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December 2016

2016 - FACING NEW CHALLENGES WITH INNOVATION

Welcome to our final edition of BTB for 2016—a year of exceptional digital disruption. From cybersecurity threats, to IOT everywhere, automation in manufacturing and services, the rise of FinTech, the arrival of connected cars, and more, the opportunities are many, and so are the challenges.


With its depth of experience and know-how, Capgemini has helped its clients successfully navigate through many complex issues stemming from the confluence of rapid technology shifts. Throughout this landmark year we have reflected on these trends; here is a recap of our key insights.


Lanny Cohen, Chief Technology Officer, Capgemini


HOW TO SELL CLOUD TO YOUR CEO?

Alexander Sciberras, Managing Consultant, UK

The CIO is having a very different conversation with the CEO than previously. Cloud solutions are a strategic initiative, and the discussion is being driven by businesss value in a world where market disrupters are clawing into the business.

ENSURING THE DISRUPTIVE FORCE OF CLOUD BRINGS TANGIBLE BUSINESS VALUE

There’s a change underway in the adoption of cloud for the enterprise. Until now, the primary driver for moving to the cloud has been cost reduction and efficiencies in IT. That’s all changing as cloud technologies evolve, disrupters come to the fore, and organizations are adversely affected by their lack of cloud maturity. Today, when embarking on a cloud-first strategy, the CIO argument to the board cannot be simply on the usually compelling IT cost reduction argument. Instead it increasingly needs to be built on cloud as a business enabler: a means to be more innovative, agile, to generate more revenue, create new revenue models, and introduce business advantage through insight.

Why the change? Cloud has always been IT driven, with the business case shaped by how it can improve efficiency across the IT estate and thus release spending capacity for other areas of IT. Now, however, as the march of digital truly gathers pace across the enterprise, there is far greater understanding of technology as a strategic business enabler, and the cloud’s core role within this.

Thus the CIO is having a very different conversation with the CEO and other members of the board. Spending on cloud solutions and services is being sanctioned as a strategic initiative, not purely as a technology play. So this conversation is driven by business value, and what’s needed to operate in a world where market disrupters are clawing into the business, to be responsive to the markets and competitors, and where talent retention is proving harder as the workforce becomes more demanding and selective of its employers.

The household-known innovators of this world, such as Netflix, Uber and Airbnb, have accepted the business case argument of the cloud, and just expect IT costs to be low. In essence, what they are really doing to drive value from the cloud is developing a new business model, a culture that is fast to innovate, and to respond to insight and change in the market. This needs cloud IT, but it also needs a host of other capabilities and values to derive benefit.

So why aren’t more companies making this transformation and seeing the business value of the cloud? Here are a few of the arguments we hear against it, along with our response:

1) We’re not looking for the business case beyond the IT benefits – a much stronger universal benefits case needs to be brought into the boardroom.

2) We fear the change – a structured transformation approach will drive that change across all aspects of the business.

3) We’re concerned it might break something or are unconvinced of the need – take a phased approach to change; use framing to drive a proposition and the multi speed IT model to make it stick, then spread it out to other areas.   

The key to successful cloud migration lies in a cultural change at the heart of the organization that has to be led from the very top. This is not just a case of switching infrastructure and application layer services; it’s a whole new mindset to the way of procuring and using technology. It’s about ensuring the business understands how the cloud can transform both the workplace and business outcomes. It’s an enterprise-wide realization that technology, and more specifically, the cloud is inextricably linked with business strategy enablement. If you focus solely on the IT business case, it’s an IT problem if the expected benefits fail to materialize, when in reality it’s everyone’s issue.

The CEO needs a reassuring measure, a methodology by which progress to the cloud can be driven. And that begins with a universal view of benefits from the intended outcomes. This must embrace each layer affected by the potential cloud solution: infrastructure, application service, project delivery, business unit benefits, and ultimately enterprise-level benefits.

At Capgemini we’ve built a business case framework for cloud-enabled transformation that starts with this universal benefits view. It’s a formalized methodology, the type of which is needed to base any cloud transformation business case conversation. While each CIO will have their own approach to put before the board, the steps will be similar. They include: identifying and recommending actions needed to realize the benefits; defining technology, skills, process and organizational changes; and establishing investment needs.

