Blaine: Joining me today is Shawn Fitzgerald, Global Research Director, World Wide Digital Transformation Strategies at renowned technology consulting and analyst firm, IDC. Full disclosure: VANTIQ is a client of IDC and frankly, Shawn and the digital transformation practice is the key reason for that. So, I’m really excited to have you as a guest today, Shawn. Thanks so much for joining us.
Shawn: Blaine, thank you very much for hosting me today.
Blaine: Anytime. Absolutely. So why don’t you start by telling us about the digital transformation practice at IDC. I think you refer to it as the “DX practice”.
Shawn: Sure sure. Digital transformation or DX at IDC is a program that’s been around about 3 years. I’ve had the opportunity to be running that program the last two years I joined IDC, about that time frame. In that span, we’ve created an industry-leading position of thought leadership around what is digital transformation, what it means for companies to actually undertake transformations which are really about threading together elements of people, process, and technology for business-oriented outcomes using technology for scale and agile capabilities that utilize, really think differently about data and information and how you apply to the business and the processes and ultimately better products and services and experience for your customers and markets.
Around that, we’ve got a great team of analysts. We’ve developed – I think we’re up to now 18 industry use case taxonomies spanning well over 800 use cases or think of them as business projects with business-oriented outcomes that utilize key technologies that are part of our digital world today. We’ve just rolled out another 8 functional taxonomies for things like finance, HR, marketing, operations customer experience, which are all the things that enterprises also have just in general because creating operational excellence and using digital technologies to automate a lot of that is certainly in our future. As a result, we were recognized earlier this year by a third party company as being the number one digital transformation influencer worldwide. That was really nice honor.
Blaine: I believe it. I fundamentally believe that for sure and I’m very very familiar with your industry use case taxonomies. I want to talk about that in a few minutes in more detail. But if you don’t mind, I wouldn’t mind backing up a little bit and finding out a little bit more about how you got to where you are today: leading the IDC digital transformation practice.
Shawn: Sure sure. Thanks for asking. I’m an industry practitioner. I’m actually not a technologist which makes me a little bit unique at IDC. I worked in industry for many years. I started my career in finance with due diligence in New York. I went on to become Lean Six Sigma certified, so I am a blackbelt in Lean Six Sigma. I ran the global order to cash program at a Dow 30 company in the 90s. I ran a two-billion dollar branded drug franchise in the 2000s. Most recently in industry, I actually worked as the global director of process excellence and supply chain for one of three companies that designs, manufactures, and produces paper security features and finished bank notes for central banks around the world.
I was an industry analyst earlier in my career at one point and had an opportunity to come back and run digital transformation at IDC. It really, I think, leverages a lot of the change management and again, bringing together people, process, and technology for better outcomes and how you do that both at that unique program level but also at the portfolio level when you’re dealing with all the complexities of enterprise scale.
Blaine: Were you excited to lead the DX practice at IDC because you’d had seen so much successful digital transformation or was it because you hadn’t seen much successful digital transformation in your career and you wanted to do something about it?
Shawn:I was fortunate. I worked for Allied Signal in the 90s when Larry Bossidy was there and they were really embracing Lean and Six Sigma as these mechanisms or processes or approaches to change management. The beautiful thing about Allied Signal is you got to see it done well. I was a younger guy in my 20s.
You typically look at your first experiences as representative of all experiences. When I left and moved on from Allied, I found out that the rest of the world really wasn’t getting it done right in terms of change management, whether that’s digital transformation or ERP implementations, or basic how do you get the organization to behave differently.
Most organizations just aren’t very good at it.There’s a multitude of reasons for it. There’s technology components. There’s information components. There’s certainly cultural legacy, management, and system aspects and attributes. So, it’s really nice to be able to take some design and systems thinking to digital transformation at IDC and use the thought leadership of myself and our extended team of analysts and experts to help companies get it right.
Blaine: No doubt. So far, we’ve used the term digital transformation probably a dozen times in this chat and we actually haven’t defined it yet. I always ask our guests to give their opinion of what digital transformation actually really means. Finally, I’ve got the analyst and guru who is literally leading the digital transformation practice. So, what does digital transformation mean to you?
Shawn: I’m really glad you asked that, Blaine because quite frankly, I hear everybody say, “Digital transformation is a tired term. It’s an overused term.” I don’t think the term is tired or overused. I think the lack of context and scoping of what the term means is the failing that industry and society at large is really suffering from as it relates to the term.
