CIOs have a greenfield opportunity in evolving transactions into relationships. Until now, the CIO has focused mainly on applying IT to front-office and back-office processes, including the web channel. The new opportunity is about out-of-office systems, which will stretch CIOs beyond IT’s traditional role. Done right, though, this stretch will place the CIO much closer to the customer than ever before.
As discussed in the article, “Using technology to help customers achieve their goals,” the proliferation of connected sensors is accelerating, creating an Internet of Things. Businesses now can collect consumption and usage data from sensors they embed in their products, and they can use this information to redefine customer relationships. PwC believes changes are afoot for businesses to go beyond the transaction. Businesses thus far have transformed their pre-transaction relationship with potential customers, often referred to as e-commerce, by digitally reinventing marketing, product discovery, comparison shopping, buyer feedback and reviews, and purchasing and delivery options; in essence, all the steps up through the transaction. A post-transaction relationship approach creates new services, post-transaction services, which use consumption data to reinvent the provider-customer relationship in the service of customers’ goals. (See Figure 1.)
In post-transaction relationships, the digitization of consumption and the augmentation of the customer experience set the stage for businesses to help customers achieve their personal goals
CIOs already play a key role in transforming business processes, most recently by enhancing extended processes that involve suppliers and distributors. E-commerce and e-support established IT as a player in customer-related processes that primarily support company goals (selling and help desk). Efforts in going beyond the transaction will pull the CIO and the IT organization to use its assets and skills to support customer goals. Fundamentally, the “business process” of interest becomes the “customer process”—that is, the set of activities targeting a customer goal, which is the reason for the customer’s purchase of a product or service in the first place.
The digitization of consumption via connected sensors creates a continuous flow of data between the customer and the business associated with this customer process. Aggregating, integrating, and applying analytics to this data will generate information businesses can use to help customers be more successful in achieving their goals. CIOs have the skills and experience to make a difference here.
Capitalizing on post-transaction relationships is not a straightforward extension of existing IT capabilities. It requires new formulations of IT, even if legacy IT solutions can serve as the starting point. Because post-transaction relationships offer the potential for new, differentiating business models, they also require new approaches to engaging with the business and its extended ecosystem.
As enterprises have adopted new IT, both enterprises and their IT leaders have seen their event horizons broaden significantly. In earlier times, IT focused on internal business processes, mainly in the back office of enterprises, starting with payroll and accounting, and eventually extending to manufacturing, human resources, and other internal operational systems. Over time, the IT event horizon expanded to the front office and the customer-facing capabilities or capabilities used by employees facing the customer. This front office included systems for sales force automation, marketing, customer support, the web channel, and others.
The post-transaction relationship presents a new horizon for CIOs, the out of office
Going beyond the transaction is a significant challenge for customer and product centers of the business, but it calls for a quantum leap by enterprise IT to a new horizon, out of office. Out-of-office systems power post-transaction services and put the customer consumption value proposition front and center. (See Figure 2.) Out-of-office systems serve the customers by augmenting their experiences and helping them achieve personal goals.
Despite the apparent challenges, out-of-office customer processes complement back-office and front-office processes. Table 1 contrasts key differences between the focus on front office or back office, and out of office. Done right, initiatives that seed post-transaction relationships can position the CIO and IT much closer to the customer in what could become their most strategic role.
Comparing the CIO opportunity in the front office, back office, and out of office
To take advantage of the post-transaction relationships, most businesses will need to evolve. Businesses will face not only a technology or innovation challenge, but a process and operating model challenge to maintain an ongoing, data-driven relationship with customers as their product experiences evolve. Success will not come by simply extrapolating from existing operations.
“You need to be ready to invest in a process, to launch and to learn, to fail, to start again, to not copy-paste old ideas, but to copy-morph them,” says Daan Roosegaarde, an artist, designer, and entrepreneur who founded Studio Roosegaarde. Studio Roosegaarde has developed many examples of unique experiences that merge physical and digital environments into an integrated experience.1
Here are some of the key capabilities businesses must develop:
Many CIOs have the skills and assets, both technical and operational, to help their enterprises adopt these necessary competencies and operating procedures. CIOs manage organizations that have extensive experience in designing, deploying, monitoring, and managing full hardware, software, and network stack solutions. The CIO organization has significant experience managing 24x7 operations and support. It also has expertise in surfacing, integrating, storing, and analyzing data from batch and real-time processes.
