Digital services mastery: A key competency for digital business

Mastery of digital services is going to become a key competency for organizations to grow their business and build sustainable competitive advantage in the years ahead. It’s no longer sufficient to have an innovative set of products or services, you have to be a master of how you design, develop, deploy, manage and continually evolve your digital services as well.

Even if your company delivers physical goods, digital services – in the form of both interactions and transactions – will likely be a growing part of your business both now and in the years ahead. In 2014, the service sector was close to 65% of gross domestic product worldwide and according to McKinsey, “services are expected to account for about three-quarters of global growth over the coming decade.”

If we look at interactions, digital interfaces and channels are likely the primary way your customer engages with your business. This has benefits for both the customer and your organization. For example, digital customer care (“eCare”) studies, such as that conducted by McKinsey who looked at the telecommunications industry, have clearly shown that eCare can both lower costs as well as enhance customer satisfaction. They found that solutions such as digital chat were 54 percent of a call center’s cost when compared to voice, and that customer satisfaction was 19 percentage points higher for those who took a purely digital customer service journey compared to a purely “traditional” journey.

If we look at transactions – i.e. revenue opportunities – the product purchase is a one-time transaction, but the services associated with the product provide the opportunity for continual customer engagement and annuity revenues.

Just look at the connected home for example. A home security system may be just a few hundred dollars for the physical equipment, but the monthly service fees for monitoring, remote viewing on mobile devices and cloud storage of camera footage provide a perpetual revenue stream. The Nike+ running app and ecosystem is another often cited example of a suite of services wrapped around a physical product.

Of course, the service-wrapping concept also extends into industry and B2B scenarios, such as the Industrial Internet and Industry 4.0. The data that swirls around these factories, fleets, machines, equipment and products can be collected, aggregated, processed, analyzed and ultimately monetized in a wide range of emerging scenarios.

The upshot of all this is that the ability to design, develop, deploy and manage digital services – and do this with tremendous agility and at high levels of sophistication and scale – is going to be a critical capability for organizations that wish to become, or even remain, digital leaders within their industries.

With digital business comes the expectation of intelligent, personalized and contextualized services that can be provided to customers and rapidly redesigned or enhanced as business needs dictate. In addition, the service itself may need to dynamically adjust based on the customer’s context, environmental parameters, business exceptions, or other changing business conditions.

According to Gartner’s predictions for IT organizations and users for 2015 and beyond, “By 2017, 70 percent of successful digital business models will rely on deliberately unstable processes designed to shift as customer needs shift.” Since the processes are manifested via software, these software services will therefore need to be able to dynamically adjust according to customer needs.

So while the familiar SMAC technologies provide the foundational building blocks, together with emerging building blocks such as the Internet of Things, there is also a need for innovative service delivery techniques and approaches to keep pace with digital business.

You can think of this as the “what” and the “how.” Just as a magician has valuable props (the “what”) essential to his performance, he also needs to perfect his sleight of hand (the “how”).

If you think about these innovative service delivery techniques essential for digital service mastery, they break out into elements you need internally for IT efficiency and elements you need externally for the digital customer experience. In some cases, excellence in one area helps inform and improve the other.

Taking a lifecycle perspective, in the digital services lifecycle, the idea is to accelerate digital service development and deployment, make services agile, scalable and available on-demand, automate extensively, personalize and contextualize for the customer experience, and manage holistically.

With this perspective in mind, here’s six key questions to ask of your current digital initiatives to see where your organization lies in terms of digital services mastery and what new techniques and approaches may be able to lend additional, even transformative, value:

1. With an envisioned business model or process at hand, how quickly can you develop it via software? With today’s pace of innovation, time to market is critical. Techniques here include agile development and methodologies, and while this is not a new trend, it’s certainly gaining traction as a way to keep up with the volume of requests from the business and the need to deliver results rapidly and iteratively. As such, digital business provides the “burning platform” to make agile approaches more important now than ever.
2. How quickly and reliably can you move digital services into production? The idea is to speed digital service deployment to place applications into production as rapidly as they’re developed. Techniques here include DevOps for a faster and more reliable transition into production and WebScale IT for scalability. Mission critical infrastructure is critical as well.
3. How responsive is your IT infrastructure to dynamically changing business conditions? The idea is to make services agile and flexible with on-demand consumption and support for rapid changes to business rules. Techniques here include software-defined principles, including the concept of the software defined data center, so that configuration changes can be applied via software as opposed to time-consuming manual tasks such as network and firewall configuration.
4. How automated are your digital services? The idea is to reduce IT cost and complexity by reducing dependence on labor-based processes and optimizing service efficiency. Techniques here include robotic process automation and machine learning. While physical robots and drones gain the majority of the media attention, software robots are at present the unsung heroes and are already delivering significant results.
5. How compelling is your digital customer experience? The idea here is clearly to delight and engage customers with compelling digital experiences so they become (or remain) loyal customers and you can gain a sustainable competitive advantage. Techniques include personalization, context, analytics-driven insights (into customer preferences, needs and interests), natural interfaces, user interface design, multi-channel support and much more.
6. How well can you manage your services and gain visibility into digital service performance? The idea is to simplify service management and to be able to manage holistically across all your digital channels. With “shadow IT” on the rise, and with today’s hybrid IT environments, this is a far more difficult challenge than might be imagined. Techniques here include ITSM tools and approaches that help you manage IT services, but also help you manage higher-level business services as well so that you can continually monitor the quality of your customer experience according to the business parameters that are important to them.

Progress in these six areas will help you build your organization’s mastery of the digital services lifecycle in terms of the digital touch points, interactions and transactions with your customers. With this competency at hand, and with continual improvement, your organization will be well poised to compete in the digital world in the years to come.