Disrupt or Be
Disrupted: today’s new normal
by Jennifer Pellet
Across industries, advances in everything from
analytics and artificial intelligence to mobility and social media are changing
virtually every aspect of doing business. Welcome to the era of “Transform or
be transformed.”
This new reality—like most large-scale
changes—represents both an opportunity and a threat for business leaders,
agreed CEOs gathered for Chief Executive’s recent CEO2CEO Summit.
Recognizing this imperative, business leaders
participating in the summit shared their experiences deploying digital
strategies to engage more effectively with consumers, streamline internal
processes, improve productivity and explore new value propositions.
Here are 5 key themes that emerged.
1. Staying current requires constant vigilance.
The rapid growth of relative newcomers like Amazon,
Uber and Netflix epitomizes the threat of disruption faced by legacy businesses
that fail to foresee and adapt to game-changing technology. The consequences of
neglecting to adapt to even incremental advances can be just as dire over time,
marching a healthy business steadily toward obsolescence.
Recognizing the need for constant vigilance is key.
Even companies that once innovated their way to success become vulnerable to
the next big thing once they reach a certain size. 1-800-Flowers—which
revolutionized the floral business by embracing telephone sales and,
later, e-commerce—guards against being overtaken by aggressively pursuing new
technologies as soon as they emerge, reported Jim McCann, founder and executive
chairman.
The company was an early partner with IBM Watson,
which led to the creation of a digital concierge. “Gwyn” is a virtual assistant
that helps web customers with their gifting needs and will, thanks to machine
learning, learn its craft much the way a floral shop employee learns about
floral service over time. 1-800-Flowers also is partnering with Uber to speed
delivery service, has a chatbot on Amazon Messenger and a partnership with
Amazon’s virtual assistant, Alexa, that allows customers to place an order with
a voice command.
2. Digital advances have raised customer expectations
across all industries.
Customers in both the B2C and B2B segments increasingly
expect instant gratification—and stockholders are no different, noted Dow
Chemical CEO Andrew Liveris, who is leading a reorganization aimed in large
part at making the company more agile. When the dust settles, Dow will be
divided into three entities: one devoted to materials sciences in the
packaging, infrastructure solutions and transportation areas; a second
concentrating on agricultural science; and a third focused on specialty
petrochemicals.
“The diversified conglomerate model is dying in the public
market,” Liveris said, explaining the thinking behind the reorganization. “You
have to choose areas of [focus] so that you can scale appropriately within
them.”
The restructuring will allow Dow to continue its
journey toward speeding innovation through technology. Already, noted Liveris,
investments in bioinformatics and robotics have increased the number of
experiments Dow conducts on behalf of its business customers from 20,000 a year
a decade ago to 2 million a year.
Recently, for example, Under
Armour approached Dow looking to make its line of athletic shoes bouncier,
water-resistant, temperature-resistant and less likely to degrade over time.
“Normally, developing a polymer that would support that would take two to three
years,” said Liveris. “We did it using chemical engineers, biomatics, robotics
and materials science in three weeks.”
Speed is just as critical in the B2C market, where
customers expect to be able not only to find whatever their hearts desire at
their fingertips, but to receive it within days—or, in the case of pizza,
within minutes. Domino’s, which built a national chain around the promise of
speedy delivery, upped the ante on that model in 2015 with a pizza ordering app
that not only guarantees easy and fast access to a pie, but lets you track
it on your smartphone every step of the way. Today, digital orders account for
35% of the company’s sales and deliver a higher repeat customer rate, higher
spending and higher satisfaction.
3. Artificial intelligence (AI) will increasingly inform
decision making.
The unbiased decision making that comes from data
being plugged into algorithms can inform rather than replace strategic decision
making, asserted David Kenny, general manager of IBM’s Watson Group. “It
enables you to see patterns and identify solutions.” For example, Kenny
described Watson’s effort to use genomics to help doctors treat a leukemia
patient who was failing despite six years of aggressive treatment. “After
analyzing her DNA and treatment data, Watson proposed she could actually have
two strains at the same time,” he said. “The medical team addressed the second
strain and now that patient is perfectly healthy.”
AI
can help management weigh strategic decisions. Kenny predicted a day when
almost every large company will have a robot director on its board. “If you are
considering making an acquisition, selling the business or making a big capital
expenditure, there are implicit models that go into that decision-making
process that an AI system can use,” he explained. “Then your
other directors will add judgment on top of that. The decisions are better
when it is the man and the machine working together. From the boardroom right
up to every major decision, AI will become a tool in our lives.”
