Kindling Innovation Across the Digital Enterprise

Sunil Maulik SunilM1 sunil@sunilm1.net

Megatrends in the Economy Today

Megatrends Affecting the Digital Economy

1,350M

343M 332M

284M

230M

200M

618M

829M

7.5Bn Mobile Devices (>Earth’s

Population!)

We live in Exponential Times

Enabling Health/Wellness

Behavior Change & Habit Design

Enabling Sustainable Energy

Design for the Smart Grid

Enabling The Internet Everywhere

Big Data & the Internet of Things

Internet of Things (IoT)

Applications of IoT

Enterprise Opportunities

Impact on Organizations

- Transparency

- Experimentation

- Segmenting groups

- Supports automated decision making

- Enabling new business models, products

Impact on Productivity

Enabling the Digital Enterprise

Digital Transformation across Markets

Digital Affects Processes,Enterprises & Transactions

• Mobile Access • Social Engagement • Sensors & Wearable Devices • Digital Financial Models and Transactions • Connected Devices • Digital Content Management

Then - Now

Then: Old fashioned, proprietary POS system. Now: Tablet + Square Reader

Then - Now

Then: Yard Sales/Flea Markets Now: Etsy, Pinterest, eBay, etc.

Then - Now

Then: Mass Manufacturing Now: Personalized, Customized, On-Demand

Then - Now

Then: Bake Sales, Flyers, Car-Washes Now: Kickstarter, kiva.org, Causes

Then - Now

Then: Slow, Bureaucratic, Restrictive Now: Fast, Custom, Varied

Then - Now

Then: Job-Fairs, Campus Recruitment, Word-of-mouth Now: LinkedIn, Klout, Social Relevance, Personal Brand

Then - Now

Then: Classrooms, Lectures, Reading Materials Now: Coursera, Khan Academy, Udacity Online, Certification, Anyone/Anywhere/Anytime

Then - Now

Then: Taxis, Minicabs, Limousines Now: Uber, Lyft, SideCar

Then - Now

Then: Hotels, Vacation Swap Now: AirBnB, Couchsurfing, OneFineStay

The Design Economy

• (Re)Designing Processes

• (Re)Designing Enterprises

• (Re)Designing Transactions

• OLD: Plan, Design, Implement, Deliver, Improve

• NEW: Launch, Feedback, Improve (Repeat until done!)

Redesigning Processes

New Processes

• “Code fast and break things”

• “Perpetually in Beta”

• “Release early, release often”

• “If you are not truly embarrassed by your product, you waited far too long to release it”

Iterative Refinement• Start with an initial model

(hypothesis or idea.)

• Collect data from the field. (Show users prototypes or basic schematics.)

• Measure users empathetic response.

• Adjust model so that it more adequately fits the measured data (meets the users needs.)

• Repeat the process until no further refinement is possible.

Appeal to the Head & the Heart

Business Objectives vs. User Needs

Who’s on First?

Digital Decision-Making•System 1: Fast, automatic, frequent, emotional, stereotypic, subconscious •System 2: Slow, effortful, infrequent, logical, calculating, conscious

“Thinking, Fast & Slow” Daniel Kahneman

How the Mind Decides What to Do• Most of the time, we’re not consciously

deciding what to do next.

• We often act based on habits. They can be created, but are hard to defeat.

• We often make intuitive, immediate decisions based on our past experiences.

• When consciously thinking, we often avoid hard work. We “wing it” with rough guesses based on similar, but simpler, problems.

• We follow other people, especially peers and experts.

Decision-Making & Habits

Decision-making & Processes

Story Telling vs. Specifications

Redesigning Enterprises

Digital Enterprises Vision

Innovation

Customer Journey

Competitive Advantage

Internal Collaboration

Empowered Workforce

Greater Efficiencies

Deeper Analysis

Customer Conversion & Satisfaction

Challenges to Enterprises

• Who will the next customer be?

• What will they want?