In short, CIOs and enterprise IT can be key resources as the business goes beyond the transactions. Delivering the services infrastructure and advising business unit leaders unfamiliar with connected sensors are two obvious ways to contribute.
PwC identifies three stages of organizational development on the path to helping customers achieve their goals. (See Figure 3.) The journey commences with a set of enabling capabilities to develop a more complete understanding of customer experiences. With these capabilities in place, the second stage unleashes business leaders and product managers to pilot many opportunities for product, service, and business model innovation. The final stage incorporates all of the preceding in a broader, enterprise-wide set of feedback loops driven by more explicit, detailed knowledge of customer outcomes (an outcome is incremental and directional feedback that steers the customer toward the goal). In short, the focus evolves from customer value proposition and convenience alone to enterprise alignment with customer experiences and outcomes. A digital operating model2 is at the heart of the journey as businesses extend their operations beyond the transaction.
Journey to better alignment with customer outcomes
Many IT organizations already have strong competencies in the enabling capabilities in Figure 3. IT may or may not be as experienced in directly supporting innovation and business and community engagement; creating post-transaction services is an ideal opportunity to develop or sharpen these capabilities.
Post-transaction relationships will stretch the CIO and the IT infrastructure, requiring new enabling infrastructure, new skill sets, a new organizational structure, and changes to the business partner model.
Businesses are at different levels of maturity in their post-transaction strategies and initiatives. Therefore, a first recommended step for the CIO would be a current state– future state assessment relative to the enterprise’s maturity:
Post-transaction relationships can enable new business models that could complement or displace the current ones. It will likely require a redesign of existing business processes or the introduction of new business units and processes. But CIOs have been here before, first with back-office automation, and more recently with front-office automation. The out-of-office focus explicitly ties the CIO and IT to customer outcomes, which some in the C-suite might view as too risky. Planning a way forward must complement the risk appetite that defines the overall business. Will the enterprise simply focus on a more automated way to deliver customer support, or will it push the envelope and assert a new business model?
That answer depends on many factors, including the enterprise’s industry, regulatory mandates, and competitive positioning; how progressive the enterprise is; how far along the adoption curve it is; the current state of its IT; other enterprise and IT priorities; and the level of management support, especially for new investment.
Post-transaction services will require significant investments of talent and technology, and there must be a long-term commitment. Customers will quickly realize if your post-transaction service offering is dedicated to their personal success or not. Such services are a fully transparent glass house of digital-physical convergence. CIOs need to help business units ensure the plan is comprehensive, is endorsed by the C-suite and the board, and has realistic potential to succeed. An inadequate plan can lead to a highly visible failure, put customer relationships at risk, and damage the brand.
Post-transaction relationships rely heavily on a post-sale digital connection between the customer and the enterprise. Only by establishing such a connection can the enterprise efficiently capture data describing individual outcomes relevant to the customer. This new infrastructure means new demands on IT. Solutions must be reliable, secure, and scalable for real-time operations across potentially millions of end users, involving perhaps billions of transactions. To meet these requirements, IT must work with product managers to describe and map a new set of behavioral patterns and associated data structures. The raw data will likely require sophisticated analytics and visualization solutions to deliver effective guidance to customers (and customer support) as they work toward the outcomes they are targeting.
The good news is that the technology industry already provides many of the building blocks, such as a reliable Internet, mobile devices, cloud services, open application programming interfaces (APIs), data analytics tools, and IT security tools. The CIO’s role in the past has been to select, integrate, and operate the assembly of these capabilities. Post-transaction services will build on these strengths and experiences, with new emphases on the following:
All businesses understand the need to put the customer at the center of the business. For some businesses, where the product is a digital service, IT may already have the most direct link to customers. In other cases, the customer link is shared with business partners, such as product development, sales, marketing, and R&D. The focus on the customer will always mean partnering with customer-centered business units.
