Steps CIOs can take to harness digital disruption

How does a CIO get involved in digital disruption? Analyst Nigel Fenwick offers a framework.

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The recent Forrester Digital Disruption Forum in Orlando, Fla. bolstered the case that digital business must be a mindset for enterprise companies, not a passing trend: either companies embrace digital products, services, information and data as a core business -- or risk being put out of business by digital disruptors.

Nigel FenwickNigel Fenwick

Digital disruptors, as defined by Cambridge, Mass.-based Forrester Research Inc., possess the ability to use digital technologies to deliver a more compelling product or service to customers more quickly and at lower cost than the competition. The disruptive part is what this ability does to an established market. (RIP, Newsweek.)

Who has succeeded in roiling the markets? As the first part of this story on digital disruption showed, everybody from the folks at Rolls Royce to the usual suspects of the digital age: Amazon, Google, Facebook.

For those companies that haven't quite made the disruptive digital dive, CIOs can play an important role by setting up the governance and technology platforms that will enable their enterprises to home in on their digital potential. Another bit of advice? Channel Sigmund Freud.

Here, Forrester vice president and principal analyst Nigel Fenwick outlines a framework for getting in the digital disruption game.

Catalog business capabilities, identify opportunities for disruption

CIOs should start by cataloging their companies' business capabilities -- all the things an organization needs to successfully function in the marketplace, from payment processing to customer acquisition. Once those capabilities are identified, CIOs should seek agreement among their executive peers about which of those capabilities are considered strategic. A company's strategic capabilities are those that differentiate it in the eyes of customers from other businesses in its industry.

You should not constrain your thinking to, 'What do we have today, and what do our existing systems support?' You're looking at all the technologies that are out there.
Nigel FenwickAnalyst, Forrester Research Inc.

This is not to say the more internal functions of a business -- managing the supply chain or managing finance -- don't also have the potential to be tools of disruption. He suggests looking as well at those capabilities, determining their effect on the customer experience and deciding whether applying digital technology to those internal functions could make a difference. Still, in his view, these internal functions typically do not promise the same disruptive potential as capabilities such as customer service or product merchandising.

Once the business's strategic capabilities are determined, CIOs should think about which digital technologies could enhance them. For example, if customer service is something the company has determined to be a strategic capability, consider whether it could be improved with live chats, merchandise recommendations or self-service options. For each capability, ask the following questions:

  • How could digital technologies change this capability?
  • Are there digital technologies that could change the customer experience? What would that look like?
  • What resources would be required to make this change?

After these questions are answered, a traditional method like a Strengths Weaknesses Opportunities Threats (SWOT) analysis can be applied to better understand the potential of the strategic capabilities for digital disruption.  CIOs should help their companies identify the internal weaknesses that stand in the way of digitizing these capabilities.

"You're looking for possibilities. You should not constrain your thinking to, 'What do we have today, and what do our existing systems support?' You're looking at all the technologies that are out there," Fenwick said.

Use social media to design and fine-tune your digital capability

CIOs must realize there is a close connection between successfully implementing a digital product or service and social media. In Forrester's parlance, the "digital ecosystem" is an extension of the "social ecosystem."  Companies must listen to what's going on in the market using social technologies to understand what customers are saying about their brands, products or services. All this information should then be fed to customer support, which should use the same social technologies to engage consumers and act on customer feedback.

At the same time, CIOs can help their companies build out collaborative platforms to involve employees across the enterprise in solving those customer challenges. The ideas stemming from this collaboration across enterprise silos should be funneled into research and development (R&D) and marketing processes. Ideas coming from customers can also be figured in as part of the effort to understand how products and services can be enhanced to provide better customer experiences.

The CIO's job is to figure out which technology platforms need to sit underneath the social ecosystem. "What does the architecture look like that will enable that ecosystem to happen in a way that is not a tangled web of wires?" Fenwick said.

Paging Henry Ford and Sigmund Freud

All of the digital disruptions Fenwick has encountered share this characteristic: They save time and they bring pleasure.

If your organization can find a way to give people more time to themselves by cutting down the time it takes to do something, you have the start of a winning idea, Fenwick said.

More about digital disruption and strategy

Ten mistakes that will ruin a strategic plan

CIOs must embrace disruptive technologies

Tips for honing your digital strategy

Will CIOs lead or lag in digital disruption?

Many successful disruptive forces also create or enhance pleasure, or reduce the amount of frustration, attached to everyday activities.  The closer a company gets to delivering a product or service that saves time and increases pleasure -- what Fenwick calls the "zone of disruption" -- the bigger the impact on the customer and on the market.

These inventions don't have to be on par with the assembly line to have an impact. Customer pleasure was at the heart of digital technology deployments at Vail Resorts Inc., a Broomfield, Colo.-based company that runs seven ski resorts in Colorado and the Lake Tahoe area. In 2008, the company started embedding radio frequency identification (RFID) technology into their lift tickets for general check-in purposes. But Vail Resorts soon realized the technology could enhance the customer's social experience. Today, through the RFID system, visitors can connect via a social media platform and compete against each other as the system tracks metrics such as vertical feet skied. Skiers who opt in can share the information on Facebook and Twitter, earn virtual achievement "pins" and be alerted when friends are at the resort.

The company Fenwick believes comes closest to that sweet spot of saved time and increased pleasure is The Stop & Shop Supermarket Company based in Quincy, Mass., with stores throughout New England, New York and New Jersey. Stop & Shop has developed an app that allows customers to scan items as they put them in bags in their shopping carts. The app keeps a running list of items as well as a running total. It also alerts shoppers to sale items or items of interest based on where the shopper is in the store and what they've already put in their cart. At checkout time, the app is scanned and the shopper pays the total.

"There's huge customer time savings and added pleasure by reducing the frustration of checkout," Fenwick said. "What else could they do? They could reduce frustration even more with automatic payment … but they're getting in that zone of disruption that can radically change a market." Viva digital.

Let us know what you think about the story; email Karen Goulart, Features Writer.

This was first published in October 2012

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