Energy and business: an operational perspective

The economics underpinning climate change and the future of energy are in the midst of a fundamental change that will heavily impact businesses; even those not part of the energy ecosystem. Unchecked climate change is forecast by Citi to cost the world $72 trillion by the middle of the century. It is also suggested that ‘…the world can spend $2 trillion less in total on energy infrastructure and ongoing fuel costs than it would in the business-as-usual scenario[i].’ Overall then, the case for an energy revolution would appear to be clear – not only could we save $2 trillion but in addition avoid losing up to $72 trillion in economic activity. Simon Dietz of the London School of Economics notes simply, that ‘…long-term investors…would be better off in a low-carbon world[ii].’ There are signs that businesses are aware that they would do better in a low-carbon world too. Nine out of ten executives see climate change as an urgent priority.

energy

Changes in the generation, capture, storage, distribution and use of energy now allow businesses to not only meet their shared environmental mandate, but strategically adopt better processes. Indeed, the energy ecosystem is already emerging as a key area for optimising business outcomes – from partner choice to financial risk and attracting talent. It is not only possible, but necessary for a much broader range of business leaders to implement a strategic energy and electricity plan. Within it, new possibilities will almost certainly exist as well as the ability to better match demand and supply.

Over the coming decade, the emerging energy landscape will undergo considerable shifts. A hybrid of large and small scale elements already visible in over half of large U.S businesses generating a percentage of their own electricity on-site, is likely to evolve further. Ikea is notable for its renewable energy plans and its refusal to rule out selling excess energy to local customers through localised microgrids.  Buildings indicating this imminent opportunity are already appearing, led and exemplified by the Edge in Amsterdam. Its solar panels create more electricity than the building uses – and while the Edge is packed with some 28,000 sensors, it uses 70% less electricity than the typical office building[iii]. In time the concept of solar panels may become antiquated with transparent solar glass already in the labs.

It appears that the main technology components of microgrids are reaching maturity, with energy storage technologies making dramatic leaps within the past two years and set for further gains. As they enable networking and the sharing of resources to match loads, microgrids can play a role in realising greater utilisation of existing generation and load resources. In time the concept of energy-as-a-service could pose serious issues to utilities ill prepared for change, and cement businesses’ place in the local community.

[i] https://hbr.org/2016/04/the-data-says-climate-change-could-cost-investors-trillions

[ii] https://hbr.org/2016/04/the-data-says-climate-change-could-cost-investors-trillions

[iii] http://www.bloomberg.com/features/2015-the-edge-the-worlds-greenest-building/

Compete or collaborate?

As recently as decade ago, the idea of collaboration, including with competitors being a prescription for an increasingly competitive business set-up may have seemed absurd. That is not to say collaboration didn’t happen but instances of it relating to key legislation, global standards and the like are giving way to a far broader array of issues on which competition and collaboration are merging. There is a growing appreciation that collaborating to solve the toughest business problems will require building relationships and tapping into new ecosystems for ideas, talent, and potential solutions. For example, ‘…Amazon and LinkedIn have welcomed competitors onto their respective platforms, recognising that expansion of their network was its own reward[i].’The mechanisms of collaboration, curation and crowd creation will therefore become critical skills and processes for businesses – and how to organise technologically and culturally for this will be critical.

compete

Any future approach to collaboration is likely to feature talent. Given the breadth and speed of technological development in comparison to relatively slowly changing educational curricula, it is unlikely that any single organisation of size will be fully able to meet its future digital or STEM skills demand. Talent platforms and trusted third parties from within a businesses’ ecosystem are likely to feature as businesses identify and engage outside firms or individuals that can round out their existing skill set. Collaboration is also permeating processes for industries less advanced on platformizing their offerings than Amazon and LinkedIn. Some 60% of European financial service providers have open innovation initiatives and studies show that the success rate emanating from open innovation is some three times higher than traditional in-house R&D.