• How can they be motivated to become long-lasting?

The Lean Start-Up (LSU) Model

Lean StartUp: A temporary organization designed to find a repeatable, scalable business model under conditions of

extreme uncertainty

The History of the Lean Start-Up

• Founded by Steve Blank (Customer Development; Repeatable Business Model Hypothesis; Rapid Experimental Design)

• Expanded by Eric Ries (Minimum Viable Product (MVP); The Pivot)

• Assisted by Alex Osterwalder (The Business Model Canvas)

How the LSU Benefits Enterprises

• Extreme uncertainty also occurs at large enterprises

• Existing Lines of Business (LoBs) often require new business models

• Discovering new revenue opportunities requires innovation

The Business Model Canvas

What are the most important costs inherent in our business model? Which Key Resources are most expensive? Which Key Activities are most expensive?

Through which Channels do our Customer Segments want to be reached? How are we reaching them now?How are our Channels integrated? Which ones work best?Which ones are most cost-efficient? How are we integrating them with customer routines?

For what value are our customers really willing to pay?For what do they currently pay? How are they currently paying? How would they prefer to pay? How much does each Revenue Stream contribute to overall revenues?

For whom are we creating value?Who are our most important customers?

What type of relationship does each of our CustomerSegments expect us to establish and maintain with them?Which ones have we established? How are they integrated with the rest of our business model?How costly are they?

What value do we deliver to the customer?Which one of our customer’s problems are we helping to solve? What bundles of products and services are we offering to each Customer Segment?Which customer needs are we satisfying?

What Key Activities do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue streams?

Who are our Key Partners? Who are our key suppliers?Which Key Resources are we acquiring from partners?Which Key Activities do partners perform?

What Key Resources do our Value Propositions require?Our Distribution Channels? Customer Relationships?Revenue Streams?

Day Month Year

No.

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LSU Methodology• Test Hypotheses: Run high-speed

experiments with rapid prototyping to validate/discard hypotheses.

• Explore: Interviews, Observations, Re-enactment. Use Design Thinking to relate to customer’s emotional state.

• Pitch: Present an idea as if it were a finished product. Get buy-in from all stakeholders.

• Prototype & Test: Launch product as unique brand. Spin-out. Isolate in a test-market.

Summary: LSU Model• Create a business model canvas

for each opportunity in portfolio

• Check which ones show evidence for customer segment, value proposition, etc.

• Use LSU model to validate these projects

• If none validate, pivot to another hypothesis/opportunity

Digital Enterprise Examples• Burberry: Connected in-store experience

• Nike: Customer Engagement

• Volvo: Digital CRM

• Harrah’s: Location-based marketing

• Starbucks: Mobile payments, loyalty points, incentives

• Virgin America: Twitter-based customer service

• L’Oreal: Customer engagement channels

• Intel: Recruiting via Social Media

• P&G: Improved productivity and enterprise innovation

Redesigning Transactions

Redesigning Transactions

• Sharing

• Alternative Payments

• Alternative Currencies

A $26Bn Economy (Economist, March 2013) Average Revenue Per User:

•Air B’nB - $9800/year •SnapGoods - $58/month •RelayRides - $250/year

Reimagine Exchange

Alternative Payments

• Real-time bank transfers

• Offline credit transfers

• Direct debits

• eWallets

• Paper-based payments

• Mobile payments

Alternate Currencies

Market Share Variation

“BitCoin is the next Internet Platform” - Chris Dixon, Andreessen

Horowitz

The Digital Enterprise

Digital Transformation

1. Social, Mobile & Real-Time are causing significant disruption

2. Digital Transformation is becoming a priority for organizations

3. Digital Transformation is driven largely by customer behavior

4. Digital Transformation is based on 3 key elements: leadership, optimizing customer experience, and a digital experience ‘swat team’

Transforming the Enterprise

Digital Maturity Assesment Digital Strategy

Digital Program Management Digital ‘Fabric’

Gap AnalysisExperience & Engagement Digital Foundation

Transformation Framework

Business Case(s) Digital Business Models Digital Architecture Digital Asset Maturity

Competitive Threat ‘Mobile-first’ impact Program Execution & Management

Hyper-connected, multi-model access

Assess Strategize Execute Transform

Enterprise Challenges

• Departments act as their own fiefdoms. • Managers act from a position of self-

preservation. • Distribution of roles in customer journey. • Budgets/resources not officially allocated. • Educating the enterprise of the value of the

transformation is difficult.