At IDC, we define digital transformation as transformed decision making with technology. Expanding on that, what is a very simple sentence, there’s a lot of complexity and components and dimension to it underneath.
We’ll talk about transform. We talk about looking at information and new sources of innovation to fundamentally rethink your business: how you go to market, how you better serve customers with information enhanced products and services. Decision making is very much about empirical-based culture. It’s getting away from gut management and really let data analysis and insight drive how the business operates.
Historically, you have processes that were enabled by technology and then some data came out of that. Now, we’re at a point with information at scale where data and insight actually can drive business process and technology. It’s almost a complete inversion, if you will.
And then, ultimately it’s about technology because we can do things as events. Societies are great at major events as a one-time effort, if you will; getting everybody to align and stack hands. What technology allows you to do is now have this repeatable process capability that tomorrow’s betterment becomes the next day’s foundation upon which to build and further improve your capabilities.
I think technology as part of this, what I call scale time capability, is really critical because all production systems have infinite capacity as I like to say until you put a time around it. We only have 24 hours a day, seven days a week, etc. How do I use information to make better, first-time quality decisions as quickly as possible that the organization can then act on?
Some of our research recently, I did a CFO series and it was fascinating to hear these CFOs talk about anywhere from 60 to 80 percent of the time that the organization spends is agreeing to a shared set of information to then make a decision around. The ability to use technology to automate the information that everybody can agree to gets you to a decision and a better outcome sooner.
Blaine: Really interesting. I was going to get to this question later, but since you brought up the notion of speed, agility, and time a few times now in just what you said, to what degree is the notion of becoming a real-time organization or a real-time enterprise tied or connected to the notion of digital transformation? We talk about this a lot on VANTIQ TV: the notion that many of the use cases around digital transformation seem to be about taking stuff that used to be done either sequentially or in a batch mode, and more thinking about doing things in parallel or in real time based on the data and the technology that we have available. What’s your thought on this notion of a real-time enterprise?
Shawn: I think there’s tremendous value in it. In fact, in our definition of digital transformation, we talk about doubling the productivity of your workforce. That seems like an audacious statement. If you look at a manufacturer, for example, a typical manufacturer, less than 30 percent of the elapsed time from raw materials going into a batch process or a conversion process or even an assembly process to the time it’s actually finished good that’s ready for sale to a customer or into a market place is actually active production time. The rest of it is you’re queing. You’re waiting. You’ve got quality holds.
Those delays are often times just information isn’t getting to the decision point so you can move that piece of production or service element to the next phase where it can get through to its final, concluded stage sooner than later. I think some of the things that VANTIQ is doing with its no code/low code and how you’re bringing together information that historically wasn’t sequenced in real time, I think that holds tremendous value opportunity for companies that can figure out how it fits into their design thinking for transformation.
Blaine: Thank you for that. You mentioned earlier the IDC use case taxonomies project. I will say, again back to my intro, this work you’ve done around these use cases is really one of the core fundamental reasons why VANTIQ joined IDC. I’ve been working with IDC on and off at various companies for a couple of decades now. Your work and these use cases brought me back to IDC and said, “Wow! This is powerful.”
Tell our listeners more. What is this project? What is the output of it? What’s it all about?
Shawn: The taxonomy is really a four level framework. It stems, again, from being a former corporate financial planning and analysis person. How do you get different parts of the organization to align to the overall enterprise goals and objectives? We developed this four-level model of mission to strategic priority to programs to use cases or projects.
Starting at the highest level, the mission is really that “what do you want to be when you grow up digital”, for example. In retail, our digital mission is what we call “experiential commerce”, making purchases in the stream of life. Underneath that, you’re going to have a number of strategic priorities that align and achieve on that mission. One might be around sourcing. One might be around customer experience. One might be around fulfillment and the supply chain and the inventory.
Then, you’ll have programs that align to each of those strategic priorities, several programs to each priority. Ultimately, you’re going to have a set of projects. Those projects are going to be somewhat bespoke as a retailer because where you need to go and how you get there is going to be a function of where you are and what the gaps are between current state and that experiential commerce mission that you want to achieve. That’s true for all industries.
We’ve built this four-level framework. We’ve utilized. We’ve got a bunch of industry experts. They went out and figured out what makes sense given their understanding and deep domain experiences with these verticals. They each worked collectively as a team with myself and Bob Parker who I work with IDC quite closely. We’ve developed these use case taxonomies. I think as a result of it, we’ve created a lot of gravity and interest. In fact, we’ve got a large home improvement retailer using one of our taxonomy frameworks to develop their own digital strategy and roadmap.
