The Elephant in the Room Just Got a Little Bigger

Meaningful Measures for Digital Strategies

A few weeks back Gartner published a survey that got just about everybody’s attention. The survey consisted of 388 CEO’s and other senior executives. And the consensus that emerged was eye opening. Turns out a majority of CEO’s surveyed don’t see the payoff in emerging technology. Now to be fair, Gartner might have skewed the results a bit by suggesting up front that there were four General Purpose Technologies (GPT’s) that they had determined to be the emerging bedrock of enterprise information technology and would soon become as ubiquitous as PC’s and iPhones. The ones Gartner included were the Internet of Things (IoT), Artificial Intelligence (AI), Blockchain and 3D printing.

Now it turns out that most of the participants had more than a passing familiarity when it came to these technologies. However, only two percent or less listed any of them as their top enabling technologies. And, to be fair, in an economy increasingly predicated on services, one would have to wonder exactly what role 3D printing would assume for the majority of these CEO’s. They were also pretty clear that when it came to technologies that capture their imagination there was only one factor they primarily paid attention to and that was revenue. Given this perspective, when it comes to Gartner’s General Purpose Technologies, it would seem that these CEOs come by their skepticism honestly.

And who could blame them?

Recently, even some of the most savvy tech players have resorted to some of the most backward management practices. For instance, while aggressively flaunting the benefits of computerized collaboration through unified communications to its prospects and customers, IBM announced that they are ordering all remote workers back to corporate offices. The same stroke of genius that worked so well for Yahoo!

Quick!

Name three things that are sure-fire indicators of a business’s imminent demise? A new corporate jet, a new corporate headquarters and ending all telecommuting for employees. And why is that? Because it is a leading indicator that management has completely run out of meaningful ideas.

Perhaps the easiest way to summarize the dissonance expressed by the CEO’s who participated in Gartner’s survey when it comes to emerging technology would be to ask this simple question:

If Watson is so smart then why has IBM’s business performance been so consistently dismal?

Someone get some peanuts, pachyderms are known to get hungry.

When you come to a fork in the road, take it…

In part, one of the reasons business leaders are skeptical about emerging technology is that the entire fabric of business is now technology based. Name a factor or function that keeps an executive up at night and there are likely to be a host of technologies that can potentially influence their concerns. Some of these are within the business’s ability to exploit and control but increasingly many are not. So sorting out what genuinely moves the needle can be a very daunting exercise. This is particularly true when nearly every factor, function or organization in any given business consistently asserts that more technology is what’s required to deliver better results. (see Digital Strategies…A Practitioners Perspective – February 2016) Choosing where to invest can propel a business to better performance. Good choices can lead to more options and opportunities just as easily as poor choices can lead to expensive dead ends. These days, judging exactly where and when to apply any particular technology can be a mind numbing exercise particularly when the technologies in question are as rapidly evolving as the outside factors that influence the future value of those same technology investments.

Spinning straw into gold

Now imagine for a moment that you are a CEO, and while you might be hypothetical your problems are not and like the CEO’s surveyed by Gartner your problem is revenue. Now there are numerous ways that technology can influence revenue generation and arguably many of those options could employ artificial intelligence. For instance, prospect identification could employ sophisticated pattern matching analyzing device use, social media, credit scores and disposable income. Marketing could employ sophisticated channel selection, ad personalization and distribution and real-time media buys. Sales enablement could employ tailored incentive management and demand inducement. And fulfillment could involve personalization through intelligent chat-bots. Or you could use any combination of the above. The only question is how would you determine if any of these actually had a measurable impact on your business?

One practical approach would be to establish a framework for measuring returns from factors where an increased technology investment in a given discipline or function in a specific time period can be compared to results achieved in a subsequent period for a specific measure. Recently, this type of analysis has become the darling of VC’s who have dubbed a specific quarter over quarter measurement of marketing expense to sales volumes the “Magic Number”. In this instance, a positive correlation in increased marketing spend to sales volume has been used to trigger subsequent rounds of investment as well as astronomical unicorn valuations. Fictitious valuations notwithstanding, such analysis may provide an indication that certain initiatives are providing momentum for revenue generation. An example of this kind of framework can be seen below and a deeper examination of these techniques can be found at Sources and Uses of Digital Leverage.

It’s lonely at the top

One important caveat in the use of this or any other framework is the difficulty in isolating factors in order to establish their direct influence in generating returns. No business operates in a vacuum and increasingly factors beyond the CEO’s control have an oversized impact in the realization of results. For instance, not unlike your typical enterprise IT budget, the ever-increasing proportion of unrelenting expenses are beginning to take a significant toll on consumer spending. The inevitable result being reduced disposable income leading to anemic economic growth. Under these circumstances, potential productivity gains from technology investments can be easily compromised and no amount of IoT or AI will make up for the consumer’s inability to afford the next new thing.

And that may soon become the biggest elephant of all.

Graphic courtesy of Mick Stevens and The NewYorker