There is, however, a reason to suggest that efforts to collaborate externally may be limited by internal structures. Some ‘…25% of market-share leaders fear that company-wide collaboration can lead to tension among company departments[ii].’ Can businesses be expected to collaborate effectively externally without being able to do so internally? There are signs that employees desire it – of the 86% of unauthorized cloud apps in an average organisation, the majority are used for collaboration[iii]. A key problem is that less than one in ten companies report being very effective in their alignment of business and I.T goals. If this cannot be achieved internally, it could be harder to craft meaningful and effective external alignment. Or, perhaps free of legacy constraints, external collaboration could become a key driver and template for internal renewal? Either way, the balance of competition and collaboration -both internally and externally- looks set to help determine the winners and losers in the emerging connected economy.

[i] http://knowledge.insead.edu/operations/managing-the-challenges-of-coopetition-4813#wK0vCXMIeu0BYIRL.99

[ii] https://www.eiuperspectives.economist.com/strategy-leadership/fostering-collaboration-0?utm_source=TheEIU&utm_medium=Twitter%20&utm_campaign=BTS

[iii] https://www.ibm.com/blogs/social-business/2016/03/31/seeing-shadows/

A contact centre for the future

We have already entered the age of virtual agents, voice recognition and immediate verification through biometric data, suggesting the future role for intelligent automation meeting customers wherever they are. Furthermore, by adding context to add value and anticipating customer needs, the contact centre could become a key aspect of brand differentiation. The key premise and challenge lies not in doing things differently, but in enabling consumers (and staff) to do different things. Gartner believes that autonomics-based managed services and cognitive platforms will fuel a 60% reduction in the cost of IT solutions by automating repetitive tasks currently tackled by humans[i]. This may not mean the end of the contact centre per se, but almost certainly indicates significant forthcoming change to both the levels of contact centre employment and the type of work done there, the skills needed for it, and the general elevation of customer service levels.

callme

Aside from excellent communication skills, agents will need analytical problem-solving skills, project management skills, and in some cases, technical training to understand the finer details of their product or service. Customer service agents will need to adapt to changes in technology, from becoming experts in apps & wearables and social networks to utilising. In essence, the remaining core of contact centre workers will need to become knowledge workers. The range of technologies impacting on customer service could actually create whole new classes of consultant-like jobs in the contact centre space. Future contact centres will likely be able to cater to non-traditional services such as medical examinations using biometrics and similar smart technologies.  Predictive analytics is likely to enable pre-emptive and perhaps even proactive customer service delivered through the omnichannel or via consumers’ virtual personal assistants. This will place greater demand and emphasis on the contact centre but could lead to greater customer satisfaction and brand loyalty if done appropriately.

The economics of this disruption are compelling. Machine learning technology and advanced speech recognition can improve upon conventional interactive voice response system and provides cost savings of 60-80% over an outsourced contact centre consisting of human labour[ii]. Customer preference must also be considered; 75% say self-service is a convenient way to address customer service issues, whilst 91% of consumers would use an online support centre if it was tailored to their needs[iii]. Personalised customer service is the ultimate goal of almost all industries and those that strategically align the contact centre experience to their overall strategy stand a chance of discovering new areas of value, providing better customer service and establishing points of differentiation.

[i] http://www.entrepreneur.com/article/245827

[ii] http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf

[iii] https://blog.proonto.com/blog/customer-service-in-2030/

The future CMO

A key principle of marketing has long held that better knowledge of a customer helps better tailoring of products and services to a given segment or individual. With the volume, variety and velocity of contextual information all increasing and set to do so further, knowledge of consumers is entering a new phase.

cmo

Whilst close to half of CMO’s acknowledge that digital capabilities have significantly changed their customers’ behaviour, only 12% feel sufficiently prepared for the consequences of digitally enabled customers[i]. Technology, analytics, consumer relationships, growth and even organisational renewal are all issues intertwined with the emerging CMO role. The extent of the role change could be significant, with 78% of leaders agreeing it will change fundamentally in the next five years[ii].

The challenge to change will ostensibly feature a new skill set, centred around analytical capabilities, but also augmented with the requisite soft skills needed to collaborate across business units and demonstrate the value of marketing as a driver of organisational revenue. Perhaps within a few years, the notion of marketing as a cost centre will finally be proven as dated.

