IT Strategy for the 4th Industrial Revolution

Presented by : Adam Stuckert and Stanley Sum

Venue: HKICPA

Date: 22 June 2016

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Disclaimer

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to provide general information and guidance on the subject

concerned. Examples and other materials in this seminar / workshop

/ conference are only for illustrative purposes and should not be

relied upon for technical answers. The Hong Kong Institute of

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firm(s) that the speaker(s) is representing take no responsibility for

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About the speaker

Adam Stuckert – Director, KPMG IT Advisory

Led multiple large scale IT strategy and

technology-enabled transformation project

in Asia and North America

Led KPMG CIO Advisory services

in Hong Kong

Experience in working with different multi-nationals

in the aviation, energy and healthcare sectors

A regular speaker in business forums on

IT strategy and IT performance management

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About the speaker

Stanley Sum – Associate Director, KPMG IT Advisory

Led a number of IT strategy, IT performance

management consultancy projects

in Asia and Europe

Specialized in technology investment /

innovation services within KPMG Advisory

Experienced in financial services sector

A certified public accountant

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Agenda

What is the 4th industrial revolution?

IT Strategy vs. IT Initiatives

Formulation of an IT strategy

Direction setting

Customer proposition

Business design

Execution planning

Critical success factors of an IT strategy

What is the 4th industrial revolution

IT Strategy in the 4th industrial revolution

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“The 4th Industrial Revolution is

characterized by a fusion of technologies

that is blurring the lines between the

physical, digital, and biological spheres.”

Klaus Schwab, Founder and Executive Chairman

of the World Economic Forum (2016).

The 4th industrial revolution has just begun

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2000

1969: First programmable logic controller

1900

1870: First assembly line

1800

1784: First mechanical loom

Tomorrow starts

today…

First Second Third Fourth

Water and steam power

Mechanical production

Division of labor

Mass production

Electricity

Electronics

Information technology

Automated production

Datafication

Hyper-connectivity

Digital labor and

professional

augmentation

What makes a difference this time?

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New technologies: ‘omni-present’

New technologies

enable mass-

customization,

flexible value chains,

open exchange of

data and working

any time, any place,

anywhere

New economy; ‘24/7, faster heartbeat’

New economies emerge, driven by rapid, often

customer driven changes, shorter lifecycles of

products & services (information- / network

economy), 24/7

New organisation; ‘blurred lines’

The traditional, stable organisation model

becomes irrelevant, due to technology driven

break-down of barriers and availability of (open)

information

New human behaviour; ‘tech-savvy’

A new generation of people is arriving, that is

used to instant availability of (open) information,

user defined functionality, in the palm of their

hands at any time

4th industrial revolution:Disruptive capabilities

Innovating by harnessing the confluence of

digital disruption to:

What makes a difference this time?

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Social media

3rd industrial revolution:Technology disruption

Mobile

Cloudcomputing

Ubiquitous broadband

Personalization

Internet of things

Machine learning

Artificialintelligence

Predictive analytics

Robotics

SensorsGPS

Data centerextension—cloud

Mobile first

FinTech

3D printing

Agile

Crowdsourcing

Big Data

Apps

Blockchain

• Make almost anything

• Connect almost everything from

everywhere

• “Datify” and digitize almost everything

• Access extensive content and compute

• Automate thought processes

IT Strategy vs. IT InitiativesIT Strategy in the 4th industrial revolution

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IT Strategy vs. IT Initiatives

IT Strategy is.....

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IT Initiative is……

Tactical

in-nature

Examples: Rolling out cloud-based

systems, implementing self-service

kiosk, developing mobile apps

Strong alignment

with overall

business strategy

Examples: Workforce automation for a

business unit / core services, harmonising

experience across online/offline channels

Usually aligned to the

needs of one department /

one customer group

Usually technology

focus, deployment of a

particular IT solution

Typically short-life

span

May involve

revision of

enterprise

architecture

Lead to a

transformation in

people, process

and technology

aspects

Longer term and

review

continuously

Usually result in

implementation of

multiple IT solutions

Example – DBS

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Source:

MIT Sloan Management Review http://sloanreview.mit.edu/article/dbs-bank-pumps-up-the-

volume-on-its-technology/

Forbes.com http://www.forbes.com/sites/forbesasia/2014/06/04/piyush-gupta-wants-a-shift-to-

digital-banking-in-singapore/#414cb9594d09

Forrester http://blogs.forrester.com/dane_anderson/13-08-23-

qa_with_paul_cobban_managing_director_coo_technology_and_operations_dbs_bank

DBS Bank https://www.dbs.com.hk/en/aboutus/pdf/DBS_Press%20Release_Nest_Eng.pdf,

https://www.dbs.com/newsroom/DBS_launches_new_innovative_learning_centre,

https://www.dbs.com/newsroom/news_1097_8288934481335335538_MIGRT

Technology

investment /

design is

cantered around

digital agenda

Leveraging cloud

/ cognitive

computing and

big data

Investing in

innovation

learning center

and accelerator

program

Establishing a structured

way to link IT deliverables

to measureable

operational indicators /

financial business

outcomes

10101110….

