investments.

I will write about consumer engagement maturity model in one of my upcoming blogs in the near future. I am hopeful that will provide some of the building blocks for having a discussion around charting this journey. Building a strategy and executing to it may very well mark the next set of winners. 

Healthcare consumerism – coming soon to a theatre near you….

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According to a number of estimates, the current individual market in the healthcare insurance space is about 20%. This is expected to go to over 60% in the next 5 years. That is a three -fold increase in a pretty short span of time. Health insurance companies are shifting a lot of gears to move their business models from a B2B paradigm to a B2C perspective.

It is expected that small groups (defined as groups with less than 50 members) would lead the charge toward consumerism. With the new ACA taking effect, convention wisdom suggested that small groups would drop coverage first…and in time, we might see an increasing tide towards the individual market.

Interestingly, there are some interesting twists already underway that might challenge these assumptions. Walgreens has announced that they are moving toward a “defined contribution” model and moving towards a multi carrier private exchange. This means their employees can choose between a set of competing health insurance companies. Is the next step moving on to the public exchange?

In discussions with friends, I was also surprised with another development. Till last year – it was standard fare to provide three basic plans: PPO, HRA and HSA. It was interesting to note that at least two Fortune 50 organizations have dropped the PPO plan altogether. In its place is offered an “ACA compliant health plan”.

There are projections – and then there is the reality. My points above are leading indicators of what is to come. While projections say it might be five years for the individual market to triple, reality might be much sooner. Consumerism in healthcare is coming…and before you know it, you’ll be seeing it in a theatre near you!

An accelerating rate of change….

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You’ve heard the cliché – the only constant in life is change. I have always believed and embraced that. My first job right out of school was in sales. I remember my manager telling me “things are changing, the competition is increasing – we need to differentiate in order to win business”.

Fast-forward about twenty years – and this resonates even more than it did then. These days, I hear the word “transformation” and “disruption” a lot. A number of industries are in the midst of transformation and disruption. If you operate in retail, healthcare, travel/ leisure, financial services – your organization is probably in the middle of one.

Some organizations are going through a transformation because they are now chasing new customers; new demographics, new markets – and these organizations now need to build capabilities that they did not possess. Others are being disrupted – either due to technology or regulation.

At a high level, these changes are occurring due one of the following or their combination:

  • Information/ Big data with increased computing power – enabling organizations to mine their data with increasing precision and take better consumer focused decisions. P&G is uses advanced analytics across all aspects of P&G’s operations – from how it creates molecules in its R&D labs to how it maintains relationships with retailers, manufactures products, builds brands, and interacts with customers.
  • Mobile revolution – has redefined the way businesses interact with their customers. You can now deposit a check to your savings account without ever having to go to a ATM machine.
  • Social media – is having a profound impact on how consumers interact with businesses. Research showed that an increase in one star rating on Yelp can have an impact of as much as 9% on revenues for small businesses.

In the last few years, entry barriers for new comers in a number of industries have gone down dramatically. “Disrupters” can emerge from anywhere, and can take on an established industry. Uber is challenging the traditional taxi-models in established markets; as is Airbnb; which is creating an alternate model to the traditional hotel industry. Then there is new technology like 3D printing at the cusp of commercialization, and “the internet of things” waiting in the wings. These technologies will bring further changes to some established business models with them.

Regardless of which industry you operate in, change will come with an accelerating pace. Let me take you back in time – just by about 5 years. There were probably a couple of large programs, and a handful of decent sized projects (I shy away from numbers because its size of a project is relative to the size of the organization). Five years later, the numbers have multiplied, probably by a factor of 2 or 3.

What does this mean? Will things ever go back to “normal” or is this the “new normal”…? I think that there may never be  “a new normal”. If anything, the rate of pace is only going to increase. It may be pointless to fight this or even try to stem the rate of change.

The only question that needs to be answered is: “how will you and your organization deal with this?”

Back to basics…?

A few weeks ago, I was at a conference. One of the sessions was about Retail – and the speaker declared “the multi-channel revolution is over! The consumer wants choices – for retailers, its back to basics…”

Hmmm…what did I miss? Wasn’t it all about consumer choices? Isn’t it a fact of life that consumers want more variety/ choice, a good value (might not be the cheapest – but a good value), and quick gratification. Like anything else, organizations who have understood consumer behavior and have used technology to make the buying process easier for consumers have succeeded. Those who have built tech widgets without understanding them, have not done well or not survived. I read a statistic which said that over 200 businesses have ceased to exist over the last 5 years. Amazon has eaten their lunch. 

More often than not, companies will invest $’s because it is the pet project of any given executive. What is needed is data driven decision making. What works – and what doesn’t? What has succeeded and what hasn’t. What is the data telling us? 

Unless organizations move away from executive driven investments to consumer driven investments, they will not be successful. Just ask any of the 200 or so that have perished….

A “Stay” interview…

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I was at the Minnesota IT Symposium today – a day long interaction with other leaders in IT from all industries in MN. It was an excellent forum with outstanding speakers and great interactions. 

One of the things that stood out for me was a “stay” interview. We are all familiar with an exit interview – but this organization does a “stay” interview. Every so often, for the high performers/ critical resources they want to retain/ nurture – the organization conducts a “stay” interview. 

I thought it is a great idea. Losing talent is never good – but when the ones you want to retain and grow leave, it’s all the more painful. I hope an increasing number of leaders and leading organizations take this up. 

The future of IT departments…?

While the concept of the “cloud” or utility computing has been out there for a while, it was only around 2008 that there was a lot of commercial viability and interest in cloud offerings. With the emergence of SaaS based platforms and services, the question was asked “what is the future of IT departments?”

Responses and opinions varied across the spectrum – with the key options being:

  1. IT departments will become irrelevant – business will move to SaaS
  2. IT departments will become more like Systems Integrators – with their main function to integrate with “best of breed” SaaS providers
  3. IT departments will have no impact – the cloud is a mere passing fad. After all, IT has been around for a while, and will continue to do so

Five years later, reality – as is usually the case, is turning out to be (d.) all of the above. IT departments are alive and kicking – and are making decisions in partnership with business whether to “build” or “buy”.

However, as if this was not enough, another thing has happened along the way. Let’s call this the “app-ification” of the world. You name a thing – and there is an app for that. When we talk about creative destruction – or the ultimate kind of crowd sourcing – this comes to top of mind for me.

This consumerization has led to even shorter lead times, lifecycles and increasingly flexibility and agility from the customers, members and end-users. For IT, these are big challenges. If you are a “typical” IT shop – you are dealing with a wide array of legacy systems, and investments lagging the needs for your IT division.

Here’s a fundamental issue that I have seen; and continue to see with my friends and peers across IT in a number of industries. We talk about methodologies (agile, iterative, waterfall) and little about outcomes. We talk with a project based mind-set and not a product based mindset. We talk with an efficient process perspective – and not an immersive end user experience perspective.

In my opinion, the biggest skill that IT departments NEED to acquire is time to market. How do we build fast enough? How do we integrate fast enough? How do we create a competitive advantage for our business?

I think we are at yet another cross-road. In industry after industry – the ability to deliver far exceeds the capacity and the capability for a vast majority of IT departments. So here’s my question to you. In five years from now, do you see:

  1. IT departments will become irrelevant
  2. IT departments will become more like product companies – with their main focus on immersive experience vs. process excellence.
  3.  IT departments will have no impact – this is a mere passing fad. After all, IT has been around for a while, and will continue to do so

Discussions and debate welcome!