However, the framework in which CMOs operate must also be conducive to broader change. Marketing functions that operate in silos are highly likely to fall behind those that integrate with wider business units and processes. Here, and elsewhere, CMOs are unlikely to be able to enact change with support from other executives. Given support by other stakeholders such as CIOs and HR executives, and by focussing on talent, analytics and customer experience, CMOs can begin to craft a more conducive framework to operate within. It should be acknowledged that cultural change is never easy to enact, and will require supportive measures that codify behaviour change – whether it be through different processes, incentives or new talent in key positions.

New models underpinned by new company wide collaboration must be built as traditional marketing, I.T and organisational models expire. Central to this must be the idea that data should be viewed as an enterprise asset rather than a departmental asset. This broader view of data and of the organisation can help the CMO and CIO develop and implement insights that deliver greater value to the business and form a key building block of the ‘Marketing 2.0,’ organisation.

[i] http://www.bain.com/publications/articles/bought-not-sold-marketing-and-selling-to-digitally-empowered-business-customers.aspx

[ii] https://www.accenture.com/us-en/insight-win-campaign-management?c=glb_artalerttwt_10000556&n=smc_0815

Why tech problems may be cultural problems.

All organisations and industries are built, to varying degrees, around (traditional) assumptions and beliefs surrounding value creation as well as a resultant set of behaviours. This ‘mental model,’ has often been found as unfit for purpose in the digital economy and inverting some core beliefs is a prerequisite for changing wider business models and any successful digital transformation[i]. All too often however, technology is diagnosed as both the problem and solution; both the cause of disruption and the answer to it. In some cases this is true; but in many cases it is the friction of new technology against legacy systems, legacy processes and legacy people that causes problems.

techculture

Prior to the Uberisation of many industries, a general belief pervaded that physical assets were durable and reliable, yet the creation of platforms for under-utilised assets (in Uber’s case, cars) brought this into question. Business models and their components have changed as a result – we are not witnessing a merely technological response. Indeed, for GE this inversion meant transforming from a manufacturing company into an IoT based analytics one and divesting various (mostly hitherto successful) parts of the company along the way. New structures, new talent and new management forms have all been necessary. Clearly, adding new technology onto the old business models wouldn’t have worked – it would have allowed them to do things differently, but not different things.

The process of digital transformation is so problematic for this very reason. The requisite changes in ways of doing things runs contrary to layers of accumulated and established ways of working, both within management and the day-to-day operations of workers. Its’ strategic nature means that it directly threatens management practices that have little changed since the 1980’s and in some cases are little changed from their 19th century military origins. That said, certain cultural characteristics can better enable transformations than others. Harvard Business Review[iii] notes the following as propitious;

  • A strong, shared sense of purpose
  • Freedom to experiment
  • Distributed decision-making
  • Open to the influence of the external world

More specifically, leadership behaviours, job descriptions and roles and the systems and processes that allow people to work must be changed if the way people (and technology) work and act in an organisation are to improve.

[i] https://hbr.org/2016/06/to-go-digital-leaders-have-to-change-some-core-beliefs

[iii] https://hbr.org/2015/08/the-company-cultures-that-help-or-hinder-digital-transformation

The disappearing bank or the invisible bank?

A couple of years ago, PwC made the claim that banks as we know them may no longer be needed by 2025. This claim of disappearing banks is rendered plausible by the rise of FinTech and various other actors seeking to gain a niche of the evolving banking ecosystem in which death to the incumbent is assured through a thousand cuts. An alternative scenario would see the banks as little more than providers of infrastructure  – or banking as a platform – from which third party API’s proliferate.

invisiblebank

A common prescription for those facing disruption is to disrupt themselves first. In this case, perhaps the key for disappearing banks is to make themselves invisible. The rise of personal digital assistants in the period to 2020 will make this possible, with Gartner for one predicting that by this date we’ll be having more conversations with bots in their various forms than with our spouses[i]. The continuation of an ever-more connected digital lifestyle, the emergence of the IoT and a profusion of digital applications is likely to augment this trend in which banking becomes embedded in every-day activities to a greater degree. Data driven, tech-savvy banks should be able to adapt a truly customer-centric model if they are able to use their data stewardship to open new value chains. For example, 97% are happy for banks to use their data if it were used to offer them a wider range of services[ii]. The opportunities in such a move would appear significant, but are matched only be the challenges of ignoring this trend; API-powered and data fuelled business models are already appearing such as Figo and Open Bank Project.

