How do managers deal with the information age along with the changes bought about by technologies like the Internet of Things, 3D printing, automation and social media?
Management in the Data Age looks at some of the opportunities and risks that face those running businesses. It was originally prepared for a private corporate briefing in June 2015.
Some further background reading on the topic include the following links.
Having a relatively clean society and ethical business cultures should be a massive advantage. It’s best not to squander it.
Does being an ethical business pay off? Transparency International found in 2014 that New Zealand come in only second to Denmark in being the least perceived corrupt country in the world, while Australia comes in as tenth out of 174 countries.
Suzanne Snively, chair of the New Zealand branch of Transparency International, believes this is an opportunity for both countries and their businesses as emerging nations deal with reforming their institutions and management cultures as she told me today at the Open Source, Open Society conference in Wellington.
“Companies do better when they are not corrupt,” Snidely states. “Energy can be used in much more productive way when you don’t have the overhead of corruption.”
Having a relatively clean society and ethical business cultures should be a massive advantage. It’s best not to squander it.
The Internet of Things is proving to be a management challenge reports Microsoft
Exactly what benefits does the Internet of Things offer businesses? A survey of Australian businesses by Microsoft claims there are benefits but few companies have deployed the IoT in their operations as managers struggle to understand the technologies.
In the survey “Cut through: How the Internet of Things is sharpening Australia’s competitive edge” carried out by research company Telsyte, Microsoft found two thirds of businesses that deployed IoT technologies have achieved an average cost saving of 28 percent while half the businesses have improved efficiencies of around the same amount.
A poor take up rate
The devil however is in the details and most notable only a quarter of the 306 companies surveyed admitting to using IoT applications.
While the sample size is small, and the Australian business community has been relatively slow in adopting the IoT, the survey indicates managers see the value but are struggling to see how they can adopt the technologies in their organisations.
Although fewer than one in 20 organisations said they could not foresee any business benefit from IoT, an alarmingly high 48 per cent still have no plans to implement the technology.
This reluctance comes largely from a lack of resources and expertise with the top five reasons for not adopting the IoT being technology challenges, affordability, security concerns, lack of skills and no management support.
Lack of management support
Management’s lack of understanding and support for IoT solutions presents a risk for businesses as the next generation of industrial machinery – from cars to tractors – will have some connectivity built into it. A failure to understand the technologies built into equipment opens a range of operational and security risks for an organisation.
Another aspect about the implementation of the IoT that comes from this survey is exactly what are we talking about? Microsoft’s emphasis in this report was clearly on the Big Data analytics, something else that might confuse the discussion with management.
What’s clear from the Microsoft’s survey is companies do realise there are benefits from the IoT but managements are struggling to understand the technologies and how to implement them into their operations. This is an opportunity for the savvy integrator or reseller.
Is it now the turn of the CIO to go the way of the tea lady
Once every workplace had a tea lady; usually a happy friendly woman who cheefully dispensed tea, buscuits and office gossip around an organisation.
During the 1980s the company tea lady vanished as companies cut costs and changing workplaces made the role redundant, is it now the turn of the CIO to go the way of the tea lady?
Yesterday research company company Frost and Sullivan hosted in a lunch in Sydney outlining their views on the growth of cloud computing based upon their 2014 State Of The Cloud report.
The report itself had few surprises with a forecast of the cloud market growing 30% each year over the next five years, a statistic that won’t surprise many watching how users are moving away from desktop applications.
Shifting procurement
One of the key trends though is how cloud services change the procurement process and lock IT managers and Chief Information Officers out of decision making. As the report says;
Half of all organisations feel that the decision making process is shifting from that of the CIO and IT department to the individual business unit for implementation or updates of cloud applications such as HR, payroll, collaboration and conferencing.
While the report puts a positive spin on what it describes as the “evolving role of IT within organisations”, Mark Dougan – Frost & Sullivan’s Managing Director for Australia and New Zealand – mentioned that often the decision to adopt a cloud service were made by executive management and then the CIO was told to implement the technology.
This illustrates how CIOs’ already tenuous grip on being a senior management role has slipped. With the rise of cloud services, it’s become easier for executives to make choices without considering the technological consequences.
Probably the business that best illustrates this shift has been Salesforce where many corporations find they have dozens of subscriptions being charged to sales managers’ credit cards, much to the chagrin of company accountants and IT managers. Salesforce and similar businesses have driven the trend so far that many consulting firms predict marketing departments will control more technology spending than IT managers in the near future.