Beyond such a framework, everyone has to see cloud as a business enabler and understand the value it can bring in terms of speed-to-market, brand reputation, customer experience, innovation, and more. At the enterprise level, blanket adoption is unlikely to be there from day one. Instead, this cultural shift must come as a result of seeing successful tangible delivery using cloud technologies as a platform for innovation, and build out from there.

Whether your organization is a leader or a follower, the clear concern is that a competitor might come up with a market-beating offer and you won’t be positioned to move into that space without this kind of innovation and solution-building culture enabled by transformational use of the cloud.

 

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RACE AGAINST THE MACHINE – WILL YOU DO WHAT THEY TOLD YOU?

Ron Tolido, Senior Vice President & Global CTO, Capgemini Insights & Data

We are soon to see bots driving our cars, flying planes, serving us food, and doing what not…But, are we culturally and psychologically ready to entrust? Read on…

Way back in history – you know, when the PC, Internet, smartphones and Pokémon Go were still unknown – IT was simply known as “automation”.

CPU power enabled computers to process data and make calculations much faster than humans, hence certain activities were automated. This rendered the human equivalents of it obsolete, obviously to the dismay of the individuals involved. But processes changed roles and capabilities evolved and people moved on, using systems to support them in their new work activities.

The information and communication dimensions of computers became more important, access to it became democratized and business and IT alignment took centre stage: Information Technology (IT) – and then Information and Communication Technology (ICT) – was born.

Automation changes its focus, first of all – ironically, if you like – to optimizing, combining and replacing human activities that are carried out with systems in the first place (Robotic Process Automation, anyone?).

The Bot effect applies machine learning and cognitive capabilities to automate communication with humans.

Leveraging a flood of data, predictive analytics, rule-based systems, and Artificial Intelligence can make thousands of automated decisions and act accordingly in a split-second, arguably with a higher success rate than humans, and obviously faster.

Bring it all together, and sooner or later completely autonomous systems will drive our cars, fly our planes, run our manufacturing plants, and essentially take care of any other task for which we assumed that human insight was crucial (including the presidency, but let’s not even go there for now, way too tempting).

The question is not really whether these highly automated systems are qualified to do their jobs. In fact, quite soon we might need to demonstrate why we would be able to still do something ourselves, for example driving a car. The real question is: will we let them do it? What if Computer Says No and we just feel it should be Yes? What if it says Leave It To Me and we don’t really trust it do it?

The success of automation in its new, ultra-smart incarnation may yet again prove to be much more a matter of culture and psychology than applying the right technologies. Realizing that, here are a few guidelines you may want to consider in order to properly race the machine:

1. Do It Yourself First. Assuming you are on the IT side of things, start applying automation to your own processes first. There are many areas in the IT lifecycle that utterly qualify for this, as proven by the advent of DevOps, which heavily relies on highly automated “tool trains” to continuously build, release, run, and repeat. But also the service management dimension of IT, including helpdesk and provisioning of IT services, is an obvious candidate. Use these IT-facing initiatives as a way to become more productive and get familiar with the next generation of technologies. But even more, show your business clients first-hand how it’s done, that it its feasible, and that it delivers real results.

2. Choose your battles. You may want to initially consider smart automation in areas that are easier to accept for humans: activities that follow relatively simple, unambiguous rules and are non-critical in terms of their business impact, for example. Then again, ultimately machine learning will prove itself most in areas that are too complex or overwhelming, or even tricky for humans; cognitive technologies may be able to deal with even the fuzziest, unclear context.

3. Explain and engage. A crucial quality of a successful technology breakthrough is that it be properly explained to its users. When a system tells us on what metrics it has based its decision, what algorithms have been used – preferably in simple, natural language – and what confidence it has in being right (expressed through a percentage, for example), it feels more natural to transact with it. Also, providing the user with feedback mechanisms to rank the quality of the logic and improve its performance will help to create a better bond between man and machine – perhaps with the aid of machine learning. Ultimately, making the technologies applied and accessible to the business – for example through a simple but powerful self-service platform – will dramatically improve the acceptance levels.

4. Think Augmentation. Artificial Intelligence should become Augmented Intelligence. Automation should become Augmented Automation. When technology is a seamless, natural complement to us as human beings, augmenting what we do, rather than replacing us or eating away our self-esteem, we are truly unleashing the power of the machine.

