Innovative CIOs strike back against digital disruption

If there’s one thing CEOs fear these days, it’s being Ubered, the dreaded code word that describes how ride-sharing startups have shaken up ground transportation. The fear is so strong that the verb changes depending on the industry, from retail (Amazon.com), to real estate (WeWork), to hospitality (Airbnb), and beyond. But the common denominator for disruption remains consistent: startups that harness cloud platforms and mobile software to deliver digital services more efficiently than less nimble incumbents.

Such existential threats pose stiff challenges to established companies, but they also present opportunities for those willing to take risks and innovate, according to KPMG, which says that 56 percent of more than 200 executives responsible for innovation expect their company’s investment in innovation to increase from 2019 to 2020. In fact, enterprises that underinvest in innovation are putting themselves at a strategic disadvantage, KPMG noted in its recent Benchmarking Innovation Impact 2020 report.

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“The cost of underinvesting in enterprise-scale innovation is high,” wrote Fiona Grandi, KPMG national managing partner of innovation and enterprise solutions, in the report. “It can mean the difference between continued growth and obsolescence.”

Grandi adds that many companies are increasingly integrating innovation efforts with strategy and transformation initiatives.

Fueled by the urgency for top-line and bottom-line growth, CEOs are turning to CIOs to develop new digital products and services, says MuleSoft Founder Ross Mason, who sold his company to Salesforce.com for $6.5 billion last year. “Without that air cover, it’s hard to get certain things done,” says Mason.

Mason tells CIO.com that incumbents recognize that they need to innovate and get to market faster.

Here, we look at how several IT leaders are turning to application networks that facilitate connections between third-party services and a variety of other emerging technologies, such as sensors and analytics to process data at the edge, in an effort to stave off disruption in their industries.

Fast-food chain gets a digital makeover

With sales falling from 2012 to 2015, McDonald’s promoted Steve Easterbrook to CEO. Easterbrook, an experienced executive who rose through the ranks at McDonald’s, seized on the fact that digital and mobile delivery channels used by DoorDash, GrubHub and, yes, Uber Eats, were noshing on its sales. When customers were hungry, they searched Yelp or other advisory websites for quick-service options and ordered food for delivery through their mobile phone. 

But McDonald’s didn’t operate digital channels, which posed a problem; it could no longer lean on brand loyalty in a quick-service industry where innovation had been democratized. “We had to change or lose share,” says McDonald’s former global CIO Frank Liberio, who now operates boutique consultancy Strategy2Execution Advisory. Easterbrook, who oversees 36,000 locations in 120 countries, elected to create digital channels and modernize, Liberio said during a keynote session at MuleSoft Connect in September.

To support these initiatives, Liberio restructured McDonald’s IT operating model to deliver software in agile delivery cycles, eliminating 12- to 18-month “waterfall” cycles in favor of four- to six-week sprints. He upgraded the point-of-sale (POS) system and helped build a mobile app to enable digital ordering and offer redemption Among the most important initiatives was Liberio’s decision to replace McDonald’s legacy point-to-point integration process with a multi-point system comprised of APIs, or application programming interfaces. APIs connect software, such as a mobile app, to another service, such as an ecommerce system, and provide a digital bridge with which third parties can plug into a network.

Using this multi-point API approach, Liberio built an application network that connects McDonald’s internal applications, such as its POS and mobile app, to third-party software from delivery partners. When a customer orders McDonald’s food and beverages from their smartphone through, say, Uber Eats, they prompt the service to connect to McDonald’s POS system to process the purchase.

Liberio, who facilitated McDonald’s mobile order and pay plus offer redemption capabilities at 21,000 locations across 7 countries within 10 months, provided a similar connection to WeChat in China. Thanks to the application network, McDonald’s supports more than 1 billion digital transactions per day, with each order accounting for 12 to 15 touchpoints. And McDonald’s mobile footprint stands to extend into other ecosystems; car manufacturers discussed integrating the McDonald’s app in their vehicle dashboards to enable similar functionality, Liberio says.

According to Liberio, one of the key value propositions of the API-led approach is the ability to reuse existing APIs rather than writing a new one for every new app or functionality that is introduced. This saves developers time and money, fueling faster innovation and time to market. And it ultimately gave the resurgent McDonald’s the return on investment it sought, Liberio adds.

Boosting time to market in the face of disruption

Other CIOs at incumbent organizations are also modernizing their IT operating models to satisfy customers and beat back rivals. New York Life, the 174-year-old life insurance giant, is facing pressure from insurtech startups that use machine learning software to better personalize and deliver digital products to consumers.

In response, New York Life has created APIs to make it easier for customers to complete critical tasks such as address changes, as well as APIs that help insurance agents track each step in an application process, says Betty Smith, vice president of enterprise integration services for the company.

Smith says these connectors, supported by MuleSoft, are part of a broader initiative to provide an omnichannel experience for members and agents. The APIs enable customers to access information and submit applications more easily, while agents are better equipped to process applications and claims, all fluidly via phone, website and mobile channels.

New York Life also envisions creating connectors to tap into apps that listen to social media to solicit new members and APIs that enable it to access data about its customers from third-party partners. This push is part of New York Life’s strategy to “stay up to date and relevant” for its customers. The reusability of APIs “helps provide consistency for the experience,” Smith says, adding that the company’s goal is to provide more self-service capabilities for employees, plan members and prospective customers.

IoT provides safer roads

You may think municipalities aren’t facing the kind of competitive disruption that plagues corporate incumbents, but you’d be wrong. People pick residential locations based on factors such as proximity to work and amenities and safety, among other attributes. As director of innovation and technology for the city of Las Vegas, Mike Sherwood is implementing technologies to ensure that roadways are well-maintained and, yes, safe.

Sherwood is harnessing the internet of things (IoT) and edge analytics to decrease traffic accidents and facilitate efficient emergency response services, a departure from the city’s traditional practice of dispatching workers to count cars traveling on a busy road. Operating at the network’s edge, these sensors funnel metadata and other information on car traffic and road conditions back to dashboards. From there, municipal workers analyze traffic patterns and decide whether to reroute traffic to less busy areas during certain events, such as conventions, conferences and concerts, or whether to order road maintenance before potholes and other obstructions crop up.

This information helps reduce operational costs associated with deploying workers. But such information, combined with machine learning software, is also critical because it offers businesses that may be mulling a move insight into foot traffic in Las Vegas, says Sherwood, who is operating the IoT and edge network with hardware and software from Dell, VMware and NTT Data Services. Such innovation arms Las Vegas with a competitive advantage over other cities in attracting more residents and businesses, he adds.

“Las Vegas is not just an entertainment capital; we have to make sure we’re building other amenities to succeed,” Sherwood says. “Cities with intelligent traffic flow capabilities that can increase public safety offer a better choice of living.”

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