On top of that, we’ve aligned our spending. We have this qualitative set of taxonomies that we’ve been talking about. We also have now aligned our DX or digital transformation spending guide into the taxonomy. The spend guide actually looks at industry and those use cases and what types of investments are being made in hardware/software services from the strategic priority level down through the use cases. What this does is a couple of things.
I tell companies to use research in a couple ways. One, if you’re an end user company, a consumer of technology, you’re going to buy the CIS and you’re going to look at the use cases to figure out: Am I focused on the right things? Am I qualitatively aligning the right projects and programs? Am I phasing them the right way for where I am versus where I’m going to go?
The spend guide alignment to that then says, “Okay what investments and what technologies are being made either at the use case program or strategic priority level both today (because we look at spend today) and then we have our forecasted outlook over the next several years of spend. It’s what technology should I be looking at today versus for the future.
On the flip side for the venders, same thing occurs is that you use the use cases to actually have this piece of social capital that you can put in the room with a prospect or a client and really get tangible about what does transformation look like manifested as this type of case or the enablement of this type of program, et cetera. And then from a marketing branding positioning from the spend guide, what should I be marketing and messaging around technologies today versus where are the growth areas over the next three to five years that I should be thinking about as I evolve my place in the market?
For vendors it’s two-fold. So, it’s how do I effectively position myself in the context of digital transformation for markets, customers, and prospects? Then there is the how do I get digitally fit myself and transform my own organization so that I’m competing effectively as a digitally enabled or transformed entity tomorrow and in the future well after that?
Blaine: Right on. And as a vendor, what you described is exactly how we use your digital use case taxonomy. So, very powerful. I hope no other vendors are listening to this because I think it’s a secret weapon we have at VANTIQ to have access to this content and this analysis.
I have to say, over the last couple of decades working with IDC and most of the other analysts firms, a thing I’ve always loved about IDC the most is the quantitative framework you put around the work you do. It’s not only a bunch of opinions about where technology is going and what the trends are, but the fact that you surround it with your server your forecast of spend around, services technology, software services and hardware, [it’s a] very powerful ecosystem you built up. I think you’ve almost got nearly 800 of these use cases built out across, I think you said, 18 industries. It’s quite incredible.
Shawn: Thank you Blaine. Very kind. Think about it, right? If we didn’t quantitatively use our own data and empirical understanding to drive digital transformation, we’d be a little hypocritical. We’d be the doctor who smokes. [Laughter] So, I think it’s important that we use data to drive our own behaviors internally as we digitally transform and again, better serve our markets. But, I appreciate the very kind words.
Blaine: Well you bet. And trust me, you guys are rocking it. As I said, I’ve worked with and still work with many of the firms out there. My listeners know that I’m a former Gartner analyst myself. So, I know how the sausage is made and I’ve always been very impressed with what IDC does and I am obviously still impressed.
Beyond the use case level, do you have any favorite examples of companies that you’re maybe working with now or have worked with or organizations that are actually making the transition toward being digitally transformed, so to speak?
Shawn: I often use the Schindler elevator company as a great example. I jokingly refer to [it as] a company that lifts things up and puts them down. But, several years ago, they decided to IoT enable a lot of their elevators and escalators and other hard assets so that they could monitor and improve maintenance up time. So, you go from outages of a couple of days to several hours because they can remotely monitor the asset performance.
What they found is, because Schindler moves about a billion people a day throughout buildings and cities and what have you, they’ve been able to network all those IoT sensors. They really understand traffic patterns in a building in the context of time of day, whether it’s everybody coming to work, people going out during breaks or lunch, and people leaving at the end of the day to go home to their families. What they found is by aggregating all that large data, they can now not only achieve their maintenance goals of improving uptime for these assets, but now they’re actually selling data as a service to building architects and city planners to better help those folks design and build structures and incorporate elevators and escalators to move people as quickly and safely as possible.
If you think about going to a really old hotel building a really old office building that has an elevator, historically when the lift wasn’t in service, it was down on the first floor in the lobby. Now, what you’ll find are elevators typically staged at different floors and that changes over the course of a day based on the large data understanding and analytics of traffic patterns.