When Fan Hui, one of the world’s top Go players lost to Google’s AlphaGo system (featuring the highly advanced Tensorflow artificial intelligence platform) he felt sad that even this game – long considered the final frontier with the human mind still superior – now became the domain of machines. But by examining the sometimes otherworldly moves of AlphaGo, he started to appreciate the sheer beauty of it, learning new ways himself as well and clearly improving as a player.

It’s where automation becomes augmentation and we realize it is no race, after all.

* Thanks to Menno van Doorn for originally using the concept of “Race Against The Machine” in a presentation.

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THE INTERNET OF THINGS TO THINGS

David Blackwood, Vice President & CTO, Cloud Infrastructure Services

The IOT once just basic sensors collecting business data to perform operational tasks (fleet maintenance, for example), it is now making all types of connections between consumers, suppliers, and businesses that really enhance the overall experience.

The Internet of Things (IOT) has the potential to fundamentally change how businesses and consumers operate, and there has been a lot said and heard about the value created by digital technologies and the implementation of IOT for operational benefit. But what might this look like in practice?

Take the example of Panera Bread, the bakery–café chain that has enhanced its already successful business model of allowing customers to tailor their salads and sandwiches. Using the latest digital technologies – and embedding the Internet of Things (IOT) throughout their operations and supply chain – Panera’s customers can now build their orders online, pre-order favorite meals with an app, and pay quickly at in-store kiosks.

It’s a great example of what Gartner describes as a “business moment” – when a business spots an opportunity to blend the physical and digital worlds to drive growth. For Panera, having the ability to engage and serve their customers in new ways has made their business more relevant in the digital age.

This new focus on customer-centric experiences shows just how far the Internet of Things has come from its B2B beginnings. Whereas IOT was once just basic sensors collecting business data to perform operational tasks (fleet maintenance, for example), it is now making all types of connections between consumers, suppliers and businesses that really enhance the overall experience.

As Scott Nelson of the Harvard Business Review puts it, “the next wave [of IOT] will be led by companies who will achieve mass-market success by changing the way they develop IOT offerings, which in turn will change the way they do business.”

I think this evolution towards IOT2.0 will have implications in three key areas: people, brand, and security.

 

REIMAGINING THE ROLE OF PEOPLE

The impact that advanced IOT has on business models is hugely significant. Whereas IOT1.0 still required human processing to make use of the data being collected, IOT2.0 is seeing a lot more machine-to-machine connections. You could call it the Internet of Things-to-Things. So if your smart fridge detects that you’re running low on groceries, it can place an order that is fulfilled by an automated warehouse, which is then delivered by an automated drone.

The role of people is therefore greatly changing as technology improves. It is creating both pressures and opportunities across workforces and HR departments – and it will inevitably reshape modern societies around a new understanding of what it means to “work”. In the case of Panera, the work environment has improved. Instead of a reduction in jobs due to automation, the Panera 2.0 digital strategy has led to an increase in jobs, where employees are focused on enhancing the customer experience by offering table service. 

 

MANAGING BRAND REPUTATION

IOT2.0 will also impact on how organizations go about building and maintaining their brand. As the buying process shifts further from physical interactions to digital and social channels – and as digital enterprises emerge that have only ever existed online – brand reputation will increasingly be in the hands of machines.

We’ve seen precisely this in retail banking, where reputation was once built on having a familiar high street presence, but now consumers are happy to switch providers to get the latest and best offerings online. Having a clear view of this new type of value chain, and understanding the speed at which reputational damage can spread over digital channels will have increasing importance.

 

BALANCING SECURITY WITH CONVENIENCE

Another impact from the rapid maturity of IOT2.0 is on security. With so much personal data being created around our buying patterns, businesses need to ensure their systems can be properly trusted by customers. Yet security mustn’t get in the way of the customer experience either. Customers want “frictionless commerce”, which 451 Research describes as “removing the step of the end user approving each specific purchase.” The security aspect must be handled behind the scenes to deliver the right experience.

My colleague, Edwin Steenvoorden, recently examined the security impacts of IOT in more depth, specifically in relation to the insurance industry, although the principles he discusses apply across all sectors.