Formulation of an IT strategyIT Strategy in the 4th industrial revolution

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Four key parts in IT strategy formulation

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Current State

and Digital

Maturity

Case for

Change

Digital

Strategic

Roadmap

Strategy

Execution

Programme

Design

Operating

Model

Impacts

Digital

Technology

Strategy

Culture &

Behavioural

Change Mgt

Digital Vision

Customer

Research

Customer and

Staff

Proposition

Digital

Capability

Model

Digital Strategy

Objectives,

Principles &

Constraints

Phase 1 – “Telling the story” Phase 2 – “Planning the journey”

Direction Setting Customer

Propositions

Business Design Execution Planning

Strategic

Context

Change management

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2

3

4

5

6

7

8

9

10

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12

13

IT Vision

Current

State and

IT Maturity

IT

Capability

Model

Technology

Strategy

Strategic

Roadmap

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Current State

and Digital

Maturity

Case for

Change

Digital

Strategic

Roadmap

Strategy

Execution

Programme

Design

Operating

Model

Impacts

Digital

Technology

Strategy

Culture &

Behavioural

Change Mgt

Digital Vision

Customer

Research

Customer and

Staff

Proposition

Digital

Capability

Model

Digital Strategy

Objectives,

Principles &

Constraints

Phase 1 – “Telling the story” Phase 2 – “Planning the journey”

Direction Setting Customer

Propositions

Business Design Execution Planning

Strategic

Context

Change management

1

2

3

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IT Vision

Current

State and

IT Maturity

Direction Setting

Source:

Forbes.com http://www.forbes.com/sites/scottdavis/2014/03/27/burberrys-blurred-lines-the-integrated-

customer-experience/#6246d9922fcd

Burberry.com http://www.burberryplc.com/about_burberry/our_strategy/pursue-operational-excellence

What did Burberry do?

Blurring physical and digital experiences (e.g. Roll-out of

Collect In Store)

Review its digital / ERP / supply chain capability

Align its digital investment with its market strategy in

different geographical locations

Invest in organisational alignment through brand

engagement, pre-launch video preview

Key considerations at this stage

Position of the organisation within its industry or sector and

describes the likely impact of various external factors

Your IT capability and maturity against peers

Define tangible / achievable goals and underlying principles

What will be a desirable outcome? What’s the future should

look like?

Messaging to stakeholders – The question of ‘What does it

mean to me?’

Customer propositions

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Current State

and Digital

Maturity

Case for

Change

Digital

Strategic

Roadmap

Strategy

Execution

Programme

Design

Operating

Model

Impacts

Digital

Technology

Strategy

Culture &

Behavioural

Change Mgt

Digital Vision

Customer

Research

Customer and

Staff

Proposition

Digital

Capability

Model

Digital Strategy

Objectives,

Principles &

Constraints

Phase 1 – “Telling the story” Phase 2 – “Planning the journey”

Direction Setting Customer

Propositions

Business Design Execution Planning

Strategic

Context

Change management

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What did Burberry do?

Re-position its target to the Millennials

Re-design overall customer experience based on

the target

Enhance customer experience with technology

(e.g. Digital Nail Bar)

Improve on customer management tools and

delivery options

Source:

Forbes.com http://www.forbes.com/sites/scottdavis/2014/03/27/burberrys-blurred-lines-the-integrated-

customer-experience/#6246d9922fcd

Key considerations at this stage

Current customer journeys for your customers when they

interact with your organisation

Latest technology trends affecting our customers and

target customers

Do your customers/staff have appetite to be tech-savvy?

Customers/staff behaviour in the context of technology?

Business design

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Current State

and Digital

Maturity

Case for

Change

Digital

Strategic

Roadmap

Strategy

Execution

Programme

Design

Operating

Model

Impacts

Digital

Technology

Strategy

Culture &

Behavioural

Change Mgt

Digital Vision

Customer

Research

Customer and

Staff

Proposition

Digital

Capability

Model

Digital Strategy

Objectives,

Principles &

Constraints

Phase 1 – “Telling the story” Phase 2 – “Planning the journey”

Direction Setting Customer

Propositions

Business Design Execution Planning

Strategic

Context

Change management

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IT

Capability

Model

Technology

Strategy

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What did Burberry do?