To be clear, both the disappearing bank and invisible bank scenarios suppose the dissolution of chunks of the traditional banking infrastructure. The choice is not between costly and potentially painful decisions but rather on whose terms these decisions will need to be made. It is estimated that machine learning will have the potential to disrupt 40% of banking roles[iii] and some banks have already instigated this; for example in its’ billion euro attempt aim to digitise and automate 80% of its’ processes by 2020, Commerzbank has announced 9,600 job cuts[iv]. ING has announced similar plans.

In transitioning to am ‘ambient’ bank – able to use platforms to give you personalised information, data and insights unobtrusively and at actionable points, incumbent financial institutions are essentially accepting the value proposition of FinTech. The adoption of a FinTech veneer is easy enough; the processes, systems and culture of the incumbent must align with the technology is its’ full potential is to be realised. To adapt legacy systems and legacy people to enable the deeper benefits that come from excellence in data provenance, interface design and value proposition are more difficult, but will help distinguish those who disappear from those who choose to become invisible in the digital age.

[i] http://www.cio.com/article/3133771/emerging-technology/gartner-by-2020-youll-say-more-to-a-machine-than-to-your-spouse.html

[ii] http://www.insuranceage.co.uk/insurance-age/news/2456807/insurtech-futures-customers-demanding-digital-first

[iii] https://ascent.atos.net/look-out-2016/banking/

[iv] http://qz.com/799816/dutch-bank-ing-is-replacing-5800-people-with-machines-at-a-cost-of-2-billion/

Digital security models

 

McKinsey suggests that by 2025, the IoT could have an $11 trillion impact[i].  A range of technologies with high values at stake – from driverless cars to the emerging wearables ecosystem will rely on this very infrastructure. New security models are sorely needed if this potential is to be realised; if our current models are insufficient for today, they will be woefully unable to deal with tomorrow’s threats. Relying on perimeter defence and rule-based security is already inadequate, especially as organisations exploit more cloud-based services and open APIs for customers and partners to integrate with their systems[ii]. This security set-up remains all too common. New, as-yet-untested models of security are needed that can deal with new and evolving threats such as deeply embedded advanced persistent threats.

digital-security

Whilst technologies represent new vectors of attack, they also represent a range of tools that could improve security. Analytics will be key. Blockchain – the technology behind BitCoin could for example, dramatically reduce the cost of governing regulatory compliance in the future. New encryption methods and interfaces – such as MasterCard’s scanning of your face to authorize payments will increase in the coming years. Biometrics are evolving in new areas; ‘brainprints’ represent a new system allowing accounts to be unlocked using brainwaves[iii]. Whether quantum computing will break all known security architectures, renew them or do both remains to be seen. In any case, the acceptance that preventative services cannot be solely relied upon will be a cornerstone of data security in the future, even as the array of preventative services evolves.

Adaptive security architectures are likely to prevail. IT leaders must focus on detecting and responding to threats, in addition to the more traditional blocking. Application self-protection, as well as user and entity behaviour analytics, will help fulfil the adaptive security architecture. Such systems need to balance access with security, and concepts are gaining traction that seek to do just this. Cloaking and containing, which can also be described as the concept of least privileges, provides the least amount of information that someone needs to do their job. At the same time, security could be built inside services, by design – especially with regards to customer facing applications and services. Perhaps the key missing issues for many in visioning new security architectures lies with the board. Cybersecurity needs to be regarded as a strategic organisational pillar and a shared cultural concern, for which both executive level and board level awareness needs to rise. Appointing members fluent in tech matters is a critical step, as is building the competence of existing members and ensuring an open and transparent relationship with the CIO and other key stakeholders.

[i]  http://fortune.com/2015/07/22/mckinsey-internet-of-things/

[ii] http://www.gartner.com/newsroom/id/3143521

[iii] http://www.cityam.com/217060/you-could-soon-unlock-computers-and-bank-accounts-using-nothing-brainwaves