Making The Shift To Intelligent Software Services from Digitally Cognizant

With all the buzz about cloud computing, it may be surprising to realize that many critical business applications still rely on infrastructure, code bases and designs that by today’s standards would be considered well out-of-date. Whether based in an on-site data center or the cloud, most of these applications are designed to run repeatable, predictable tasks only when triggered by a human. Because of the business value these applications produce, organizations struggle to innovate and take advantage of new technology to achieve a competitive advantage.

These legacy applications are a stark contrast to what will drive the next, and more powerful, wave of digital transformation: Intelligent software services that can think, learn, adapt and autonomously take action on data faster than any human could.

Such software services could include:

  • A ride-sharing service that taps a customer’s schedule and social media posts to proactively suggest local events, arranging transportation and nearby venues to eat and shop, as well as a local weather forecast.
  • A home shopping and financing service that monitors a customer’s cash flow, current home listings and the latest changes in interest rates and mortgage terms to suggest specific properties and relevant financing strategies.
  • An inventory tracking system that monitors not only the amount of goods in warehouses but also expected production levels at suppliers and manufacturers, weather and traffic conditions and pricing trends to automatically minimize inventory costs while avoiding out-of-stocks.

What sets all of these services apart from software applications is that they can initiate action without waiting for human input, learn and optimize their performance over time, and tap a far wider range of information than a human ever could.

The Role of Software Services

For consumers, software services will provide far more complete, convenient and useful solutions to everyday challenges, saving them money and time. For enterprises, software services will deliver increased employee productivity, customer satisfaction and retention, competitive differentiation and the potential for new revenue streams, such as the sale of products or services that complement their primary offerings. Auto manufacturers, for example, might receive a portion of the sales of camping gear through a trip-planning application provided to vehicle owners, or a bank might receive a referral fee from a lender providing mortgages to users of its home-purchasing service.

To understand the difference between a software application and a software service, consider the humble thermostat.

In the pre-digital days, thermostats could be set to maintain only one temperature, whether or not anyone was home, or whether energy prices had spiked. Next, we had digital thermostats that could be programmed to, for example, use less energy at night. Like a software application, these devices merely took our input and executed it.

Far more useful is a thermostat service. Using location information from the homeowner’s smartphone, these intelligent, connected devices can turn up the heat when the individual is 20 minutes from home. Through links with the family calendar, they can automatically adjust the temperature, and by connecting with weather tracking and forecasting services, as well as utilities and heating oil suppliers, even lock in the best energy price for the season, or save money during peak pricing periods.

The ability to intelligently and automatically take action to achieve a desired result for an enterprise or customer will enable a wave of innovation, driving efficiency and value into everything we do.

Such software services are not to be confused with “Web services” that replace traditional monolithic applications with reusable “services” that make up, for example, the user interface or a loan calculation engine. Software services are a different form of software, far more intelligent and independent than software applications, that can learn over time based on new data that doesn’t have to be provided by humans.

Critical Challenges

These software services will enable new business models, especially when combined with ever-greater capabilities in areas such as artificial intelligence (AI) and virtual and augmented reality. But delivering them will require meeting four critical challenges:

  • Effectively applying AI so that systems make better decisions over time. This will require skills in, among other things, big data management and analytic frameworks, analytic algorithms and machine learning. Effective AI will also require ensuring data quality and connectivity with an explosion of Internet of Things (IoT) devices whose data will help provide more and better services to customers and employees.
  • Governance, risk management and compliance (GRC). It doesn’t take much of a security breach to tank a company’s stock price, trigger fines and lawsuits, and end careers. As software services require far greater degrees of real-time data sharing between more enterprises, the amount of data at risk (and the channels through which it could be compromised) will also grow, making GRC more complex. Businesses will need internal staff or partners that can ensure GRC without slowing the pace of innovation.
  • Finding and keeping skilled staff with a deep understanding of the industry and corporate culture. Employees will need to work together in new ways, using DevOps and Agile approaches and principles, to deliver fast innovation. This will entail careful recruitment and/or partnering with outside specialists, as well as retraining and change management.
  • Understanding which capabilities will drive the greatest competitive advantage. Before writing a line of code, businesses need to understand, at the deepest possible level, their customers’ human needs. Such insights are best gained through in-depth, on-site anthropological research that uncovers needs and, coupled with rapid delivery,  produces services that resonate with customers.

Software Services: Get Started Now

The infrastructure allowing enterprises to deliver software services is being created as we speak with every tweak to an AI algorithm, each device added to the IoT, and every new application built to enable real-time data sharing. Each of these helps enable software services that add more value than the software applications that came before.

Software services will create new winners and losers in every industry. The winners will aggressively build their AI capabilities, manage the GRC challenges, grow or partner with others to develop the right skills, and ensure their new software services meet the most critical human needs of their customers.

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The Role of Service Integrators in the Digital Economy

Macroeconomic Factors
Disruption is difficult to forecast particularly when it comes in the form of a technology company that learns how to build self driving cars instead of a car company developing the technology to enable cars to self drive. Yet that’s the landscape in front of us and car companies will yet again change the nature of disruption far into the future. These are the macro economic factors at play.

But car companies are not alone when it comes to changing our thinking. Apple changed the way we consume and think about software forever and I believe that cars will continue to have that same impact on technology, how it integrates with our lives and how we consume it. The technology we will create to fit into self driving cars and the experiences and consumption of that technology will drive the next wave of change. Even though these higher-level activities may seem disconnected from our day today lives they will undoubtedly have an impact long-term.

A time will come when we will look back with embarrassment at how mediocre the technology of today was. Experiencing our car self diagnosing a problem, calling to make an appointment when it’s convenient for us and driving itself to the shop to be repaired will eventually be the norm. Our children will wonder how we ever endured a smelly waiting room filled with other people thumbing through old magazines wondering when their car will be fixed.

