REDWOOD SHORES, Calif. -- CIOs are struggling to make good on the promise offered by shiny new technologies like...
artificial intelligence, IoT and virtual reality. It can be hard for established enterprises to calculate how these computing advances might add to the bottom line or generate new value for customers. But enterprises absolutely need to figure out the business costs and benefits to stay competitive.
That was the message from IT executives at the recent Oracle Media Event, where the discussion focused on CIO strategies for finding business value in emerging tech.
"We have to be pragmatic since; we don't have a huge R&D budget," said Glenn Coles, CIO at Yamaha. "We try to be creative on where we focus those dollars. Maybe the upfront investment is not about the bottom line, but about the potential. It becomes a huge balancing act. The art lies in finding the right sponsors to get behind those projects."
Yamaha has traditionally focused its R&D on building better motorcycles, not IT. "But the future of the company will require us to think about how to embed technology into these products," Coles said.
A big part of this transition requires Coles to shift beyond making improvements in ERP and supply chain automation to plotting a strategy for digitalization. "An influx of younger talent is pushing us into digital spaces," Coles said.
Focus on business value
Railroad giant Union Pacific focuses on how new technologies can help drive asset efficiency, said Lynden Tennison, CIO of Union Pacific. One use case is applying new tech to reduce the inspection time for trains. Today, valuable time is lost when a long train with dozens of cars pulls into a terminal. Union Pacific is looking at how it can use sensors embedded in the cars to automate this process, so the trains can spend more time moving cargo.
"That will enhance our spend, which can lead to cost savings," Tennison said.
Union Pacific is also experimenting with using virtual reality simulation to help drive training efficiency. Inspection personnel can learn the basics in a classroom with virtual reality simulations and hit the ground running when they move out to the field.
Tennison said he approaches such experiments with caution, investing a modest amount just to see how a promising new technology may work in practice. But once the cost rises over a half-million dollars, he and his colleagues need to think through a solid ROI.
CIO strategies for complex new technologies must also deal with the question of where to invest, he said. For example, Union Pacific might outsource technology integrations to outside partners. This is particularly true for immature applications, like using blockchain for supply chain management. For a project like using IoT to improve train management and maintenance -- mission-critical operations for Union Pacific -- he said it is important to keep the development in-house.
"Technology is a core part of our business," Tennison said. "If the technology stops, we stop running trains." Some of his investments in new technology have resulted in side businesses. The development of internal apps for things like running trains and scheduling crews, for example, has grown into a $50 million business. Tennison said that's a small amount for a company with $20 billion in revenues, but it's a nice little business that helps fund other innovation efforts.
CIO strategies, however, should steer away from reinventing the wheel. He said Union Pacific buys the software for most of its back-office functions like purchasing, supply chain management and HR.
Experiment with different funding models
Union Pacific has explored a variety of funding models to test the waters for new ideas that don't always pan out. Tennison holds monthly meetings co-hosted by the COO at Union Pacific where employees are encouraged to pitch new ideas. The two commit about $4 million a year in innovative ideas and fund the most promising ones with a modest investment. This is enough to get these projects through the conceptualization phase, and either the project dies or gets implemented into a formal project.
Another strategy involves running six campaigns per year on how to use tech to boost marketing efforts. This involves goals like exploring creative strategies to boost customer penetration in a particular market.
Aside from these efforts, Tennison also likes to invest a modest amount in new technologies for research, benchmarking and testing. These tend to be smaller investment just to kick the tires and get a better understanding about how these technologies might be integrated into more focused projects down the road.
'We don't chase shiny technology'
Older businesses like 124-year-old UL, a global safety consulting and certification provider, are also experimenting with creative ways of driving innovation. Christian Anschuetz recently transitioned from being the CIO to the chief digital officer at UL.
Typically, the CIO role is focused on finding the right technologies to drive internal efficiency and efficacy, Anschuetz said. In his new role, he is looking at how to incorporate digital technologies into the services provided by UL, known throughout the 20th century as Underwriters Laboratories.
"There is a real commercial opportunity to apply these new technologies to companies like ours and figure out how to amplify our ability," he said.
But adopting technology for technology's sake is not a good strategy. "We don't chase shiny technology," Anschuetz said. "We chase business value." Part of this process involves working with executives at UL who are willing to invest in new technology.
He said a big part of his job lies in promoting change management at the people level and not just for the technology itself. "If you spend the time and focus on people and invest in your people, you can take advantage of whatever the signal is that now is the time to try out a new technology like blockchain," Anschuetz said.
IT as ambassador of the future
The city of Las Vegas is exploring innovation across different avenues, said Michael Sherwood, director of IT in the city of Las Vegas. It recently launched the country's first self-driving shuttle service.
Las Vegas is also experimenting with using augmented reality to help city workers see pipes underground in order to ascertain where to dig -- and where not to, a process that can typically take weeks. The city is also experimenting with using VR to help workers learn how to inspect the roof in a learning lab, before they have to go out into the field.
CIO strategies for getting business value out of emerging tech must also include the vision thing. Sherwood said a critical part of his job is ensuring that his IT team understands its role in helping the city thrive. Technology-enhanced services can give a city a competitive advantage in attracting new business and new residents.
"It is important to get people to think outside the norm and identify [technology] options that will solve a business challenge," Sherwood said. "I spend more time working with my staff in seeing the future and how they are part of the future than ever before. I want them to see that some tech is fading away and new tech is emerging."