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How to make money out of digital : think the impossible!

Stuart Lauchlan Profile picture for user slauchlan October 3, 2013
Summary:
Most research into digital focuses on what it is. Accenture takes a more commercially minded approach in its research: it wants to know how you make money out of digital.

Mark P McDonald
Mark McDonald

Most research into digital focuses on what it is. Accenture takes a more commercially minded approach in its research: it wants to know how you make money out of digital.

Responsibility for answering that question rests at least in part on the shoulders of Mark McDonald, recently appointed Managing Director, Digital Strategy at the firm. It's by way of a return to an alma mater as McDonald previously worked at Accenture before moving to research firm Gartner.

So how do you make money out of digital? An important starting point, according to McDonald, is to recognize:

"You can make money out of this, yes. But you need to recognise that the way to make money is not about taking information and selling it, but rather to ask how to take that information out of resource base and then re-inject it to do something previously thought to be impossible.

"It's about the realization of what is possible and what is profitable."

But Accenture too needs its own definition of digital in order to have those all important conversations with clients and prospects. Here the firm is drawing on a broad canvas:

"We define digital very very simply. We define it as an adjective, not a noun. It's really about the use of technology to increase information intensity and connectedness of customer and business resources.

"As an adjective it denotes that you can apply technology to anything. Most people will say that it's about mobile phones, tablets, the computer. But you can apply it to any resource. You can make the table digital. You can make the conversation digital.

"You need a definition of digital that is broad enough to support all technologies now and all that are to come.

"One reason why our digital definition is so broad is because each company is going to have to create its own source of digital difference. Our goal is to work with clients to build their digital businesses. We define that as being an organisation that uses technologies to create new sources of growth."

Meat on the bones

McDonald puts some meat on the bones of these theories with some real world examples, beginning with the LA Childrens Hospital which back in 2009 opened a new building with the ambition of having zero paper. This meant complete digitisation of all records, including integrating 40 clinical areas into one record.

That had what on first sight seems an unexpected outcome:

"The outcome was the elimination of information as a source of patient harm! A cause of why people leave hospitals sicker than when they went in is down to the information gap. Someone forgets to get a prescription, for example."

By digitising paper records and integrating them down into single sources, 66,000 hours of processes and operational activities were eliminated and that time put back into patient care. All of which is marvellous of course, but where's the revenue? McDonald explains:

"What they did was create an asset that no-one else had. Everyone had electronic records so everyone had full telemetry or provenance over all the patients. They used that complete view to attract research grants and world-leading scientists. You then get patients who come to the hospital because it now has the best experts."

OA_01
The other example cited is Royal Caribbean Cruise Lines and their massive Oasis class ships which can ferry over 5000 passengers at any one time.

"The marketing department decided that the customer experience should be as grand as the ship itself and assigned the CIO and the Head of Hotel Operations to find out what that meant. They found 26 points at which cutomers could find themselves standing in line and set about eliminating those."

A prime example of this came with the dining options on board:

"Cruise operators will try to make sure you don't stand in line by telling you when to eat. That way they can control the experience. So you have a good experience as long as you do what you're told."

Royal Caribbean turned that notion on its head by asking what would happen if people were left to their own devices on the basis that crowd queuing theory generally argues that crowds will themselves eliminate bottlenecks.

So the cruise line put shape-detecting cameras in each restaurant on board which meant they were able to tell how many people were in any given place at any given time. The question now was how to make use of that information and how to present it:

"Like a car park you can have signs that say there are 3000 slots open, but that doesn't really help much. If I told you there were 53 chairs open in a restaurant and that there could be a table of four available, that would be better. So they put up digital signage that let you know that a restaurant near you was 87% full or 47% full.

"The food is the same in the various restaurants. So the choice is up to you. At a task level, people create own experience. What they found was that when they made that information available then they would balance one another out."

So revenue improvements come from capacity utilisation:

"If you have to stand in lines, you won't recommend the ship to your friends. But when you ask an Oasis passenger if they've ever had to stand in line, they say no. They eliminated two business systems: there are no reservation systems and no adjustment systems to change reservations. Customer satisfaction levels go up so customer revenues go up."

Where's the CDO?

In this latter case, a traditional CIO combined with a line of business role in the form of Head of Hotel Operations to create a new digital experience. There was no Chief Digital Officer (CDO) in sight. McDonald comments:

"In some cases you just don't need one. You need a CDO for three reasons. If you need a focal point for transformation; if collaboration among senior executives is not particularly deep; or if you need a single point of accountability who can communicate to the rest of the organisation that this is important.

"A lot of the CDOs we do see are still Chief Digital Marketing Officers. But the most effective CDOs will be those who can bring multiple layer of experience and can see how to bring lots of pieces together."

So can the CIO transform into the CDO? McDonald argues:

"CIOs who concentrate on predominantly lowering the cose of services and don't concentrate on innovating are less likely to be CDOs. Digitally-thinking CIOs know it's not just about lowering cost, it's about increasing yield on existing investments. If all you seek is lower costs then it's a zero sum game.

"There's no fundamental reason why a CIO can't be a CDO. Fundamentally CIOs who are concerned about how to use information and technology to drive corporate growth can be a CDO. But we have examples where the CDO is an IT guy, examples where it's a marketing person, examples where it's the Chief Operating Officer who takes it on.

"The notion that it's a zero sum game in the executive suite is unnecessarily limiting."

It's a different world in which CIOs have to operate, he adds, and it's different for an unexpected reason:

"They won. The CIOs won. Fifteen years ago in IT the mantra was to automate business processes. They did that. Ten years ago it was to integrate those processes. They did that. Five years ago it was get those processes online. They did that. They did all of that. So now they need to play a new game, because they won the last one.

"The business side used to tell the IT side what to do. Then IT would build stuff back to the business that the business would then take to the customer. It was a linear relationship. Technology was still pretty immature and the penetration of technology to business processes was still pretty low.

"That has all changed. We now need to think about every piece of digital technology and how it links back to what we pejoratively call the legacy technology. Relationships become concurrent, not linear.

"If you accept that IT really did win, then the conversation has to change."

 

 

 

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