At a technology level, partnering between IT and business units increasingly looks like co-creation, where IT delivers a set of core services via published APIs. Central IT is the one place where all data come together. Acquiring and shepherding that data and/or the analytics derived from it is IT’s core competency, but localizing the value from it is often best delivered via applications built by others inside or outside the enterprise. (See Figure 4.) PwC calls such an arrangement an open IT platform.
Open IT builds on prior or ongoing service-oriented architecture (SOA) and API efforts, and it reorganizes IT capabilities in modular chunks to allow co-creation with internal and external partners
“We are opening up our capabilities to allow merchants and publishers to take advantage of our infrastructure to deploy end-to-end seamless experiences,” says Dominic Morea, senior vice president of advanced solutions and innovation at First Data. The need to go beyond the transaction and the innovative devices emerging from the Internet of Things are not the only drivers of this change. Advances in social technologies, mobile technologies, analytics, and cloud computing (SMAC) are also pushing IT departments to be more open, so the enterprise can participate in increasingly digital partner ecosystems.3
The core requirement for open IT is that it scale efficiently and reliably. PwC described how to do this in the Technology Forecast 2012, Issue 2.4 Done right, open IT delivers information services that internal and external partners build on rather than passively accept as the endpoint in an information supply chain.
For IT, this approach is a change from delivering and maintaining full, end-to-end applications to delivering a platform that has modular capabilities expressed as reliable interfaces. “The IT department creates a foundation by integrating the machine data with various other sources to enable a wide range of use cases,” says Konica Minolta’s Ingrassia. “We use this enabling foundation to power the applications that my organization develops to support the technicians and their support experience.”
In post-transaction services, many of the connected sensors and devices will expose their information as APIs that form part of this modular technology ecosystem. Similarly, almost all network and cloud services are built with explicit anticipation of API support.
For the CIO, open IT is an architectural matter more than a technology purchase. As business ecosystems become more digital, the value differentiators increasingly come from information generated by or associated with a product or service. The post-transaction relationship capitalizes on this transition of value as connected sensors digitize consumption at the individual level, helping customers achieve their goals.
Embracing post-transaction services via open IT and associated infrastructure requirements will be an organizational challenge as well. Enterprise IT has historically been optimized around the design, deployment, and operation of core systems; it is unlikely the organization has many of the new skills needed.
The CIO needs to focus on building an API-, web-, mobile-, connected-sensor-, and cloud-competent IT organization. Some CIOs are creating startup-like tiger teams under separate leadership. PwC often sees agile methodologies and approaches to code management and deployment in these groups. Other CIOs are establishing incubator groups or centers of excellence for SMAC and/or RESTful API development. Sometimes embedded in business units, these distributed groups focus on building a competency in a given area and acting as evangelists for the methods, tools, and so forth to be used in the future. The members of these centers might also begin to plan, execute, and gain experience building the future state architecture as laid out by the CIO. The great news is that many in the IT organization today are anxious to upgrade their skills and would welcome the opportunity to learn new skills and technologies.
CIOs have long been advised to get closer to the customer. Post-transaction relationships are the opportunity to do so down to each individual customer. The CIO’s vision is clear—use information at the point of consumption to guide customers to better outcomes. Implementing this vision will require CIOs to define a new out-of-office context for IT that builds on and complements the capabilities CIOs have assembled with earlier back-office and front-office projects.
Because the action takes place out of office, there are new imperatives. Connected devices present their own hardware, software, and network stack, as well as requirements for remote, automated services and for coordination with R&D and product managers. Post-transaction services will also push IT further into the cloud where many network and device management services already reside, seeding a partnership model based on an open IT via APIs.
The huge potential created by post-transaction relationships is real. So are the challenges. The connected things on the Internet are likely to be as disruptive to the enterprise as e-commerce was in pre-transaction relationships. But CIOs have met the disruptive future before, and they have responded by investing in new skills to address new requirements. This challenge is all about making customers successful. Because of that, post-transaction services will be the most compelling business opportunity CIOs have ever had.
1 See http://www.studioroosegaarde.net/projects/ for examples.
2 “Exploiting the growing value from information,” PwC Technology Forecast 2012, Issue 2.
3 “Embracing open IT: Enabling the permeable enterprise,” PwC Technology Forecast 2012, Issue 2.
4 “Business value of APIs,” PwC Technology Forecast 2012, Issue 2.