Mark P. McDonald - The Digital Edge: Exploiting Information and Technology for Business Advantage

The Digital Edge
Exploiting Information and Technology for Business Advantage

By

Mark P. McDonald

Andy Rowsell-Jones

Gartner, Inc.

Copyright

2012 Gartner, Inc.

All rights reserved. No part of the book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from Gartner, Inc., 56 Top Gallant Road, Stamford, CT 06904.

ISBN: 978-0-9883897-1-7

http://www.gartner.com/ books

Additional Books

by Mark P. McDonald

The Social Organization, How to Use Social Media to Tap the Collective Genius of Your Customers and Employees

Co-Author with Anthony Bradley

Harvard Business Review Press, October, 2011

The e-Process Edge, Creating Customer Value and Business Wealth in the Internet Era

Co-Author with Peter Keen

Osborne/McGraw-Hill, 2000

Blog

http://blogs.gartner.com/mark_mcdonald/

Dedication

Mark P. McDonald

To Carolyn, Brian and Sarah

Andy Rowsell-Jones

To my darling wife Janice, without whose support nothing is possible

SECTION I

Identify Digital Value

1: Think Differently About Digital

Some companies have an edge, some dont. You can probably name the companies in your industry that have an edge based on operational effectiveness, innovation or sheer revenue. Maybe your company is one of them.

Your company may have used technology to give it an edge by reducing costs, automating existing processes or turning analog business models into electronic channels. But sharpening any edge becomes increasingly difficult over time. After all, as soon as others figure out how to automate the same processes, wheres the edge? How can companies create a new edge, and sustain it, when grinding away at their current strategies delivers fewer and fewer results?

The answer is digitalization.

Technologies such as smartphones, tablet computing, social media, big data, analytics, cloud computing, remote sensing and others provide the raw materials to forge a new edge. Any company today large or small, old or new can use this digital technology to create a winning edge for its business and, perhaps, its industry.

That is the digital edge .

Executives want this edge. According to a 2012 McKinsey & Company survey, Minding Your Digital Business, half of the executives responding view investments in digital technologies as building a competitive advantage in their business. More than 20% overall say that the intent of their digital investments is to build a new business platform or tap new profit pools.

There is a catch: Forming a digital edge requires new thinking and a new approach to access customer value and make revenue and results addressable to the organization. Instead of substituting atoms for bits, a digital edge combines digital and physical resources in innovative ways to deliver that new value. When the organizations studied for this book employed these methods, they solved fundamental contradictions for their customers or business models that made new opportunities possible in ways that are hard for competitors to copy.

Take, for example, the worlds biggest cruise ship.

Royal Caribbeans Digital Edge on the High Seas

Royal Caribbean Cruises sought an edge when it set out to build the largest class of cruise ship, its Oasis-class ships. Costing more than a billion dollars to build, each ship functions as a small city, with 5,400 guests in 2,700 staterooms served by 2,200 crew members. If youve ever sailed on a cruise ship, then youll understand how a massively populated, at times crowded, experience would only be intensified on an even-larger ship.

Royal Caribbean wanted an operational edge by sailing 5,400 vacationers on one large ship rather than multiple smaller ships. But if the size of the ship overwhelmed passengers with overcrowding and long lines, any operational edge would be offset by customer dissatisfaction. The companys challenge required resolving a fundamental contradiction: How could each guest enjoy a personalized experience on a massive ship with thousands of other guests?

Without digitalization, they cant.

Royal Caribbean built its Oasis-class ships with pervasive digital connections that transform guests cruising vacations into ones that allow them greater individual control to influence their experience. To do this, Royal Caribbean thought about every aspect of the ship and its operations from a guests perspective. That experience formed a simple, yet powerful, goal: Zero tolerance for lines. If you have to stand in line, explained Bill Martin, vice president and CIO, the ship suddenly seems too big and the experience diminishes sharply.

Royal Caribbean applied a key step in forming a digital edge: It started with a clear and unambiguous outcome eliminating the need for lines on board. Defining this customer outcome provided a fundamental change from implementing technology for technologys sake. Once this goal was identified, Royal Caribbean convened a cross-functional team to identify the process chokepoints that led to passengers queuing up for everything from boarding the ship to eating in restaurants, attending theater shows, going on onshore excursions, using onboard activities such as the rock climbing wall or wave simulator, and checking out and settling their bills. Royal Caribbean could have simply automated these chokepoints with digital technology by, for example, arming staff with tablets to facilitate reservations and providing technical means for passengers to reserve restaurant seats and excursions in advance. Instead, it used digital technology to eliminate chokepoints by creating solutions that allowed passengers to choose how they interact with the ship on their own terms.

Passengers Control Their Experiences

When passengers check in at one of the 90 desks in Fort Lauderdale, Florida, their photos are taken and routed to a digital profile that forms the basis for digital support of their experience while on board the ship. The cruise line provides a smart card for onboard activities and purchases. The smart cards, combined with their digital photo facilitate on- and off-boarding of the ship at all ports of call as customers swipe their smart cards and have their digital picture verified by the quartermaster.

Once on board the ship, digital technologies give passengers greater direct control of their own experiences via smartphone apps and digital signage, thus connecting customer behaviors with the cruise lines no line goals.

Imagine the potential for lines when 5,400 people are hungry at about the same time. Rather than telling people when and where they can eat, Royal Caribbean captures each of the 24 restaurants capacity information in real time via shape-sensing cameras. Capacity information is provided to passengers on digital signage located around the ship. Passengers know the available capacity of each restaurant, and use this information to make their own dining decisions. Thus, their individual choices have the collective effect of distributing demand across the ship and reducing crowding at the restaurants.

Royal Caribbean strategically chose to protect passenger privacy by using shape-sensing cameras to count the number of people in each restaurant instead of other technologies. The cruise line uses facial recognition software to recognize individuals in professional photos that were previously posted on a public photo wall. Now, individual photos are available to guests in a personalized binder available on a photo kiosk or the interactive television inside their rooms.