The Role of Service Integrators in the Digital Economy
Much fear has existed about the impact the cloud will have on our businesses. Many people believed the shift to the cloud and the abundant leveraging of automation would reduce jobs and ultimately IT spend. Fast forward 2 years and we find a different story. We find IT spending increasing. More over many C-level executives are realizing a direct correlation between IT spending and competitive differentiation. Investing in technology is driving even greater value/revenue for their business. Even though the forecasts about spending decrease and impending dooms day never came to fruition there are still some important changes we not only need to keep in mind but put in place to be successful.

Unlocking Value
When I speak with C-level executives they’re concerned about 3 principle areas, Legacy Applications (often referred to as maintenance), Innovation and new technology, Delighting the user. They feel shackled to their legacy applications. They sometimes feel like they’re chained to the pyramids and cannot move. They have no idea how they’ll ever unlock the enormous value in these apps and worse, how they will transpose their value in a cloud native context. Second they’re tired of being steam rolled by technology. They watch their competitors take advantage of new technology to achieve a competitive edge and they wish they could do the same. Lastly they wish they could deliver delightful user experiences, ones that drive user adoption and loyalty. When they select a strategic partner they will choose one that will enable them to unlock the value of their maintenance applications and redefine their competitive advantage in the digital economy. Moving them to a position of strength – transitioning from being disrupted by technology to leveraging technology as a disruptive force.

Value based outcomes
I often hear people throw around the notion that every company needs to become a software company. Perhaps the devil is in the details but I fundamentally disagree with this notion. When I speak to customers they implicitly talk about driving business value. They want to focus on the applications that drive revenue for their business and forget about the rest. They are looking for a partner that pulls together the ecosystem of technology to accelerate their time to value and time-to-market.

Showing up in a Different Way
If you have regularly read my blog posts or attended my talks you will undoubtedly have heard me talk about the companies that I believe that will be successful in the future. Those companies will be the ones that can create a cultural factory – one where new hires become assimilated into the company culture through the use of pairing with other experienced individuals. The companies that can achieve this kind of DNA replication across their entire organization will undoubtedly thrive in the world. Why is it important to change DNA? The simple fact is that customers are looking for a partner that can take them on a journey. A journey that will lead them to success. A successful journey is one that transforms their applications and people. The first wave of customers have already begun selecting strategic partners. The second and third wave of customers will look to the first for guidance. The strategic partners that are able to demonstrate success in helping the first wave transform will undoubtedly be chosen by waves two and three.

The Future is not set in Stone
Part of what makes digital transformation and selecting the right partner a challenge, is the fact that there is no set journey to success. There are no guarantees in the future. The organizations and the strategic partners that can adjust based on market needs and user feedback will be the ones who will be successful. We live in a world where there are no guarantees and the outcomes are uncertain. It is important that we work together to build trust and demonstrate capability. In doing so we will invariably find a solution and in the process build a solid foundation which after all is what strategic partnerships are all about.

 

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Customer Experience at the Heart of Digital Transformation

In many of the talks on Digital Transformation I’ve given around the world I often get asked how we measure the success of transformation. This question often seems odd to me. This is a business after all, the score card is clear, revenue. Many companies measure their success by the revenue they generate. When speaking to other executives I often frame the discussion in a way they will understand and so I focus on, money. By reframing the work we’re doing to be mutually beneficial we often achieve better engagement across all parties involved. We build software that produces X value to the customer and the customer pays us Y amount of money in return. This is often one of the biggest driving factors for transformation in the enterprise and a key selling point that makes sense to the C-Suite.

Customer Value Quantified

We can almost place a monetary value on customer experience, something that for many feels intangible as they transition from old work patterns. By understanding the customer journey and optimizing how they experience the software we almost certainly drive greater business value or money. This is extremely important in hosted SaaS applications where customers pay for a service via their credit card. Stickiness is difficult to achieve in this context. By delivering poor customer experience it becomes difficult to retain customers which will have an almost immediate impact on software consumption and revenue generation.

Bringing it All Together

Companies that can bring together Big Data, Analytics, the cloud, the Internet of Things (“IoT”), mobile, and rapid application development will drive transformation across their business at unprecedented rates. CEOs that drive a transformation initiative to disrupt themselves know they need to solve for 3 major challenges in their business:

1. Heritage Applications: Legacy applications hold much of the value for Enterprises. Yet the C-suite realizes they need to unshackle themselves from these slow moving monolithic systems and unlock their value.
2. Innovation: A key concern for many business leaders is how to take advantage of technology at the same pace as their competitors. More than pace though, they need to figure out how to unlock value and translate that value to revenue.
3. Delighting the User: The shift to cloud is not solely about redeploying existing applications in a cloud context. It’s about finding new value generating experiences that unlock customer loyalty and revenue.

Blueprint for Change

Further complicating matters is the fact that there’s no set transformation map that companies can follow. Many businesses are accustomed to watching early adopters and first movers and learning from the first wave. Unfortunately that luxury is not afforded to those embarking on transformation journey because each industry is being affected at a different pace and overcoming challenges in new and unique ways. The reasons are simple, at the heart of every company going through this change are organizational structures and people. Each has their own nuances and as a result the journey is unique.

We all must confront a stark reality: integrated digital technology is changing customer experiences, operating models, and business models. Many believe the shift to the cloud is fueled primarily by cost reduction but the reality is something different. IT spending is increasing because digital technology is improving enterprise performance in game-changing ways. The “Digital Leaders”, those companies that are already well on their transformation journey, are quantifiably outperforming laggards. Every industry is facing disruption and for those that have been moving slowly it is a matter of survival.

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