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Departments in direct communication with customers are leading the digital transformation charge. Indeed, it's a company's customers who are spurring digital transformation strategies by demanding an Amazon-like experience -- regardless of the industry, according to Land O'Lakes Inc. Senior Vice President and CIO Michael Macrie.
In this video interview recorded at the recent MIT Sloan CIO Symposium, Macrie explains why back office functions that are out of a customer's line of sight tend to lag behind their front office counterparts and about why pilot projects are a good promoter for digital transformation strategies.
Editor's note: The following has been edited for clarity and brevity.
What parts of the enterprise are leading digital transformation efforts?
Michael Macrie: Digital transformation affects every aspect of our business. As far as the leaders, we're definitely seeing it the front office -- sales, marketing. Digital marketing has changed the way marketing is done today. We see them aggressively moving to new digital techniques -- automation, online advertising and everything else that comes with it when it comes to microsegmentation and going after customers in new and innovative ways. Amazon has changed the customer experience for so many people. So, every company is trying to keep up with the expectations that they're setting in the marketplace.
What parts of the enterprise are slow to transform?
Macrie: It's still probably the back office. Those are the things that the customer doesn't see. They're not driving that demand as much. But there's still a ton of opportunity out there, whether it be in the supply chain or a finance organization or even the IT organization. There are so many other things that we can do to automate and take advantage of all these new digital technologies.
Are there other hurdles for the back office beyond lack of visibility?
Macrie: In the back office, it's much more about business case. How is this investment going to change the way we work, change the way we operate, increase our profits, reduce our costs or help the customer in some other way -- maybe shorten the time to delivery. And so it just takes a little bit longer to basically look at these technologies, adopt them, incorporate them into your company, change your culture and then move forward with them. If a customer demands it, it's out in front, and so you've got to react a little faster. In the back office, it takes just a little bit more time.
What digital transformation strategies help push those efforts along?
Macrie: For us, we do a ton of pilots. We do a lot of hands-on: Let me show you how this could improve your forecasting capability. Let me show you how we can automate a process that couldn't have been automated in the past. Let me explain how we're going to use a big data algorithm to improve how we set prices or how we detect fraud. And so we spend a lot of money now on piloting different technologies and introducing them to the business stakeholders. That cuts the cycle time of adoption, I would say, almost in half.
What role does IT play in developing pilot projects?
Macrie: So, in my IT organization, I love to hire people who have a knack for business as well as technology. We tend to watch our business holistically. We look across all the functions, all departments, the customer markets. And we look for opportunities, whether they be in the back office or the front office. And then we'll bring those ideas -- we like to partner with maybe an innovative thinker in the business -- and bring those ideas and pilots to life.
In some cases, my team's done it on its own. They've seen a practice -- they maybe couldn't explain it because one thing for sure is IT orgs are not the best communicators -- but they'll go off, I give them some time, give them a little bit of money to take those pilots, bring them to fruition and then we demonstrate them for the business and say, 'Do you want one of these or not?' Because that makes it real for them. And then we can decide whether we want to move forward with an investment or not.
There's budget specific to innovation for your team?
Macrie: Absolutely. I have an innovation budget every year. I also take a percentage of the savings that I may make in the ongoing year and reinvest that in innovation in any given year. So, like any good CIO, I have revenue goals, I have cost-savings goals and I have objectives. But as part of those cost-savings goals, I don't give 100% back to the company. I take a little piece of that and invest in innovation to keep moving forward.
Give an example of a successful IT-led innovation project for the business.
Macrie: We worked on a project with a big data algorithm and machine learning to segment customer buying behaviors at the grower level. And we figured out that there were basically about 350 patterns of buying and behaviors in the marketplace. At the beginning of that, the business -- they weren't resistant, but they were a little like, 'We don't quite understand how you could even address it and how you could target it.' We turned that into a guided selling tool to help them address different microsegments and talk about different products at different times of the year that were specific for those microsegments. That's an example where we had to go a little further to explain the value of microsegmentation in our marketplace.