Upgrade its core SAP system to improve operational

effectiveness and facilitate growth in digital channels

Create additional/unique touch-points between staff and

customer through technology

(e.g. By using RFID, a dress taken into the changing room

may trigger a runway video showing this jacket/dress

combination on a model).

Third-party digital partnership

(e.g. Burberry Kiss with Google)

Source:

Forbes.com http://www.forbes.com/sites/scottdavis/2014/03/27/burberrys-blurred-lines-the-integrated-

customer-experience/#6246d9922fcd

Burberry.com http://www.burberryplc.com/about_burberry/our_strategy/pursue-operational-excellence

Key considerations at this stage

The desire level of maturity of your IT capability, where

are the gaps and what it takes to close them?

Your technology landscape and architecture, where do

you need investment, and with whom?

How business transforms itself with technology?

Execution planning

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Current State

and Digital

Maturity

Case for

Change

Digital

Strategic

Roadmap

Strategy

Execution

Programme

Design

Operating

Model

Impacts

Digital

Technology

Strategy

Culture &

Behavioural

Change Mgt

Digital Vision

Customer

Research

Customer and

Staff

Proposition

Digital

Capability

Model

Digital Strategy

Objectives,

Principles &

Constraints

Phase 1 – “Telling the story” Phase 2 – “Planning the journey”

Direction Setting Customer

Propositions

Business Design Execution Planning

Strategic

Context

Change management

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Strategic

Roadmap

What did Burberry do?

Set clear plan and milestones and communicate across

the organisation

Further enhance experience through improvement in

mobile sites, search engine / browser optimization and

data analytics

A senior leadership team with strong transformation

experienceSource:

Forbes.com http://www.forbes.com/sites/scottdavis/2014/03/27/burberrys-blurred-lines-the-integrated-

customer-experience/#6246d9922fcd

Burberry.com http://www.burberryplc.com/about_burberry/our_strategy/pursue-operational-excellence

Key considerations at this stage

Identify top 5 launch initiatives to create impact

Be flexible on execution, it’s not an one-off project but

evolution

Define clear KPIs and NPV – ensure availability of

relevant and accurate operational and financial data to

evaluate performance

Governance during execution – who needs to be involved

and how frequent?

Critical success factors of an IT strategy

IT Strategy in the 4th industrial revolution

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Position your IT with the vision to support the Digital World

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Diversification

■ Information management

■ Transaction based

■ IT is strategic weapon

■ IT costs

Value Generation

■ Data revolution; information is

becoming part of products and

services

■ Data analytics key differentiator

■ ERP was yesterday’s problem

■ Security & privacy are hot topics

■ Everything is mobile and shared

■ Value delivery by IT

■ Technology enabled business

■ Partnership and alliance

Unification

■ One company standard

■ CIO becomes more important

and Business Unit IT managers

will disappear

■ Business owners per process

■ ERP solutions

■ Master data harmonisation is a

prerequisite

Past

Present

“Digital world”

Challenges in the

‘Traditional’ World

Challenges in the

Digital World

Breaking away from the ‘traditional’ IT environment

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1. End the (unhappy) marriage between I & T by

decoupling Information (CIO) and Technology

(CTO/IT manager)

2. Educate both IT professionals in business

(processes) and business executives in IT,

enabling a symbiotic relationship

3. Break down the alignment mechanisms and

related intermediary roles

– Transfer the business-related IT functions

(e.g. information management) close to the

business or in the business (phased)

– Incorporate I(T) strategy in the business

strategy

– Encourage networking & partnerships

Adopting new philosophy in managing IT day to day

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The business

strategy needs to

continuously

synchronise with

the competitive

environment.

At the same time,

the IT strategy

needs to stay

aligned with the

business strategy

Continuous cycle

Both the IT and

business strategy

should embrace

uncertainty and

support

organisational

flexibility using

agile work

methods

Agile

Strategy building

does not start with

a greenfield. It is a

challenge to make

sure current

legacy is

understood and

to plan for

increased

flexibility

Reduce

complexity

Rather than

prepare large

transformation,

strategy should

include innovation

and controlled

experiments

Experiment

Strategy formation

is not a one off

project but needs

to form the

heartbeat of the

business and IT

organisation

Heartbeat

Questions?IT Strategy in the 4th industrial revolution

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Thank you