That shift predates the coining of the word ‘cloud’, the term “port 80 and a credit card” was used to describe the Salesforce model of sales people signing up to what was then described as Software As A Service (SaaS) earlier in the century.
The electricity and railway industries remain huge employers and are essential to modern business but most for most companies the products are taken for granted – few companies have a Chief Electricity Officer sitting on their executive team despite power being an essential service.
For those IT managers hoping for a senior c-level position or even a seat on the board, the move to the cloud is terrible news. Rather than getting the corner office, the CIO could be heading the way of the tea lady.
The performance of Apple and Microsoft in recent years show two very different management philosophies.
The stunning quarterly results of Apple announced yesterday compared to Microsoft’s indifferent performance illustrate how the fortunes of two different business cultures have changed.
Apple yesterday announced a spectacular result for its quarter finishing at the end of last year with revenues up 30%, profits by 38% and Earnings Per Share just short of fifty percent.
The announcement was an emphatic vindication for Tim Cook and his management team who made some big bets on the larger form factor iPhone 6 which paid off spectacularly with shipments growing 46% to 74.5 million and revenue reaching $51.2 billion, over two thirds of the company’s total sales.
One notable aspect of Apple’s success is the difference with Microsoft’s and this shows how different business cultures come in and out of fashion.
The Triumph of the MBA
For two decades Microsoft’s licensing business model was dominant and this confirmed the MBA view that companies should do everything they can to move design, research, manufacturing and distribution out of their operations – the virtual corporation where there was no inventory, few costs and even fewer risks was the ultimate aim of the modern manager at the turn of the century.
Microsoft encapsulated this philosophy with its licensing model, while the company made massive sales with huge margins – as it still does – all the business risks in the computer market were carried by resellers and equipment manufacturers. For many years the markets loved this.
Apple tinkered with the licensing model under John Sculley in the mid 1990s during Steve Jobs’ exile but was never really serious about giving away its hardware capabilities and in 2001 moved into retail with the opening of the first Apple Store.
Coupled with the App Store, Apple have come to control the entire customer journey from marketing, design, purchase and ongoing revenue after the product is bought.
King of the new Millennium
While the 1980s and 90s were the time of triumph for the Microsoft model, the 2000s have been good to Apple as shown by the revenue and profit figures.
Apple and Microsoft Revenues 2000-2014Apple and Microsoft Profits 2000-2014
The key inflection point in these charts is, of course, the iPhone’s release in 2007. Apple caught the wave of change as computer use switched from personal computers to smartphones and is now the dominant vendor.
For Microsoft the success of Apple is bittersweet; the company had a smartphone operating system in Windows CE but it was too early to the market and the devices vendors went to market with were, at best, substandard.
Microsoft’s failure with the smartphone was also echoed with tablet computers and exposed the licensing model’s reliance on vendors to supply and support decent products, even today Microsoft’s hardware partners struggle to release decent tablet systems.
Cloudy on the web
Another problem that exposed Microsoft’s weaknesses was the rise of the web where hardware and operating systems really did matter so much any more. Along with pushing out personal computer lifecycles it also had the consequence of allowing other systems into the marketplace, notably Linux and Google Android.
With OS X, Android and Linux systems no longer hampered with the compatibility issues that irritated non-Windows users in the 1990s the market was open to adopting those systems. While the PC market has remained quite loyal to Windows, although the Apple Macs are showing serious growth as well, Microsoft’s system has barely any marketshare in other device segments except servers which are also declining as business increasingly move to cloud services.
Apple have shown in the computing and smartphone business that controlling the hardware products is as important as supplying the software, a lesson that Microsoft now acknowledges with its restructure into a ‘Devices and Services’ company under former CEO Steve Ballmer.
Under current CEO Satya Nadella Microsoft is focusing on cloud services which also aren’t as profitable as its legacy operations but see it competing with companies like Amazon and Google who don’t boast the profits from their online operations that Apple makes from its hardware.
Microsoft aside, the lesson Apple gives the technology is pertinent for its competitors in the smartphone space as well; companies like Samsung, LG and the army of Chinese handset vendors are going to find their markets tough unless they can take control of their software development and distribution channels – relying on Google for Android and telcos to get their phones to customers leaves them exposed in similar ways to Microsoft’s partners in the last decade.
In the battle between business models, Apple is the current winner and shows throwing all of your business operations over the fence to partners and licensees is a risky strategy. How those lessons are applied in other sectors will test the limits of both management philosophies.
Business and governments around the world are appointing Chief Transformation, Digital Officers. Do these positions work?
As the scale of technological change facing organisations becomes apparent, managements are appointing Chief Digital Officers to deal with the adjustment. Is this a good idea or just window dressing?
