Digital Transformation At Work: ERP Moves To The Cloud And The Rise Of The CDO

Digital transformation is the most pervasive force in business today and many large enterprises are struggling to adapt. After investing large amounts of capital on Enterprise Resource Planning (ERP) software or Best-of-Breed applications, the decision to migrate to the cloud is not easy.  Enterprises rely on existing systems to store and manage data from every stage of business, including manufacturing, sales and marketing, supply chain management, and human resources.  The largest vendors, which include SAP, Oracle, and Microsoft, have until recently failed to meet the expectations of the millennial generation. They also fail their customers by missing out on the benefits of the cloud: minimal capital expenditure, pay for usage, access from any device anywhere, and no software to install or upgrade.

The move to cloud computing has the potential to be a vast improvement over the legacy systems that permeate enterprises.  The on premise ERP systems can cost upwards of $10 million dollars to upgrade, as well as take eight months and potentially cost the CIO his job. Using the cloud, a new application can be turned on literally overnight with little to no cost or risk.

I still see the need for Best of Breed, however, the options have changed dramatically and new entrants located in the cloud warrant a closer look.  Business can use Workday for human resource management, Salesforce for customer relationship management, Box for storage, Google Apps for collaboration and productivity, and ZenDesk for analytics. Eventually these disparate systems, all accessed via the web, will have integration capability and work together.  And all of the data underneath these applications can live on google or salesforce.com hosting centers or an Amazon.com server farm.  While many of these options have gone mainstream, each enterprise has unique needs and needs to carefully select their ecosystem partners. Once they do, the cloud is built to scale from day one.

Moving an ERP to the Cloud is only one of the transformations happening within enterprises. According to a recent Economist article, “demands for digitization are coming from every corner of the company. The marketing department would like to run digital campaigns. Sales teams want seamless connections to customers as well as to each other. Everyone wants the latest mobile device and to try out the cleverest new app. And they all want it now.”  Social concepts and behaviors such as collaboration, feedback, and integrated profiles are now expected to be as part of an employee’s daily job.  These needs can now be met in the cloud due to rapid advances in processing power, storage capacity, and bandwidth. If you are the Chief Information Officer, what can you expect from this ‘digital tsunami”?

Among current executives, CIOs are the most attuned to the way technology is being applied throughout their industry. However, results from a CIO.com survey revealed that only 43% of the top 500 CIOs said they were either effective or very effective at identifying areas where IT could add the most value.  This is not always their fault.  The majority of IT budgets are not used for innovation or supporting new business goals but for ongoing operations, maintenance, and security.  Businesses need a new position focused on digital innovation that captures additional value for the enterprise using tools such as crowdsourcing, web interfaces for consumer engagement, open innovation platforms, and social media.  These can all lead to powerful consumer insights since the cloud allows for unprecedented levels of data storing, mining, cleaning, and analyzing.

One scenario happening more often is for a CEO to hire a Chief Digital Officer – someone who seeks ways of embedding digital technology into products and business models. A CDO can also provide a big picture view of how social media and digital technology shapes business strategy. Gartner estimates that 5-6% of companies now have one.

While people might still believe they won’t get fired for buying IBM, it is also true that change can be swift and brutal to those who don’t see it coming.  If you wait until your competitors hire a CDO, you might be too late. Just look at “Research in Motion” that went from a cultural icon in the mobility market with its Blackberry device to an embattled company fighting for survival within just two years.  A CDO needs to stay on top of recent trends, which means the position is more likely to be filled by someone from the marketing department than IT.  The CDO also needs to be capable of leading a shift in culture and have the support of the CEO, since their work might involve overcoming resistance to change and claims that current systems cannot be abandoned.   Finally, more than just a new position is needed to transform a company into the digital age.  This person needs the power to make things happen. Companies can ask someone to innovate, but if they do not have the budget and supporting tools it can amount to nothing.

Dan Steinberg

The Power of 10x Thinking

If you take a current idea or product and make a 10 percent improvement then you might be a mild success, but will it succeed wildly or even change the world? 10x thinking is focused on making something at least 10 times better. This is sometimes called moonshot thinking in reference to the United States pursuit of putting a man on the moon. President Kennedy famously said that we choose to go to the moon not because it is easy, but because it is hard.

During a trip to Silicon Valley last month as part of my MS-MBA program at Boston University, I visited start-ups, venture capitalists, and established companies vying for a piece of the valley mystique. However, it was a visit to the colorful and impressive Google campus where I learned about the power of 10x thinking. In a recent Wired Magazine interview, Google co-founder Larry Page said that 10x thinking “requires rethinking problems entirely, exploring the edge of what’s technically possible…..incremental improvement is guaranteed to be obsolete over time. Especially in technology, where you know there’s going to be non-incremental change.” He goes on to say:

Another way to think of 10x thinking is how many people will the idea impact. Google won’t even consider making a new product or providing a new service unless it will be used by a billion people. Google has earned the right to speak loudly about 10x thinking since its portfolio includes an ever growing list of 10x ideas including the driver-less car, google fiber, and even side projects like scanning nearly every book ever published and giving readers access to it. Google Glass, the computer that resembles a pair of eyeglasses, is another example of 10x thinking. When it was first unveiled, nobody though it would do anything, according to Google CFO Patrick Pichette. But the idea of having voice-directed computer attached to your head, which frees up your hands, is clearly catching on, he says. “It’s going to morph into 17 different things in the next decade,” he says. “That’s the essence of 10x.”

It is not just Google where 10x thinking is taken place. At Wipro, a global IT consulting firm I visited, I heard about new and incredible ways that Drones could enter the commercial space. At Scanadu, I saw how smart phones could revolutionize how we monitor our own health. I met with the bank BBVA and discussed how Bitcoins have been a wakeup call that a disruptive force is entering their market. And as a student, I see how education is being affected by 10x thinking as MOOCs (Massive Open Online Courses), now offer free or low-cost, high-quality classes to hundreds of thousands of people.

Dan Steinberg

Economic Impact of the ‘Sharing Economy’

A recent research study from the Boston University School of Management helps us better understand the economic impact of the sharing economy. Focusing on the state of Texas, a group of marketing and computer science professors analyzed data from over 22,000 Airbnb stays from 2008 to 2013 and tax revenue data from over 4,000 hotels. They estimate that every 1% increase in Airbnb listings in Texas results in a 0.05% decrease in quarterly hotel revenues. Airbnb, an online marketplace that connects hosts with guests for short-term apartment rentals is now being used by over 50,000 renters per night.

This research adds some needed quantifiable date to the ongoing debate over the impact of the sharing economy. Proponents of Airbnb, which was founded in San Francisco in 2008, argue that a supply of inexpensive accommodations can increase tourism spending and be an overall net positive producer of new jobs. While Airbnb does generate demand that did not previously exist, there are costs involved with lowering the barrier to entry for online suppliers in relation to traditional suppliers. In Texas, the impacts are distributed unevenly across the hotel industry, with lower-end hotels and hotels not catering to business travelers being the most affected. These businesses have reason to be concerned as Airbnb continues its rapid growth and consumers increasingly see it as a better value than lower-end hotels.

The growth of Airbnb and similar services is getting a lot of attention, and there are efforts under way to slow it down. Cab drivers in Paris recently turned violent against Uber drivers, and New York Attorney General Eric Schneiderman issued a subpoena to Airbnb last October, demanding information on New York City’s 15,000 hosts and 25,000 listings. With so much at stake, this debate is not going to end soon.

Dan Steinberg