Strategy. Innovation. Brand.
Digitizing The Enterprise
McKinsey recently published a survey of 850 C-level executives regarding their views on digitizing the enterprise. McKinsey asked about five major trends: 1) big data and analytics; 2) digital engagement of customers; 3) digital engagement of employees and partners; 4) business-process automation; 5) digital innovation.
What do C-level executives think? Of the five trends, customer engagement is clearly top of mind today. Over half the respondents (56%) say that engaging customers and finding new customers through digital channels is at least a top ten priority.
Indeed, digital engagement is accelerating. Compared to the same report in 2012, companies are increasingly using digital techniques to: maintain brand consistency across channels, identify and advertise to target customers, make personalized offers, engage in social media, and create branded applications (and games) for mobile devices.
Big data and analytic initiatives are also growing. Executives report they are especially focused on analyses that help improve forecasts and planning processes. In general, big data activities focus mainly on growth and enhancements – growing revenue, for instance, or enhancing customer service. Using big data to reduce costs is much lower on the priority list.
Similarly, the next wave of business-process automation focuses primarily on efforts to improve quality or create new digital capabilities. Relatively few process automation projects are targeted at reducing cost or replacing labor.
Digital innovation activities revolve around improvements rather than entirely new product categories. Some 40% of respondents say they are adding digital capabilities to existing products or enhancing their technology stacks – by adding cloud computing, for instance.
Of the five key trends, digital employee engagement seems to be the least well developed. Executives report that they use digital tools for employee evaluation and feedback. By and large, however, they’re not engaging in more advanced applications like collaborative design and knowledge sharing.
CEOs are also becoming more involved in digital initiatives. In the 2012 survey, both the CIO (26%) and the CMO (25%) were more likely to be leading digital initiatives than was the CEO (23%). In 2013, the tables turned with CEOs (31%) leading the way while CIOs and CMOs stayed about the same (both at 26%). CFOs lagged far behind – 12% in 2012 and 13% in 2013.
There’s also a new C-level executive at the table – the Chief Digital Officer or CDO. Some 30% of the respondents say that their companies now have CDOs, often with “cross-cutting responsibilities for all digital activities”. Those companies with CDOs claim to have implemented more of their digital vision than those without.
Overall, the executives are quite optimistic about their digital initiatives. Nearly two-thirds (65%) expect that their digital projects will improve operating income over the next three years. Interestingly, B2B executives are more optimistic about growth potential than their B2C counterparts.
While two-thirds of executives foresee growth in income due to digitization, one-third don’t. The more pessimistic executives fear that they won’t be able “to adequately respond to changing customer behavior and expectations”.
Executives admit that they’re only roughly one-fourth of the way toward their ultimate objectives. Still, they’re quite bullish on digital initiatives as ways to transform their companies and their markets. If they can manage three key obstacles: leadership, expectations, and talent management – they see a bright future for their digital enterprises.
Where You Stand Depends On Where You Sit
Stand by me.
I walk our dog, Bella, two or three times a day. I enjoy it almost as much as she does. I’ve also found that walking a dog is a great way to meet people. (If only I had known when I was single). It’s nice to meet the neighbors. But what’s frightening is that we all think alike.
As Bill Bishop pointed out in The Big Sort, we’ve sorted ourselves out by political viewpoints. Republicans live in Republican neighborhoods and Democrats live with Democrats. We don’t mix and mingle much. When we meet people, we tend to hear things that confirm rather than challenge our views. We live in echo chambers. Tom Friedman calls these monocultures as opposed to polycultures.
Monocultures can make you crazy. If you only read and hear ideas that you agree with, you’ll only reinforce pre-existing connections in your brain. You won’t create new connections. From everything I’ve read, the brain thrives on connections. The more, the merrier. Tom Friedman writes that polycultures are much more sustainable than monocultures. I suspect that a polycultural brain is much healthier than a monocultural brain.
We also know that mashup thinking is one of the best ways to stimulate innovation. You take ideas from different boxes and mash them up. This is not out-of-the-box thinking. It’s multiple-box thinking. Take X-rays and mash them up with computer processing and you get CT scans. Take phones and mash them up with computers and you get smart phones. Take MTV and mash it up with cop shows and you get Miami Vice.