Obviously in the morning, probably most of those lifts are going to be down on the first floor because they know people are entering the building to go to their various office locations. Throughout the day, those patterns are going to shift based on the data and historical analysis and the continued ingestion of new data as those elevators are utilized on a day-to-day basis.
What’s fascinating is if I said 30 years ago, “There’s a company that makes elevators that moves things vertically and has a data as a service business and they’re going to monetize that.”, you’d probably think I was off my rocker, but it’s real. It’s just one of thousands of examples of transformation that we see all across different industries. It’s a good one because when I give talks, I ask people to raise their hand if they’ve ever been on an elevator. Usually, it’s 100 percent response rate.
Blaine: Absolutely. And it’s a great example because they’re doing things they were doing before more efficiently and effectively, but the real transformation, in my opinion, is they’re doing things that they never did before: opening up new revenue generation opportunities and really starting new lines of business within what is fundamentally a very old legacy business. It’s a great example. Very, very impressive and powerful.
Shawn: And we didn’t even talk about the supply chain optimization opportunities. They have advanced understanding of where asset performance is and they have all these large datasets that they can predict which components are more likely to need that maintenance interval versus others. Think about the value that they’ve created for themselves in terms of just managing their supply chain and their physical inventories, even the time cycles to get on time delivery, the cash, earnings, and other general business measures of betterment that that has enabled.
Blaine: Makes perfect sense.
Who do you think or which parts of the organization are fundamentally driving DX initiatives today? Is it primarily coming from the IT side, the CIO and that gang, or is it more from the LOB side?
Shawn: I hate to give you know the typical analyst response of “it depends” because it really does. If you’re a retailer, you’re very customer facing, you’re typically going to see your Chief Marketing Officer or some of your commercial folks trying to drive that curated and cultivated hyper-personalized experience for customers markets. If you’re further back in the value stream either as a supplier or an assembler or some type of distribution entity, it might be much more about the operations. If the nature of your work is very much data and informational and interconnectivity, that’s where you’re typically going to see a stronger IT presence perhaps at the table.
But, I really think the broad response to that question is there is so much more education to do around digital transformation because, I think to the point where we kind of started earlier in our conversation about defining digital transformation, I think a lot of organizations at all functions across these organizations still don’t have a shared understanding of what it is. And then, even without that, how do you then say, “Well what does that mean to me and who should be driving it?”.
I think the best companies – our research has really teased out two types of organizations. One, we call the digitally determined who are doing transformation well and we’ve got a lot of data and information. Again, using data to drive our position and conclusions about those organizations and the attributes. And then, the digitally distressed: companies that really aren’t figuring it out. They’re maybe doing pockets of pilots or as one McKinsey guy was listening to talk about pilot purgatory where you’re just buying things and it’s Groundhog Day but it’s a different kind of pain and you never get it to scale and the enterprise doesn’t perform better at large because you never get out of that learning phase.
For digitally determined organizations, we really see two attributes. One is there is a unified strategy around digital that either mirrors the business strategy or the digital strategy is the business strategy which means it’s being CEO-led and driven, prioritized. All the executive team members understand what it is, what it means for them, and what field position their departments and parts of the organization play in undertaking the transformation. The strategy is the one aspect of it and how highly integrated or overall alligned it is is one dimension.
Then, the other is quality of execution. I work for Larry Bossidy (famous book “Execution”). I’m going to paraphrase his thinking on it was, “To see strategy as slideware is great, but without the actual ability to realize that strategy in the world that we all live and breathe then is just delusion because you’ve got an idea without the ability to realize it.” The other part of what we’re seeing the digitally determined do well is execute to that strategy; taking the idea and manifesting it in the reality in terms of technology enabled capabilities that grow and improve and get better and that are very much aligned to business goals and objectives. It’s not technology for cool “gee whiz” shiny sake, it’s technology applied to betterment.
How do companies develop the kind of agility that’s necessary to stay on top of the constant change, though, that’s happening in and around them? What’s the secret to that?
Great question. I think for companies that are in technology-oriented industries or spaces are much better at that because innovation is just culturally what they’re required to do to stay current with products. Things like aerospace companies: a lot of development cycles. Really, just extending that existing inculturation to the broader organization.
I think a lot of traditional companies that quite frankly we’ve made the same widget the same way for 100 years, I think they’re the ones that struggle. I think from my own point of view and the advice I give all companies, digital transformation is both a team sport and a long game. Not only do you need to engage your entire organization, but you need to find the right partners because you’re not going to develop all these digital capabilities yourselves nor should you.
