Locked in a footrace with rivals to lure new customers, companies are increasingly expanding existing or building new digital capabilities to make business processes more efficient or improve customer service.
Digital products and services take many forms, from mobile banking apps to internet-connected refrigerators that self-monitor their temperature. Such capabilities are typically augmented by analytics or to help CIOs gauge the digital tool's effectiveness.
CIOs are spending 18 percent of their budget in support of digitalization, a figure expected to increase to 28 percent by 2018, Gartner analyst Andy Rowsell-Jones told CIO.com in October after surveying 2,600 CIOs worldwide. Going digital often means significant challenges and consequences, says Rowsell-Jones, adding that companies are overhauling their business models and allocating more of their IT budgets to catch digital disruptors. "You're seeing products become services in the digital ecosystem," says Rowsell-Jones.
The stakes are high. Leading digital companies generate better gross margins as well as better earnings and net income than organizations in the bottom quarter of digital adopters, according to Harvard Business School (HBS). Leaders post a three-year average gross margin of 55 percent, compared to just 37 percent for the digital laggards.
As we hurtle toward 2017, CIO.com is taking a look back at some of the top digital transformations that showed up on our radar in 2016. None of these CIOs would claim that their digital journey is complete. You could argue that that the transition to digital is never really over, as companies continuously release code and ship minimally viable products. But these eight strategies stood out for their ambition and audacity in an age where some CIOs feel it's too risky to shine.
At JetBlue, CIO Eash Sundaram has deployed high-speed internet and streaming, mobile payments, and other tools to improve passengers’ experiences. Earlier this year the company launched JetBlue Technology Ventures (JTV) to invest in startups seeking to bring to the travel market machine learning and analytics as well as new approaches to customer service. Think of it as another channel for innovation. "If you just pile everything into the mothership, things don't move as fast as you want them to move," says Sundaram, who has also set his sights on near field communication as a replacement for self-service kiosks and check-in desks.
Dominos Pizza has incorporated capabilities to allow consumers to place orders from any computing device. The company's AnyWhere platform allows you to place orders through smartphones, smartwatches and smart TVs, by entering orders into the Dominos website, and by tweeting and texting emojis. “Choice drives our whole mobile and digital platform,” Vasconi tells CIO.com. “Millennials love that.” Domino's current challenge? Getting Dom, its voice-activated virtual assistant, to understand and facilitate all of the different ways people order food through speech.
Target's digital journey has suffered through its fits and starts and a devastating data breach in 2013 didn't help matters. To help jumpstart its digital transformation, the retailer hired CIO Mike McNamara from Tesco, where he had led several digital initiatives for the U.K. grocery chain. McNamara spent much of 2016 flipping the software development model from outsourced to insourced andspearheading custom software development, including new supply chain applications to better align inventory availability with consumer demands.
Like Target, Wal-Mart has been refashioning its software stack as a custom platform, which includes a new search engine and several cloud applications. Based on OpenStack, Wal-Mart's new ecommerce platform is designed to help the retailer compete better with the OpenStack cloud platform. In fact, open source is a huge part of Wal-Mart's digital transformation. The group earlier this year launched OneOps, a platform that lets programmers test and switch among different cloud providers, a crucial benefit as companies embrace hybrid cloud models.
Capital One has built a huge banking and credit card business thanks to solid customer service, with a major assist from digital capabilities. Its mobile banking app was among the first to support Apple's TouchID biometric software. In 2016, the bank was the first to enable voice-activated financial service transactions via Amazon.com's Alexa virtual assistant. Now CIO Rob Alexander is overseeing a major shift to DevOps to facilitate faster software creation. “Winners in banking are going to be the ones that recognize that technology is really going to play a central role in how consumers want to bank in the future,” Alexander tells CIO.com. “We’ve got to be great at building software.”
Pharmaceutical retailers are rarely mistaken for digital innovators. CVS Health is trying to change that by consolidating its websites and mobile applications. It later hired CDO Brian Tilzer to lead the company's digital strategy but rather than whine and lament what many in his position view as a threat, he welcomed the addition to the executive suite. To that end, Tilzer and Gold 2015 opened a digital innovation lab in Boston. Early projects, including digital prescription and insurance card scanning and integration with Apple Watch, have come to fruition. The company also integrated technology from startup Curbside into a mobile app that lets shoppers order and pick up products in front of a CVS store. Gold says the innovation team’s remit is to fail fast. “Part of the output of innovating is going to be things that don’t work and that’s fine as long as you discover that early in the process as opposed to late in the process,” Gold says.
CVS’ chief rival Walgreens has been steadily transforming its business as well, with CIO Abhi Dhar assuming the reins of the company’s digital strategy a year ago.With what he describes as a “maniancal focus on customers,” Dhar has redesigned the company’s mobile app to allow consumers to manage their medication schedules from their Apple Watches and enabled Balance Rewards members to earn and redeem points using Apple Pay.
Subway’s transformation is only in its infancy but CIO Carman Wenkoff is leaving little to chance. He’s hiring more than 150 technology, marketing and operational professionals to help overhaul the company’s mobile app and redesign the sandwich chain’s stores for the future, including self-service kiosks and other capabilities. Wenkoff this summer also tacked on the title of CDO, which he says will help bring coherence to the business strategy.