Many would be wary of listening to what a consultancy firm with a long history of working in traditional IT had to say about what it takes to be a true digital company. And to be honest, I wouldn’t blame those people - the large consulting firms have somewhat of a chequered past when it comes to transformation projects.
That being said, Accenture Digital strikes somewhat of a different tone with me. Accenture as a whole has benefitted tremendously from investing in digital capabilities early on, with its Digital group now accounting for as much as 40% of its revenues and driving huge leaps in profits in recent years.
Accenture Digital has focused on building out core competencies in the big technologies you’d associate with ‘digital tech’ - e.g. big data, IoT, artificial intelligence - and has spent time acquiring much smaller start-ups that play an interesting role in digital design to boost its credibility.
And speaking with Accenture Digital CEO Mike Sutcliff recently in London, it’s clear that he gets it. He understands the challenges facing companies in this fast paced world of changing consumer expectations, which are being hindered by ageing legacy systems.
Sutcliff said that he has been working with a bunch of companies that are looking to blend digital tools with their existing processes, to eliminate a certain amount of friction from the customer experience. However, he added that whilst this can improve things for a business, it shouldn’t be the end game. He said:
The much more interesting question is when companies start to rethink how would they achieve their core mission, if they could start from scratch? And how would they take advantage of platforms other people have developed? How would they partner with other members of the ecosystem? What would their different commercial model pricing structure look like? What would the employee experience be? Should they tap into the gig economy?
So there's a whole different set of questions and experience that go into creating a strategy to achieve your mission that's enabled by digital, as opposed to creating a digital strategy to just improve the business you already have.
Digital identifies your best customers
Sutcliff said that to rethink what is possible with digital, companies should really try and understand what customers value and what they’re willing to pay for, versus things they value, but don’t actually influence their behaviour. He said that there is a fine line between these two things. The customers most at risk are the customers that are subsidizing another part of the customer base, Sutcliff said. Giving an example of the insurance industry, he added:
In the insurance industry, the way it traditionally priced their policies would be to take a very broad population, collapse that into a pool of people that had similar risk profiles based on characteristics about the person. Are they male or female? How old are they? What city do they live in? What's their estimated income range? And so they would create pools of people and they would say, "Because you fall in this pool, this is the price of your policy."
So that worked for a long, long time. And then the digital tools allowed us to understand something completely different about you, which is not "Are you male or female?" Or "How old are you?" Or "What's your estimated income?" But, more importantly, "How do you actually drive the car?" Okay. And so now I actually understand your behavior as opposed to attributes about you, and when I understand your behavior I can have a much more direct, correlated understanding of the risk.
Now, I can go attract, I can make offers to customers who have the least risky behavior, but are part of that big risk pool. And if I pull them out of that big risk pool by making them a good offer, say, "I'm going to save you 30 percent on your insurance." Well, in reality, you were overpaying by 50 percent, because you're the least risky in the pool, and if I can pull you and get you to be my customer, I'll make more money and my competitor will lose more money, at the same time.
Basically, companies are able to use digital tools to understand their customer base at a much more granular level and then are able to offer them a service that is specific to them.
Needs to be done
Sutcliff said that he often gets asked the question, ‘What’s the difference between computerized and digital?’, which is understandable given that technology has played a central role in doing business over the past few decades.
However, Sutcliff believes that digital isn’t just about more automation through computers. Instead, he said, digital is about using new tools that allow companies to put the customer at the centre of the experience. It’s a very human-centric approach to doing business, which is being driven by mobile, social, data and cloud.
But becoming a digital organisation isn’t easy, as well all know. Sutcliff identifies three key priorities, however, for making this possible. They centre around fixing the back-end systems (typically by wrapping an API architecture around the legacy), being more open, and then also attempting to get rid of existing internal, organisational silos.
You have to. You have to fix. In order to create fantastic experiences in what we would call the front office, you have to fix the mid and the back office. Right. And you have to be willing to even rethink the way you design your product or your service, the way you learn from customer usage of that product or service, and then on a much faster cycle keep iterative design going so that you're not releasing a new product or service every two years, you're releasing one every three months.
So, yeah, we think you've got to do front, mid and back office and you have to be willing to increase the clock speed or the cycle time inside the business.
In addition to that basic concept, it's also an open ecosystem approach that leverages other data, other platforms that you don't pay for and create inside the walls of your business. And so you have to open the architecture of your business to be part of that ecosystem and collaborate actively with others in the supply chain and the value chain so that you've got a relevant value proposition to your market.
Now, if you're doing that, if that's digital for you then, by definition, the way you used to work, your internal organization structures, the silos that existed in your business, are going to have to be rethought. They're not going to be effective in this new world. And so there is a massive organizational business model and cultural change that goes on as companies move from thinking of themselves as a black box that serves their customer to thinking of themselves as part of an ecosystem that is collaborating and learning and developing new products and creating new experiences, not 100 percent under their control, but as part of that broader ecosystem.