Digital unleashes new competitive threats, forcing CIOs to take charge
Blog: Colin Crofts - Business Process Improvement
Jennifer Banner, a bank director and CEO at the family-owned Schaad Companies LLC, had some stern words for CIOs at the recent MIT Sloan CIO Symposium.
“Don’t come down with a thousand pages of PowerPoint decks and heat maps,” said Banner, a panelist at the event. “Come into the board room, put your fist down and say, ‘There is a war going on.'”
The dramatic language referred to the new competitive threats created by the digitization of business processes and business models. Digitization is not only enabling competitors intent on upending whole industries but has also spawned a new breed of competitors that’s happy to demolish just a piece of a business. They’re “chipping away at various business lines and profit centers,” said Banner, a director at Branch Banking & Trust Corp. and at the Federal Reserve Bank of Atlanta’s Nashville branch.
These days, a financial services disruptor doesn’t have to reinvent the banking industry (although that’s happening). Instead, the competitive threat could come in the form of a mobile payment app that alters the traditional relationship between financial institution and customer — something Banner is experiencing first hand.
“I have a couple of teenagers who keep me pretty informed on how the world is changing. Most recently, my 19 year old asked me what a check was and if she needed those,” she said.
Time is of the essence
Christopher Perretta, executive vice president and CIO at State Street Corp. in Boston, Mass., agreed that businesses must pay attention to competitive threats from outside their traditional peer groups.
Before the days of digital disruption, Perretta said he and his colleagues “felt pretty safe,” taking comfort in the high barrier to entry for their industry. State Street is not a commercial bank; it’s a financial services holding company with strict regulatory requirements. These days, however, “it’s not enough to know what the [usual] competition does,” he said.
Businesses like State Street want to be in front of the innovation ball — not behind it losing market share. “So speed is a big deal,” he said.
Just don’t mistake agility for speed, said Derek Roos, CEO at Mendix Inc., arapid app development software company. Agile methodology relies on quick development cycles and incremental improvements to build products or manage projects. While agile production cycles are shorter than they are in waterfall development, incremental improvements can go on forever and the time-to-market doesn’t necessarily change. If CIOs want to accelerate time-to-market, “you have to do things differently,” Roos said.
Strategic partnerships to combat competitive threats
Roos pointed to a Mendix customer, an established insurance company that was struggling to innovate faster. Guided by standards set by a new CEO, the company created a “fast-track innovation team” of about 10 employees.
“It wasn’t only on the IT side, it was a cross-functional team across all departments,” Roos said. In short order, the strategic partnerships between IT and the business brought to market a product in a couple of weeks that normally would have taken about 18 months to launch. But to experience that kind of success with an innovation team or lab, CIOs can’t aim low. “The key is to put them on your most important projects and accept that they may fail,” Roos said.
For Pablo Ciano, CIO at DHL Express Americas, strategic partnerships don’t live just within the enterprise. The global delivery service is working with third parties to create new “opportunities to optimize our operations,” he said.
DHL, an organization with about 500,000 employees worldwide, has seen a major shift in business-to-consumer (B2C) deliveries from 5% to 45% in the last five years due to ecommerce purchases, and that’s put significant focus on the last mile of service.
“It’s all about delivery options; it’s all about convenience,” Ciano said. “It’s all about expanding the way consumers, driven by B2C purchases, can choose where they want to pick up their packages.”
Currently, DHL is partnering with Amazon and Audi on a pilot program to deliver packages to the trunk of a recipient’s car. “Audi will send a one-time code for the driver to open the trunk of the car and leave the package,” Ciano said. As of right now, recipients have to live in Germany, where DHL is headquartered, if they want to take advantage of the service.