CIO Magazine: November Issue

Top CIOs Start the Journey to the 'Digital Enterprise'

The buzzphrase 'digital enterprise' can be a bit mushy. What does it really mean? And how do you get there? Here are five emerging models.

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CIO Magazine: November Issue

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 Back in 1980, the woman who now runs the data center at State Street Bank started her career there by pricing a mutual fund in a ledger book. That process would get automated as the bank became a computerized enterprise. Today, she can connect State Street's systems with those of customers and partners and produce sophisticated reports to let customers analyze the mutual funds they might buy. That's the digital enterprise.

"In the old days, like last week, you built systems in functional towers, based on what process you need to automate and what function you need to do for the business," says State Street CIO Chris Perretta, reflecting on his colleague's experience. But that's not the case in the digital enterprise. That demands a company whose business rules and policies are completely digital, where people's jobs are represented in digital fashion and, most importantly, a technology ecosystem that takes the company's information and makes it both secure and, for those with the right access, easy to find and share.

"It's more a philosophy of how work is going to get done," Perretta says.

Achieving this new vision is a huge thing for State Street. Perretta has spent the past three years on a transformation project to translate that philosophy into a technology foundation that will let the financial services company share information effectively with customers. As we're talking, Perretta's screensaver flashes one of the banks' four key strategic goals: "Digital Enterprise."

The digital enterprise is more than just a CIO catchphrase. In a recent Altimeter Group survey, 88 percent of 59 digital strategy executives interviewed said their organizations are undergoing formal digital transformation efforts this year. Even CIOs who think the phrase "digital enterprise" is mushy, like Mojgan Lefebvre, CIO of Liberty Mutual Global Specialty, say that consumers wielding smartphones have shifted the balance of power. "The one thing that comes in and absolutely disrupts industries is giving the end-user customer, consumers, the ability to do anything and everything they want on their mobile device," Lefebvre says.

[See Sidebar: Digital Transformation Starts With the CEO ]

CIOs interviewed for this story say the digital enterprise signifies an epic change in the way work happens. "The employee of the future is going to be different than the employee of the past," predicts Perretta.

For one thing, tomorrow's employees will have immediate access to much more information. The digital enterprise revolves around making information mobile. Workers will use mobile devices, either smartphones or tablets. They'll connect, via the cloud, not just to company data but to data from customers, suppliers and relevant outside sources, including social media and Internet-connected objects. They'll apply fancy analytics techniques to make better business decisions.

"What's new about the digital enterprise is the emergence of all these new technologies coming together at the same time," says George Westerman, a research scientist at MIT's Initiative on the Digital Economy and co-author of a recently published book titled Leading Digital: Turning Technology into Business Transformation.

"There's a huge role for computers to help people do a better job of what they're doing," he adds.

It isn't that past technology investments will be junked--Westerman says they form the backbone of the digital enterprise. But that backbone is being levitated by new technologies.

By the way, more tech is coming, and fast.

"There's been a change in momentum" of technology development, says Ray Voelker, CIO at Progressive Insurance. Voelker traces this to the spread of the smartphone since 2008. He says Progressive was "100 percent" a digital enterprise in 2008, based on the Web technology available at the time; all work flows and interactions, be they with insurance agents, partners or customers, were done digitally. "But that was before everybody was carrying around HD video recorders in their pocket that could be used for claims resolution, for example," he says.

It's a sign that the digital enterprise is a moving target. Now, Voelker says he can't say what the digital enterprise will look like in five years. "I don't know where wearables are going to go, where the Internet of Things will go, how the technology onboard vehicles . . . comes together," says Voelker.

The rise of a digitally savvy populace that expects more from companies has also increased pressure on companies to build the digital enterprise.

The eruption of new technologies has brought with it shifts in how technology gets managed, with some chief marketing officers controlling big technology budgets. "The pace of change in marketing is running at a faster clip than CIOs have been able to keep up with," says Michael Sutcliff, group chief executive at Accenture Digital, a consulting unit formed in 2013 to respond to the growing interest in digital business. But Sutcliff says CMOs would like it if IT were in sync with the pace of technology change in marketing.

Seize the Moment or Risk Being Left Out

The good news for CIOs in all this change is that they now may have once-in-a-career opportunities. Westerman cites the emergence of the CIO-plus, where the CIO runs IT, shared services, e-commerce and other digital efforts. "What we find with digital transformation work is that it's not really a technology problem, it's a leadership problem," says Westerman.

Digital leadership turns out to be about technology vision, governance savvy and knowing your IT platforms, he says. "These are all things IT people know how to do and can help the rest of the organization learn."

Westerman says CIOs may never see a better chance to shape corporate strategy. But "if you don't," he adds, "you're going to be left out." The Altimeter survey found that CMOs constitute the biggest group credited with leading digital transformation. Asked what executives "champion and support" digital transformation within their companies, 54 percent of the respondents said the CMO, 42 percent said the CEO and just 29 percent chose CIO/CTO.

Voelker says it's not just the CIO who is in danger of irrelevance. Corporate success is also on the line. "I'm going to spend a ton of money making sure that everything we do is compelling on mobile devices. If we don't do that, I do think that we will fail."

Voelker points to the period in the early 1980s when banks built ATM networks. Those investments had to be made, but today there is no longer any competitive advantage to having the technology. It's gone from cutting edge to table stakes. "Nobody runs commercials saying, 'Hey, come to our bank--we have ATMs,'" he says.

Voelker argues CIOs are facing the same challenge with today's emerging technologies.

Competitive advantage will come in short spurts. The good news is that no one's too far behind, yet. Stephanie Woerner, a research scientist at the MIT Sloan Center for Information Systems Research, says that in 2012, a global survey of 2,008 executives found that 59 percent of business processes were fully digitized. But those processes were "the easy ones," she says. What comes next will be more challenging.

It's one thing to see the digital enterprise coming. It's another to build it. Some companies will need to develop entire new technology infrastructures, especially as they expand into new markets and as new things become Internet-connected. There is no template that all companies must follow.

Here are five different visions of the digital enterprise.

1. A Great Experience, Online and Offline

Mobile phone carriers--on the front lines of the smartphone revolution but also dealing with physical networks, products and customer interactions--are under intense pressure to be digital, according to Thaddeus Arroyo, who was CIO at AT&T Services until he was recently promoted to president of a new technology development group. "I talk about the digital-physical blur," he says, referring to the way physical products are becoming digital services. For his company, being a digital enterprise means creating a consistent experience across its digital and physical channels. To get there, Arroyo says he must weave a "digital golden thread that seamlessly extends through the enterprise."

Weaving that golden thread means putting the same kinds of customer information at all the places customers touch AT&T, as well as giving it business context. For example, in AT&T retail stores, sales representatives now carry mobile devices and stand next to customers instead of behind counters. Arroyo says those mobile devices must have up-to-date information on the customer, compiled from customer service updates, previous interactions in stores and even correspondence via social media. AT&T home technicians need a different view of the same information, and call center agents should have yet another slice of it.

AT&T hopes to have 80 percent of customer interactions happen in a digital form by 2020, up from just over 47 percent today.

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