The more we have monocultures, the less we’ll have mashups. The more we talk to people just like ourselves, the fewer innovations we’ll have. It’s by putting different things – products or ideas – together that we get innovation. We all have partially formed ideas. Only by interacting with people who have complementary ideas can we develop bright new innovations. (I suspect this is why Apple recently hired Angela Ahrendts from Burberry).
Given all this, I’m constantly amazed that companies deliberately create monocultures throughout their facilities. Engineers sit with engineers. Finance folks sit with finance folks. Marketers sit with marketers. Each little zone is a monoculture. People with the same outlook, backgrounds, education, and conditioning sit together. They don’t talk to people with complementary ideas. They talk to people with the same ideas.
If you want to stimulate innovation in your company, mix it up a bit. Even a random seating chart is probably better than a department-by-department arrangement. Group people with different interests and backgrounds together. Then change it every now and then to establish new patterns and innovative connections. Just remember, where you stand depends on where you sit.
Which Companies Are The Most Innovative?
Change Is Coming
Last week, I wrote about which countries are the most innovative. (Hint: Switzerland and Sweden topped the list). This week, let’s discuss which companies are the most innovative.
Boston Consulting Group (BCG) just published their eighth annual compilation of the most innovative companies in the world. BCG collected data from 1,500 executives and rated and ranked the 50 companies that are deemed the most innovative.
Innovation continues to be a very high profile objective. Over three-fourths (77%) of the respondents noted that innovation was among the top three strategic imperatives for their respective companies. This is a steady upward trend since a low point of 64% in 2009, when companies presumably had other things on their mind. This trend seems to match a similar “return to innovation” trend at the national level.
So which companies are the most innovative? Apple continues to claim the top spot but Samsung has leapfrogged over Google to stake a strong number two position. Samsung has built an innovation culture around the slogan, “Change everything but your spouse and your children.” As BCG reports, building a culture that emphasizes and accepts change is one of the keys to success.
High tech companies take six of the top ten positions. In addition to Apple, Samsung, and Google in the top three slots, Microsoft is fourth, IBM is sixth, and Amazon is seventh.
The presence of top tech companies is not a big surprise. The bigger surprise for me was that three car companies vaulted into the top 10: Toyota is fifth, Ford is eighth, and BMW is ninth. Perhaps even more impressive is that car companies accounted for nine of the top 20 slots. GM is 13th, VW is 14th, and Hyundai, Honda, Audi, and Daimler take positions 17 through 20.
BCG suggests that three major factors are pushing the car companies towards greater innovation. First, “…manufacturers are racing to meet higher fuel-efficiency standards”. Second, many companies are investigating and experimenting with electric vehicles. Third, “…safety standards continue to rise”.
What causes companies to be innovative? Based on this year’s crop of leaders, BCG notes that there are five critical factors. I’ll write more about these in the future but here’s a first take:
- Top management is committed to – and fosters a culture of – innovation as a competitive advantage. Like Samsung, the leaders of the leading companies push hard for innovation.
- They leverage their intellectual property. They understand the rules of the IP game and they manage – sometimes buying, sometimes selling – complex portfolios of patents and other intellectual property.
- They manage a portfolio of innovative projects. They generally guide multiple projects simultaneously. Some are world changers; others are incremental enhancements. Management understands the project process and has a good sense of when to fish and when to cut bait.
- They have a strong customer focus. They continually ask the question, “What’s good for the customer?”
- They develop “strong processes, which lead to strong performance”. They often have standardized processes that require inter-disciplinary leaders to make conscious decisions about where to invest (and where not to).
Don’t Call Me Surely
Surely, this isn’t happening
I’ve written before about mental shortcuts called heuristics – rules of thumb that help us make a great majority of our decisions. Most of the time they work brilliantly. We recognize patterns subconsciously and make smart decisions automatically. Our conscious brain is free to deal with more difficult tasks. It’s like automatic pilot or highway hypnosis.
While heuristics help us get through the day, they can also make serious mistakes. (For a catalog of mistakes, click here, here, here, and here). It’s a fairly long list and surely most of us have made most of them. The more we’re aware of our heuristics, the more we can teach ourselves to avoid the errors inherent in automatic thinking. We can learn how to not trick ourselves.
But what about when someone else tries to trick us? Just like heuristics, the tools of disputation can lead us to believe things that just aren’t true (or disbelieve things that are true). You can always look to the evidence but you may be presented with evidence that’s biased or simply wrong. However, just as you can learn to recognize the ways that you deceive yourself, you can also learn to recognize the ways others deceive you.
