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Don't fall into the old CIO trap when forging a digital strategy

If your digital strategy doesn't include how you're going to make money from a digital initiative, you're doing it wrong: The Data Mill reports.

Companies have become obsessed with all things digital. But here's the harsh reality: They're also introducing...

ways to erode their own business, leaving them "on the cusp of one hell of a reckoning," Mark McDonald, managing director at the consultancy Accenture plc, said during his talk at Fusion 2015 hosted by WTN Media.

Instead of building a strategy that addresses how the business will make money on digital initiatives, CIOs and business leaders have been relying on the old way of doing things -- finding business cases, developing road maps and procuring technology. The danger of this business-as-usual approach? CIOs are allowing themselves to be seduced by digital eye candy -- tantalizing use cases, new technology -- rather than thinking about what's profitable for their businesses.

McDonald's warning was like the digital version of a record scratch, coming as it did after a talk by J Schwan

Schwan, CEO and founder of Solstice Mobile in Chicago, Ill., a mobile consulting firm, talked about emerging digital trends such as human-centered design and the power of cutting edge technologies like contextual computing and interapp communication a la Apple's HealthKit and Epic's MyChart applications. "IT needs to build systems of experience," Schwan said. 

He highlighted companies that are mapping out the "customer journey" with a brand -- from first to last touch -- and developing new products or services that enrich the experience. American Airlines, for one, introduced mobile notifications that provide GPS and road traffic information to passengers in addition to what have become the more standard notifications about flight delays and gate information.

Schwan's talk set a high (and exciting) digital bar, but McDonald made it clear: Getting there won't be simple, and, in some cases, won't be worth the investment. "You can't just say, 'Wouldn't it be cool if we eliminated all of the friction of how you get to the airport,'" McDonald said. "You have to ask the fundamental question of who the hell will pay for it and how the hell do we get that money into our coffers." Otherwise, businesses run the risk of increasing costs without increasing revenue.

Take mobile banking. Digitizing money transfers and check deposits might be popular features, but they don't necessarily bring in more money or more customers or reduce company spending somewhere else. "Yes, you can say these transactions are cheaper, but time after time, banking transactions fall equally across the branch network, which means it's hard to close branches or monetize through cost savings those different behavioral changes," McDonald said.

But mobile banking, for many financial institutions, has also become table stakes. In cases like this, McDonald recommends cheaply parroting the market and then figuring out what tweaks to the standard industry digital model could bring in new revenue. "[Digital] is the application of technology to anything, to any resource that makes it more information intensive and connected," he said. "And, therefore, it has new capabilities that enable me to create and find new sources of value."

More than keeping up with the Jones' or, worse, what McDonald called "chasing the cool," CIOs should focus on where the company value chain is vulnerable to disruption and could be made stronger -- and more economically viable -- from a digital reboot. That will vary from one business to the next; the constant is for a digital strategy to include how the investments will "fundamentally change the way we make money," McDonald said.

Digital transformation tips

McDonald also advised businesses consider these three digital transformation tips:

Give digital projects a focus: "You need to make a decision about which needle you're going to move and how your investments are going to change it," he said.

Work as a team: Executives have to work together because "producing digital outcomes requires a level of coordination and a level of collaboration across the enterprise that is literally unheard of," McDonald said.

Some businesses have hired a chief digital officer for just this reason, but McDonald said there are examples of successful digital projects where businesses understood the problem and the outcome they were trying to achieve without one.

Define the terms of competition. McDonald said too often startups are defining the rules of competition, which will, in many cases, force established businesses to chase down false leads. And, by giving that power over to startups, established businesses fail to leverage what they have that startups don't.

"We are not using our size, our capability, our capacity to dictate the terms of future competition," McDonald said, pointing at Geico and Progressive as examples. "They're not doing adverse selection, but they're making sure they get the people they want," he said. (Not to mention, they have great ads. Have you seen "Scapegoat: It's what you do?")

Say what?!?

"We're always reinventing how we do service. When something breaks, service doesn't mean you walk in and fix something, it means you make it better." -- Mark Shaver, vice president, CIO, Joy Global Inc.

"I'd rather try something and fail than not try something and regret it." -- Dan Adamany, founder, CEO, Ahead LLC

"If Google and Amazon and Walmart and PayPal and Square and eBay aren't on your list of competitors, you need a better list." -- Peter Coffee, vice president, strategic research,

"B2B [marketing] is dead, from my perspective. Everyone is a consumer." -- Neal Campbell, senior vice president, chief marketing officer, CDW Consultants Inc.

"If your product or service assumes your customer has nefarious motives, you've already defined the relationship." -- Rick Davidson, president, CEO, Cimphoni; interim CIO at AAA Mid-Atlantic

Welcome to The Data Mill, a weekly column devoted to all things data. Heard something newsy (or gossipy)? Email me or find me on Twitter at @TT_Nicole.

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