4.
Collaboration is essential to innovation and effective teamwork.
Tapping
the potential of digital technology often requires assembling multidisciplinary
teams—from external as well as internal businesses—who share data and insights.
For example, advances in medicine are far more likely to come from
collaboration between colleagues or companies than from a lone scientist
toiling in a lab, asserted Judith Dunn, global head of clinical
development at Roche Innovation.
“It’s
changed how we hire and how we do business,” she said. “I have a theoretical
physicist—a math whiz—whose job is to model disease. I pair him with a
biologist. Their work helps us understand safety and efficacy more thoroughly.…
We’re also finding that more and more therapies are combination drugs where we
need to find out how our drug and another company’s drug work together”.
The
need for access to both top talent, academia and potential business partners
factored heavily in Roche Innovation’s decision to open a research facility in
Manhattan, where the company would be able to engage with medical professionals
from the city’s teaching hospitals and medical schools, as well as attract and
retain top talent. The new research center is located near the city’s East Side
medical corridor in the state-of-the-art Alexandria Center for Life
Science building, joining tenants like Eli Lilly and Pfizer.
5.
Companies must look for ways to bridge the digital talent gap.
One
of the biggest challenges to digital transformation is finding the employees
with the skills to work with the tools and technologies being adopted by companies,
agreed many CEOs attending the summit. “It is no longer blue collar or white
collar, it’s ‘new collar,’” quipped Dow’s Liveris, discussing the need to
reskill or replace today’s workers. “We have a 19th-century education system
turning out a workforce attuned to two ends of the spectrum: higher education
and people who don’t make it through high school [educated] for assembly lines.
There’s a big piece in the middle—at places like our infrastructure and
materials companies—that our education system doesn’t support.”
Addressing
the dearth of technically skilled workers will require changes in the nation’s
educational system. However, companies can’t afford to wait for that shift to
happen organically, argued Liveris, who leads President Trump’s manufacturing
council. “The big opportunity is how to collaborate [and] rebuild the public
education system around that new workforce,” he said. In the meantime, Dow is
working with community colleges to design curriculums tailored to its needs.
“Our ecosystem—we have 50,000 Dow employees but my ecosystem also includes all
the high-tech firms in our supply chain—will require more jobs, but of a
different skill set,” he said.
AT&T
is also taking a proactive approach to bringing its workforce up to speed.
Recognizing that its digital talent gap will only continue to widen, the
company worked with educational institutions to design relevant coursework and
then focused on incenting its employees to voluntarily re-educate themselves
for the jobs of the future.
“We
tried not to inhibit ourselves by looking at what we already had; we said,
‘Five years from now, what will we need?’” explained John Donovan, chief
strategy officer and group president. “Then we gave every employee a view not
only of where they are today but where we expected them to be on the internal
path five years from now. We also took a very important step: We allowed them
to look at any future [career] they wanted and build a curriculum that
would get them there, whether that be 80 hours to meet expectations or 800
hours to go out and become a new person.”
6.
In the digital age, face time is just as critical as ever.
Even
as technology enables us to connect with geographically dispersed colleagues on
team endeavors, there’s no substitute for the energy and enthusiasm that a
face-to-face, real-time gathering can offer.
At
1-800-Flowers, McCann fosters an atmosphere of innovation by dining with team
members regularly. “I run monthly dinners with 10 to 15 people,” he explained.
“I ask core talent folks to invite younger newer people and we ask them to
bring ideas, anything they do that is new and creative. We have wonderful
dialogues. In fact, being early to Facebook was because of a lady sitting next
to me who told me how she used Facebook. The next morning I was there with two
cups of tea, saying, “Show me what you do on Facebook.”
In fact, face time with a CEO time is becoming
currency, noted Liveris, who has adopted an “inclusive model” of leadership
that involves traveling the globe to engage personally with constituents,
customers, owners, employees and partners. “It’s very demanding,” he said,
adding that how CEOs allocate their time can be a competitive differentiator.
“Your time is the only thing left that is discretionary. Everyone else has
everything else you have. I’m away from headquarters 250 days a year; I slept
on an airplane 90 nights last year. That’s
what modern technology has done”.
Source: Chief Executive
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