Whether you’re driving your car or running a business, when things are out of alignment, performance suffers. One of the goals of digital transformation is to put data-driven processes in place to help organizations better align themselves. Tehreem Naeem, content lead at Astera, asserts, “Digital transformation is not a buzzword anymore — it has now become a reality and a goal that most businesses want to achieve.”[1] Deloitte analysts underscore that point. They note, “Eighty percent of CEOs in one study claim to have transformations in place to make their businesses more digital; 87 percent expect to see a change in their operating models within three years.”[2] Why do businesses want to transform? According to the McKinsey Global Institute, “Data-driven organizations are 23 times more likely to acquire customers, six times as likely to retain customers, and 19 times as likely to be profitable as a result.”[3]
Obtaining data is not generally the greatest challenge companies face. Most companies have access to lots of data; however, as Naeem notes, data is often kept in silos. She explains, “In the past decade, businesses focusing on growth and evolution have implemented multiple systems to help them store, manage, and evaluate information as the first step towards digital transformation. The challenge here is that the information usually resides in disparate systems. There is no consolidated system for accessing all the information related to business operations, which can lead to erroneous reporting and missed opportunities.” As a result, she asserts, “The first step towards digital transformation should be to integrate these independent systems. This will help you establish lines of communication between departments and solve interoperability issues.” Deloitte analysts add, “A review of transformations across industries reveals a common theme: Successful transformations realign the organization to a singular vision; failed endeavors typically do not.”
Fostering enterprise alignment
“The good news for companies born before the digital era,” Deloitte analysts write, “is that they often quickly understand the value in transforming to agile, adaptive, and responsive enterprises because they already have the other intangibles in place: strong brands, an entrenched customer base, established sales methods, and partners — suppliers, distributors, and technology.” Nevertheless, they note, “An organization has a far better chance at succeeding when its operating model — or how the organization creates value — is aligned to its strategy.” They go on to observe, “In moving forward with a digital transformation, the first step is to identify the holistic set of capabilities required to meet the enterprise’s strategic ambitions. The capability set should include both existing capabilities and new ones (as needed) and address front-, mid-, and back-office functions across all product lines.” Unfortunately, what often occurs is that each department sets goals and makes plans independent of other parts of an enterprise. This is done with the best intentions; however, it often results in unforeseen consequences.
When departmental planning functions are disconnected from one another, conflicting goals often result. In order to deconflict goals, companies need to create an objective function that balances these goals. Developing an objective function ensures corporate alignment in order to optimize operations and maximize profits. An objective function scores an outcome’s utility so the best outcome can be chosen. For example, manufacturing may be tasked to fill all orders which requires having inventory on-hand in distribution centers. However, distribution centers may be given the conflicting task of minimizing excess inventory space and cost. Without an objective function that spans multiple planning departments, each department’s objective function may conflict with others in often subtle ways. The answer to this dilemma is concurrent planning. Concurrent Planning refers to planning by multiple departments simultaneously with consistent objectives. The ultimate goal is having an enterprise wide planning objective filter down into each department to keep the enterprise in perfect alignment. Cognitive computing systems — such as the Enterra Cognitive Core™, a system that can Sense, Think, Act, and Learn® — can help enterprises achieve better planning results and improve corporate alignment.
Cognitive technologies and digital transformation
Cognitive computing systems can do more than improve concurrent planning and corporate alignment. Louis Columbus (@LouisColumbus) suggest ten way cognitive technologies can help companies achieve successful digital transformations.[4] They are:
1. Cognitive technologies help companies know their customers. Columbus writes, “AI is helping to more precisely define customers’ preferences and needs, leading to more accurate personas that guide digital transformation projects from the very beginning.”
2. Cognitive technologies improve modeling and simulations. According to Columbus, “AI-based algorithms are making it possible to create propensity models by persona, and they are invaluable for predicting which customers will act on a bundling or pricing offer.”
3. Cognitive technologies help make companies data-driven. Columbus notes, “Digital transformation frameworks that are customer-centric and rely on AI are essential for a business to reinvent themselves today.”
4. Cognitive technologies improves data integration. “Capitalizing on insights gained from AI,” Columbus explains, “organizations are redesigning IT infrastructure and integration so they can better scale customer experiences.”
5. Cognitive technologies make supply chains better. According to Columbus, “Digital transformation initiatives often include digitizing supply chains, enabling on-time performance based on insights gained from AI.”
6. Cognitive technologies can help protect personal data. Columbus asserts, “AI is revolutionizing how organizations digitally transform their security strategies as threats to customers’ identities, and personal data continue to proliferate.”
7. Cognitive technologies improve enterprise efficiency. Columbus reports, “Gartner predicts that by 2025, customer service organizations that embed AI in their customer engagement center platforms will increase operational efficiencies by 25%, revolutionizing customer care in the process.”
8. Cognitive technologies improve marketing efforts. According to Columbus, “AI is improving digital transformation’s success rate in the areas of marketing and selling effectiveness by being able to track purchase decisions back to campaigns by channel and understand why specific personas purchased while others didn’t.”
9. Cognitive technologies improve visibility and transparency. The coronavirus pandemic has demonstrated new uses for cognitive technologies. Columbus notes, “Track-and-traceability enhanced with AI-based predictive algorithms is now a must-have in a post-COVID-19 world where excellent customer experience is increasingly defined by the transparency it provides.”
10. Cognitive technologies can improve manufacturing. Columbus writes, “AI is also making an impact on digital transformation efforts to improve manufacturing by reducing producer’s conversion costs by up to 20%, with up to 70% of the cost reduction resulting from higher workforce productivity.”
Boston Consulting Group (BCG) analysts believe cognitive technologies will play an important role in post-pandemic transformations. They explain, “Rather than heavily concentrating sourcing and production in a few low-cost locations, companies will build more redundancy into their value chains. Consumers will purchase more and more goods and services online. And increasing numbers of people will work remotely. We believe that the application of artificial intelligence will be immensely valuable in helping companies adapt to these trends.”[4]
Concluding thoughts
BCG analysts note, “Most companies already have extensive experience with digital applications such as automation and basic data analytics. But AI, which enables machines to solve problems and take actions that in the past could only be done by humans, goes far beyond that. … These capabilities will be enormously valuable as companies confront and adapt to the new reality of the current crisis and its aftermath.” They conclude, “Unless they are digital natives that already have AI at their core, companies should view the current slowdown in day-to-day operations as an opportunity for strategic reflection about how value creation mechanisms are changing — and how to prepare for the postcrisis world. They should start preparing and reskilling their people and increasing their loyalty, enthusiasm, and long-term value in the coming age of AI.”
Footnotes
[1] Tehreem Naeem, “Creating an Integrated Enterprise Ecosystem to Drive Digital Transformation,” RTInsights, 20 April 2020.
[2] Deloitte, “If You Want Your Digital Transformation to Succeed, Align Your Operating Model to Your Strategy,” Harvard Business Review, 31 January 2020.
[3] Tricia Morris, “16 Statistics Showing Data’s Influence on Customer Experience,” Business 2 Community, 26 April 2018.
[4] Louis Columbus, “10 Ways AI Can Improve Digital Transformation’s Success Rate,” Forbes, 15 April 2020.
[5] François Candelon, Tom Reichert, Sylvain Duranton, Rodolphe Charme di Carlo, and Midas De Bondt, “The Rise of the AI-Powered Company in the Postcrisis World,” Boston Consulting Group, 2 April 2020.