If I manufacture industrial motors, my forte is not necessarily advanced IT. technologies and capabilities. I need to partner with the right hardware/software service entities to give me access to the data that’s probably locked up in all my manufacturing facilities that, again, I want to network together to get the big data analytics and drive better informed decisions and in more real time, improve supply chain, all those other good things. It would take me probably 100 years to get the right IT mentality and culture into that business when my business is making industrial motors, in that example.
Blaine: Wow. I have a feeling we could spend an hour on every one of the questions I’ve asked you so far. This is really, really rich and deep. Let’s take it down to the end here. One of my favorite parts of these interviews is asking the guest what some aspect of conventional wisdom is that you would like to call bullshit on. So, where is the market saying X and you’re actually generally saying Y?
Shawn: I don’t know if I declare BS on a particular thing. What I would really call out is the need for senior leadership to actually find humility and time to self reflect. Trying to apply traditional functional structures and management systems and how we typically thought or starkly thought about the role of HR and how we incentivize people needs to fundamentally change: the look of the organization, how it’s managed, what types of talent you want to attract, hire, and retain. Our own data shows this, by the way.
We’ve come up with a couple different dimensions of digital KPIs, if you will. Beyond the KPI dimension themselves of innovation rate or digital operations or customer experience, what was really fascinating to me in the findings was that not only were digitally-determined companies using different types of measures beyond traditional financial ones, (which aren’t going anywhere because the market’s valued companies based on revenue, earnings, and cash flow and that stuff is here to stay) but supplementing with these digital KPIs to better understand the operational effect of this and efficiency of the transformation. How those KPIs are used was the real eye opener.
Digitally-determined companies are over 50 percent more likely to use these digital measures when doing either annual or strategic planning, much more likely to drive those into quarterly operating reviews or monthly operating reviews. I don’t have a committed to memory, but I think it’s over 27 percent of the digitally-determined companies are better at managing daily and weekly activities in the organizations with these.
Change management is a function of altering habit. Habit is just a pre-programmed behavior set. In order to change that pre-programmed behavior set and get these new habits of digital, you have to practice those every day. Research has shown that it takes about 300 times before that new habit becomes just your habit. That’s a better part of a year if it’s something you do every day.
To not employ the work differently and monitor it differently is to get more of the same that you’ve always gotten and then be frustrated. We see that because the digitally distressed are much more likely to show digital measures to their employees and to their organizations without any of those management shifts in behavior that drive to a different outcome. It’s kind of like being in a car that is heading towards a cliff, but the door handle is broken, the steering wheel won’t turn, and the brakes and the accelerator don’t function. I’m giving you a front row seat to the crash that’s coming.
Blaine: That’s a good way to put it. I’m glad you’re helping companies avoid being in that situation. That’s a great analogy.
Another thing you do is you help in the world of making predictions. Any interesting technology or business predictions for 2019?I know you’ve just had a series about that. In fact, tell us a little bit more about IDC predictions.
Shawn: Sure. We do these futurescape predictions. We’ve just published our top 10 2019 digital transformation predictions where we look out over the next five years and make some pretty bold statements about where the market is headed or where we think the market is headed. The big one, and I talk a lot about this digitally determined vs. digitally distressed. Quite frankly, today we see about 1/3 of companies are digitally determined and 2/3 are digitally distressed.
Even just to tread water with your transformation is actually to backslide because the market is moving forward while you’re just staying in spaces, if you will. One of our big predictions was that by 2020, we see at least 55 percent of organizations becoming digitally determined. It’s really not just about [if] they’re going to get there by 2020, they will have figured out they need that unified strategy. They’ll need that singular roadmap. They’ll need to break those roadmaps into use cases or chunkable bytes that are prioritized by, “What do we do today, what do we do in the mid-term, and then what do we need to think about longer term?”
Blaine: Makes perfect sense. And obviously, you’re helping to enable that transition. So, thank you for that.
I think that’s actually probably a good place to end. So Shawn, thanks so much for joining us today. It’s really been a great and interesting conversation.
Shawn: Thank you Blaine. It’s been a pleasure and I appreciate you hosting me.
Blaine: You’re welcome. Those interested in hearing more of Sean’s thoughts can follow his frequent posts on LinkedIn. Also, search for Shawn Fitzgerald on IDC.com to see the many relevant reports that he and his team have been producing. Of course, you can reach out to me anytime [email protected]