Let’s take the metaphor further. Why does it matter how effectively information flows in the company? Because the entire economy is a collection of organizations interacting in an ecosystem that follows the same principles that living biological systems follow. Just as in a biological ecosystem, the economy is a collection of entities operating in interdependent networks and competing for resources. In the case of business, those resources include time, money, talent, expertise, and the attention that ultimately comes from customers. Information flows—both within companies and in the broader economy—are at the center of this activity. Our society and its associated value chains, knowledge networks, and information flows are endlessly complex, interrelated, and nuanced, containing layers of systems upon systems at every level of interaction—from the most basic to the most mind-bogglingly complex.
Just as environments select for the strongest organisms in a particular set of conditions, so too does the economy select for the strongest and best-adapted organization in a particular market sector or niche. Many companies will go extinct as our economic environment continues to change. Yours can be one of the survivors, but only if it can adapt to those changing conditions.
SERVING CUSTOMERS EFFECTIVELY IS WHAT MAKES COMPANIES SUCCESSFUL
In biological systems, organisms succeed because they can find food and reproduce (grow). What is the analogy to this in business? It is serving customers. The enterprise that best serves the customer grows and thrives at the expensive of its competitors.
While customer-centricity is ostensibly a major focus of most enterprises today, in many cases the understanding of customer experience is immature, or is siloed in parts of the organization that “own” one aspect of customer service or customer support. That understanding of customers is largely disconnected from other critical processes. Using the entire customer journey as the anchor to programs—whether traditional information projects or cutting-edge machine learning programs—is critical to success. (I describe the customer journey in more detail in chapter 3.) The customer journey is not a single thing; it encompasses everything that the enterprise does, directly and indirectly, that impacts how its customers perceive their interactions and the value they receive. If a system or process cannot be tied to value for the customer (whether that customer is an internal consumer of information or an external paying-end customer), then it cannot be justified.
The real challenge to delivering value occurs when systems are part of the foundation for a capability that can impact the customer, but customers don’t interact directly with those systems. Infrastructure programs are notoriously difficult to justify because of the lack of a clear line of sight to their impact on the customer; but when the infrastructure is faulty, serving the customer becomes slow, complicated, or impossible. When the customer is internal, this is even more of a challenge. (I will discuss the “internal” customer in chapter 8 on productivity, but the same principles largely apply in that context.) In chapter 3, I will define an approach and framework that will show you how to establish the linkage between systems and customer value and how to communicate the value any project in the enterprise has for the customer experience.
Some of these linkages are indirect. Others may be difficult to measure. However, they all should be traceable to activities and capabilities that produce customer value. Everything that an organization does needs to improve how it serves its customers and how the enterprise creates value; each program, project, investment, and decision should be linked to a metric that impacts the customer’s perceptions of their experience and the value that they receive from their relationship with your organization. High-fidelity customer journeys (described in chapter 3) are the key to successful AI initiatives such as personalization and campaign optimization, which can transform the customer experience and deliver new efficiencies and capabilities from human augmentation and machine-enabled automation.
AGILITY AND ADAPTABILITY DETERMINE COMPETITIVE SUCCESS
It’s not enough to be customer-centric. You must also operate quickly. Speed matters in the biological world (ask the early bird that gets the worm), and increasingly, speed and agility are the factors that differentiate successful enterprises from those that lose the race.
Every enterprise needs to adapt to changing conditions in the environment (including customer needs, competition, changes in technology, and macroeconomic shifts). The faster it can do so, the better it can serve customers and beat the competition. Getting products and solutions to market faster requires faster decision-making, faster feedback, faster iterations, and faster experimentation—and each of these requires faster information flows. Friction in processes, systems, and technologies impede the flow of information and therefore slows decision-making.
Unfortunately, the speed of business change is inherently faster than the speed at which complex enterprise systems can adapt. When systems have data in incompatible formats, or when that data is of poor quality due to manual processes and conversions, making the data compatible adds another layer of friction. Friction comes from many sources, including out-of-date information, lost content, incorrect or poor quality data, disconnected processes, incorrect measures, inconsistent communications, excessive meetings, overcommunication, and undercommunication. These sources of friction become impediments that inexorably slow information flows.
The challenge is that this happens in myriad incremental ways that are difficult to pinpoint, hard to quantify, and challenging to remediate. In most cases, this friction is accepted as business as usual or as the nature of the beast—“that’s just the way things work.” Or leaders decide that it is too expensive to fix and that adding some people to deal with the issue is the most economical (short-term) solution. The problem is that these incremental friction points, which individually do not make sense to address, are never considered as a whole—or if they are, they become too difficult and disruptive (not to mention costly) to tackle.
AI projects can provide incremental value by addressing these friction points. As Tom Davenport points out in his book The AI Advantage, AI and cognitive technologies augment human work and provide incremental value in many areas that accumulate to transform the enterprise.
Since organizations operate on information flows, the leadership of the enterprise needs to invest in the things that smooth, speed, and improve the efficiency of those flows. The problem is knowing what to invest in and how to harvest the benefits of investments. When executed correctly and based on a solid ontology, investments in data and configuration of the infrastructure through which data flows can lead to enormous value. One implementation that I will describe led to a $50 million annual savings from a $1 million investment. Another digital transformation, the core of which was built on investments in data, data architecture, and technology infrastructure, led to an $8 billion increase in market value from a $25 million investment in the foundational principles that I will discuss throughout this book.
Things are accelerating as new entrants arrive that are “born digital”—like Airbnb in the lodging business, Tesla in the automotive business, Google in media, or Uber in transportation. Such businesses have the luxury of reinventing the end-to-end value chain and building integrated processes that speed the flow of information and data using a green field/ clean sheet approach. It’s a huge competitive advantage—like the speed that warm-blooded animals tapped during the evolution process to allow them to compete effectively with sluggish reptiles.
THE PROBLEMS THAT KEEP BUSINESSES FROM MOVING FASTER
Businesses know all of this. So why can’t they get out of their own way? Let’s review the three most common problems that stop corporate organisms from competing effectively in the economic