Peter Facione can identify 17 ways in which our own heuristics can deceive us. On the other hand, Richard Paul and Linda Elder can identify 44 “foul ways to win an argument”. Surely the fact that there are so many more ways to deceive others (as opposed to ourselves) indicates that humans are innately devious. We’re not to be trusted.
Over time, I plan to catalog all 44 methods of deception so we can compare the ways we trick others to the ways we trick ourselves. I wonder which causes which. Do others deceive us or do they simply confirm our own self-deceptions?
So, where to start? Well, I’ve already slipped the first one by you. It’s what I call the handily hidden assumption and is often preceded by the word “surely”. When a person says, “Surely you believe…” or “Surely we can agree…”, it’s time to suspect trickery. The person is trying to hide an assumption so you won’t question it. The conclusion may flow logically from the assumption, but the assumption may be fatally flawed. If you ignore the assumption, the argument may sound logical and convincing.
In logic, this is known as begging the question. In common parlance, we often use begging the question to mean raising the question. In fact, however, it means exactly the opposite. It really means that the question goes begging. The question of whether the assumption is correct goes begging. Nobody pays it the respect it deserves.
So be careful when you’re debating a point with a slippery sophist. Or, for that matter, when you’re reading my website. And don’t call me surely.
Disgustology
My mother used to say that good manners are like oil in an engine. If you have them, everything runs more smoothly.
But is that all that manners are good for? Valerie Curtis, who might be called the Doyenne of Disgust, writes that manners evolved because we’re so… well, disgusting.
Curtis argues that one of the benefits of being a human is that we’re a very cooperative bunch. By collaborating with each other, we can accomplish great things. But only if we don’t die first. Curtis describes us as a “walking bag of microbes”. My microbes are probably not good for you and vice-versa. So we need to learn to keep our distance.
Curtis writes that manners are fundamental to human nature and evolved from two related systems. The first is the “disgust system, which motivates us to recognise and avoid potential pathogen hot zones.” The second is “the ability to feel shame.” Curtis surmises that feeling “shame if someone looks at us with a disgusted expression” is simply nature’s way of moderating our behavior to keep us from infecting one another.
Manners may have evolved to help us avoid diseases but they also helped us develop complex social systems. Curtis writes, “Humans became adept at looking for clues as to who was likely to cooperate and who was not. Manners provided an indicator. Those who were careful with hygiene were good candidates, as were those who put … the interests of others before themselves.”
While Curtis has a new book out on disgustology, the field has been growing for the past several decades. Other contributors include Daniel Fessler, Jonathan Haidt, Rachel Herz, Daniel Kelly, Paul Rozin, and Joshua Tybur Here are some key discoveries form their work:
It’s not all oral – different researchers proposed different typologies of disgust. Some suggest that there are nine different domains of disgust; others identify only seven. We might immediately identify disgusting smells and tastes. But we’re also disgusted by fleas and immoral behavior. The world is disgusting in many ways.
Liberals and conservatives view disgust differently – research suggests that liberals and conservatives are similar when it comes to the disgust of disease avoidance and immoral behavior. But conservatives are more disgusted by sexual topics.
Pregnant women are more sensitive to disgust – researchers found that, as progesterone levels increase, so does sensitivity to disgust. This seems particularly true in the first trimester, when the immune system is weakened. Apparently, our bodies protect us from low immunity by increasing our sensitivity to disgust.
It works in advertising — though it hasn’t been studied formally, I can attest that disgust can create powerful advertising and branding campaigns. The Little Lulu illustration above is from a famous campaign that changed our behavior. Prior to Little Lulu’s warning – Don’t Put A Cold In Your Pocket — people often carried cloth handkerchiefs. They sneezed into them and then returned the handkerchief to their pocket. Ewww! If you don’t carry a cloth handkerchief today, you can thank Little Lulu.
Apparently, some of our campaigns have come full circle. Little Lulu changed our handkerchief behavior. Valerie Curtis aims to change out bathroom behavior — and wash our hands more often — with a campaign build around the slogan, Don’t Bring the Toilet With You. If it works as well as Little Lulu, we could all be cleaner and healthier.
(The Little Lulu ad comes from the Gallery of Graphic Design).
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