Communications Minister Malcolm Turnbull said the Digital Transformation Office will be charged to co-ordinate the adoption of online services across agencies and state governments.
“The DTO will comprise a small team of developers, designers, researchers and content specialists working across government to develop and coordinate the delivery of digital services,” the Minister’s announcement stated. “The DTO will operate more like a start-up than a traditional government agency, focussing on end-user needs in developing digital services. ”
Minister Turnbull hopes to emulate the UK Office of the Chief Technology Officer which was launched with the intention of delivering streamlined sign ons, simplified government websites and easier access to online services in Britain; although the experience has not been a great success so far.
What’s notable about the UK experience is the CTO came with high level support within cabinet, which gave the agency a mandate within the public service to drive change.
A job without a budget
That the Australian CTO has no budget – its UK equivalent has over £58 million this year – indicates it will not have a similar mandate and will struggle to be little more than a letterhead.
When Digital Officer do have the support of senior executives and ministers, it’s possible to achieve substantial returns. Vivek Kundra, former Chief Information Officer in the Obama administration described to me in an interview two years ago how his office had created a dashboard to monitor government IT projects.
Kundra learned this lesson from his time as the US Government’s CIO where he built an IT Dashboard that gave projects a green, yellow or red light depending upon their status.
Some of these government projects were ten years late and way over budget, the dashboard gave the Obama administration the information required to identify and cut over $3 billion worth of poorly performing contracts in six months.
This is low hanging fruit that a well resourced group with the support of senior management can drive.
Looking beyond end users
A concern though with these CIO positions is they are only looking at part of the problem with the UK, US and Australian teams all focusing on end-users.
While no-one should discount the need for easy to use online services for customers or government users; digital transformation has far greater effects on private and public sector organisations with all aspects of business being dramatically changed.
The risk for CTOs focused on how well websites work is they may find the digital transformation within their organisations turns out to be the greater challenge.
Indeed it may well be the whole concept of Chief Transformation, or Digital, Officers is flawed as digital transformation is pervasive; it affects all aspect of business through HR and procurement to management itself.
Passing the buck
The great risk for organisations appointing a CTO or CDO is that other c-level executives may then believe those individuals are responsible for the effects of digital transformation on their divisions.
While Chief Digital, or Transformation, Officers can have an important role in keeping an organisation’s board or a government aware of the opportunities and challenges in a rapidly changing world, they can’t assume the responsibilities of adapting diverse businesses or government agencies to a digital economy.
Done well with proper resources and management buy in, a good CTO could genuinely transform a business and be a catalyst for change.
Regardless of the responsibilities a CTO or CDO assumes within an organisation, for the role to be effective the position needs the full support of senior management and adequate resources.
If a company or government wants to pay more than lip service to digital transformation then a poorly resourced figurehead is needed to drive change.
Links of the day include how jaywalking became a crime, where Chinese tourists go and a lost Mars lander found on Mars.
Where do Chinese tourist like to travel to? One of today’s links looks at where the modern PRC tourist likes to go. Other links include how jaywalking became a crime, Samsung’s attack on the low end Indian smartphone and how disguised Starbucks may be popping up in your suburb.
Kicking off today’s links is an examination of how Zappos’ CEO and founder Tony Hsieh is carrying out a daring experiment on the management structures of his company.
No-one can accuse Zappos’ founder Tony Hsieh of thinking inside the box, his experiment with new form of management called holacracy is another example of how he tries to do things differently. Whether it will be successful or not remains to be seen.
Vox tells of how cars took over our cities’ streets during the early Twentieth Century. It’s an interesting description of the political, social and economic forces at work as the effects of the automobile started to be felt by our communities.
“It was a heroic failure.” Britain’s Beagle space mission to Mars ended in mystery when the lander vanished just before Christmas 2002. Now it’s been found. I find this story quite touching.
Like McDonalds, Starbucks is facing structural changes in its market. One of the ways both companies are responding by launching experimental new stores. Some of which might be near you without you knowing.
Just as the car changed the Twentieth Century the smartphone may well be one of the critical technologies that shapes this era. Cheap phones in emerging markets are the equivalent of the Ford Model T a hundred years ago.
Samsung’s move is a response to the Chinese manufacturers who are dominating that market. That Samsung is using their own Tizen operating system rather than Android which most of the Chinese companies use is something worth watching.
As Chinese manufacturers look to emerging markets as their economic future, the country’s tourists are exploring the world. This article laments how those PRC travellers are ignoring London and the UK but also has some interesting observations about the destinations they prefer.