Key Elements to Digital Transformation

• Vision & Leadership • Digital Transformation Team • Digital Customer Experience

Vision & Leadership

ROLE OF CHANGE AGENT In the absence of digital leadership, change agents must rise from within the enterprise, unite with each other, and partner with executives to collaborate for change.

UPDATED VISION For digital transformation to mean something to all involved, a vision must be clearly articulated to explain why change is needed, what it looks like, and its value to customers and employees.

EXEC SUPPORT Strategists must make the case and create a sense of urgency to gain executive sponsorship and support.

Digital Transformation Team

CENTER OF EXCELLENCE

It’s necessary to form a cross-functional group tasked with redesigning and optimizing the customer experience, including roles, responsibilities and projects.

ORGANIZATIONAL STRUCTURE

Digital expertise may not be common throughout the organization, but it should be sought. The goal should be to organize a qualified team of strategists who can educate key stakeholders.

IT PARTNERSHIP A strategic alliance between IT and marketing will streamline and help scale digital transformation efforts.

Digital Customer Experience

CxO FOCUS Companies must rethink the entire customer journey and experience.

INNOVATION CULTURE

Journey mapping often leads to unplanned products or services that reflect actual customer needs and behaviors.

DATA INTEGRATION

New roles are needed to analyze data, connect it to lines of business, and present it in actionable ways.

COLLABORATION Journey mapping should lead to insights into which departments need to work more closely together.

Benefits of Digital Transformation

Work 2.0: Designing for Behavior Change

Work 2.0 - The Digital Enterprise• View boundaries not as edges but as

areas of overlap

• Enable employees to see the impact of their work

• Design for culture: Link culture to brand

• Maintain identity in a distributed world

• Adhere to core principles while adopting to changing conditions

Purpose Mastery

Autonomy

Towards a New Culture

From Work to Network• Microtasking/Crowdsourcing:

Disintermediating work from the enterprise

• Open Innovation: Involving ecosystem in new inventions and products

• Generativity: Creation of completely new products or processes from existing systems

Management 2.0• Coordinating communities of practice will require new

forms of managerial skills (data analytics, efficiency)

• Managers will need to manage cooperation, competition and conflict simultaneously

• Data will be critical for decision making, risk assessment, and developing new products

• Instinct, gut-feeling and tacit knowledge can still uncover patterns and insights that data analytics might overlook

Agile Management?

Management by Holocracy?

Affecting Employee Behavior

Five Stages of Behavior Design

• Understand: How the employee decides to act

• Discover: The right behavior to change, given your goal

• Design: The process to bind to a specific behavior

• Refine: Measure impact & success based on careful measurement and analysis

• Iterate: Cycle through this process until the desired behavior becomes habit-forming

Environmental Design

Constructing the Environment

• Help employees see themselves as people who would naturally take the action.

• Help employees build strong associations between things they are already familiar with and enjoy, and the new action.

• Provide employees with clear instructions on what they need to do and any other essential information to act.

Quantitate Changes in Employee Behavior

Optimizing Behavior Change• Ensure employees are motivated to act, and that

motivation is at the front of their minds.

• Ensure they are cued to act now. (Ask them.)

• Ensure they know if they are succeeding or failing—give them actionable feedback.

• Avoid or co-opt behaviors that are competing for their attention. (Ideally, piggyback onto something they are already doing.)