 

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APPLIED INNOVATION IN RESIDENCE

Lanny Cohen, CTO, Capgemini

Applying innovation to today’s business problems is not easy. That’s why, for selected clients, we have started an immersive, 18-month program at the AIE to recode executives to be full participants in the digital era.

Last week, we introduced an upcoming residency program aimed at imbuing a culture of innovation in the businesses of our clients. This program will select a handful of participants for an 18-month immersion program that will recode them to be executives for the digital era.

I’m excited about this program because it embodies the goal of our Applied Innovation Exchanges (AIEs) Our AIEs steep clients in awareness and insights so they can create a sustainable framework for innovation within their organizations amidst ongoing digital disruption. We recently introduced the residency program at our San Francisco-based AIE during an event for media and partners.

At this event, we discussed some of the many challenges clients face in a digital age where innovation is expected and, when optimally utilized, can be a catalyst for rapid and scalable impact when applied in a results-oriented manner. Two issues that frequently arose from sessions covering retail, automotive, and the rise of fintech within financial services, were keeping pace with change and incorporating a culture to scale the benefits of innovation. These issues will become increasingly relevant as the digital transformations of business accelerate the pace of change in the market and magnify their effects.

During a retail session, Kevin Schaff from Twyst pointed out fully digitized brands (i.e. everything from design concept to logistics and inventory) are able to get a product to market in ten days--something that normally takes up to eight months to do. Lisa DeCarlo from Wells Fargo during a fintech panel discussion said that by turning to digitization in product development they were able to gain willing support from 90 different internal business stakeholders for a new product that launched in six months. Typically in such a large organization as Wells Fargo, it could take at least two years to launch a product and would rarely have broad awareness let alone support.

Too frequently, innovation is misunderstood and underutilized. Innovation isn’t a shiny object, such as a drone or a robot - it is a skill set that needs to be understood, distributed and sustained to achieve breakaway results. Skill sets take time to develop and a commitment to nurture them.

Our AIEs help our clients build up those innovation skill sets and embed them as a foundational part of their organizations. We offer up workshops to help discover innovations, devise frameworks to take advantage of them, deploy business models using the benefits of innovation; and sustain a culture of innovation. Our AIEs can act as a platform for digital transformations and offer the application of innovation as-a-service.

Organizations need to harness innovations to translate them into their businesses and their results while simultaneously keeping up with the pace of change that is accelerating as more businesses go digital.

We currently have 12 AIEs globally located in strategically important regions for our clients and our business, with two more set to open in 2017--one in New York City and another in Singapore. We anticipate two to four more in the coming years.

Our next step in our AIE vision is the residency program, which is in the planning stages, and we have identified our first three participants who will undergo a digital transformation in our San Francisco-based AIE starting in early 2017.

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The Spread of Innovation around the World

Jerome Buvat, Global Head of Research at Capgemini Consulting and Brian Solis, Altimeter Group

It is not just Silicon Valley anymore—Singapore, India, and Australia to name a few—are making huge investments in the innovation game. Building fruitful relationships with a wide spectrum of technology startups is also fueling the rise of innovation centers, at large corporations.

Silicon Valley still remains the hub of the world’s most dominant innovation “empire” – a location of a thriving innovation ecosystem where innovation centers cluster. However, as the innovation center phenomenon has continued to spread globally, a number of new empires have emerged where innovation centers are flourishing.

In just eight months, from March 2016 (around the time our previous research, The Rise of Innovation Empires Worldwide, was published) to October 2016, 88 new centers opened across the globe, compared to 67 between July 2015 and February 2016. The top 3 cities in Asia together added more innovation centers than Silicon Valley. Our research also finds that specialized function or technology-focused centers are in vogue.

The Spread of Innovation around the World: How Asia Now Rivals Silicon Valley as New Home to Global Innovation Centers.

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THE APPLIED INNOVATION EXCHANGE MAKES A DIFFERENCE TO CLIENTS

Lanny Cohen, CTO, Capgemini

The Applied Innovation Exchange gives clients a very different way to engage with Capgemini. It sets us apart in the arena of business and technology consulting—a collaborative environment with an ecosystem of technology, talent, and discovery.

Lanny Cohen, Group CTO at Capgemini breaks down the reasons that the Applied Innovation Exchange is making a difference to its clients.

 

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