F. Digital strategy Flashcards
what is disruptive technology?
instances where technology is used to fundamentally change and ‘disrupt’ the existing business model in an industry
transport: Uber taking on traditional taxi firms
accommodation: Airbnb
retail: Amazon, Alibaba
advertising: Facebook and Google
what are the two largest growth sectors for disruptive technology?
health services
financial services - Fintech, GS estimates that upstarts could steal up to $4.7trillion in annual revenue, and $470 billion in profit from established financial services companies
what is Zopa?
Fintexh loan company
links lenders and borrowers, without bank margins so lower fees
no physical branches so less overheads and operating costs
loans are unsecured but credit scores are available to lenders so that they can match lending rates to different credit scores
lenders can sell their loan if they want to cash in early
What is Betterment?
financial portfolio management platform
take away from financial advisors
use smartphone to get investment advice
what is a ‘born digital’ organisation?
founded recently with digital tech at forefront e.g. Uber, Deliveroo
what are the advantages fo Fintech?
- better use of data
- a frictionless customer experience using elements such as smartphone apps to provide a broad and efficient range of services
- more personalisation of products/services to individual customers
- lack of a physical presence
- access to cheap capital to fund growth
According to Accenture’s Technology Vision, how can management ensure that organisations survive digital disruption?
Internet of Me - users being places at the centre of digital experiences
Outcome economy - customers want outcomes rather than just products
the Platform (r)evolution - global platforms through cloud computing, mobile technology
the intelligent enterprise - use of data in a smart way
Workforce reimagined - people being used in a different way
what are the myths about digital transformation?
those organisations that are not digital already have missed their change
becoming a digital business is an administrative exercise that focuses on achieving operational efficiencies
digital transformation can be successfully achieved just by creating a digital business unit headed up by Chief Digital Officer
-needs to be top down and everyone buy in
what is AI?
an area of computer science that emphasises the creation of intelligent machines to work and react like human beings
designed for use in:
- voice recognition
- planning
- learning
- problem solving
what is machine learning?
developed through algorithms to detect patterns and learn how to make predictions from very large data sets
adapt to new data and experiences to improve their function over time
what are the 3 major types of machine learning?
supervised - human label input data and the algorithm finds the connection between input and output
unsupervised - the algorithm receives unlabelled data and infers relationship between input and output
reinforcement - the algorithm learns to perform a task by maximising rewards earned from actions it takes, ideal when there isnt alot of training data available
what are the 3 steps to how supervised learning works?
- a human labels every element of the input data and defines the output variable
- the algorithm is trained on the data to find the connection between the input variable and the output
- once training is complete- typically when the algorithm is sufficiently accurate in providing output data from input- then the algorithm is applied to new data
what are the 3 steps to using unsupervised learning?
- the algorithm receives unlabelled data: for example, a set of data describing customer journeys on a website
- the algorithm then infers some sort of structure on the data
- the algorithm identifies groups of data that exhibit similar behaviour e.g. clusters of customers of similar age that exhibit similar buying patterns
what are the 3 steps to using reinforcement learning?
- algorithm takes an action on the environment e.g. ti makes a trade in a financial portfolio
- it receives a reward if the action taken brings the machine a step closer to its objective e.g. return on investment chosen
- the algorithm optimises for the best series of actions by correcting itself over time e.g. if losses made, will do better next time
what is AlphaGo?
reinforcement learning helped the AI system AlphaGo defeat the world champion Ke Jie in the Ancient Chinese board game of Go
-played with human beings instead of online
How did JLR use intelligent vehicles?
introduced self-learning vehicles into its range of vehicles
system within the vehicle integrates with different passengers’ mobile devices and learns to recognise their individual behaviour and preferences
can then apply such understanding to adapt issues such as conform controls within the vehicle and the entertainment choices that are offered
How can AI contribute to improving finance and systems?
- ML to code accounting entries and improve on the accuracy of rules based approaches, enabling greater automation of processes
- improving fraud detection through more sophisticated, ML models of ‘normal’ activities and better prediction of fraudulent activities
- using ML-based predictive models to forecast revenues
- improving access to, and analysis of, unstructured data such as contracts and emails
what is cloud/mobile computing?
computing based on the internet
providers maintain software, applications, servers and services on the internet and make them available to authorised users
what are the benefits of cloud computing?
- store and share data
- on-demand self-service: users gain access as and when needed
- flexibility for users
- easier collaboration between users
- more competitive
- easier scaling
- reduced maintenance
- backups
- disaster recovery : faster and cheaper
- better security e.g. loss of hardware avoided
what are the risks of cloud/mobile computing?
- reliance on service provider e.g. security, keeping tech up to date, staying solvent
- regulatory risks: service provider must ensure compliance with data protection. Provider may be in different jurisdiction
- unauthorised access of business and customer data: possible hacking of service provider will impact all users. Also misuse by service provider staff
what are the cloud computing applications to finance
used in budgeting process
budget templates worked on simultaneously by many people without them having to be at the same location
what is IoT?
inter-connection via the internet of computing devices embedded in everyday objects, enabling them to send and receive data
according to DTI, 8bill devices globally, forecast to grow to 1T by 2030
What are intelligent refridgerators?
alert user for sell-by date of ingredients to reduce food waste
can identify when stock is about to run out
add milk to next order from supermarket automatically
what are the benefits of blackboxes?
work out cheaper for good drivers
give motor insurance companies more data
leads to more careful driving
what are smart meters?
heaters that turn on and off or reduce and increase according to demands
can be controlled from smartphone
overall energy consumption reduced
How can dairy farming use IoT?
trial smart collars attached to a herd
feeds back info to the farmer’s computer about the cow’s behaviour
2 issues affect cow’s profitability:
- illness costs industry around £100m
- cow’s ability to conceive
abnormal behaviour could then in turn lead to action being taken by farmer
How does UPS use IoT?
fitted fleet vehicles in the US with smart devices that tracked fuel consumption
identified that making left turns at traffic lights lead to increased amounts of idle time and therefore longer journey durations and fuel consumption
re-routed deliveries so as to avoid unnecessary left turns
saves 9m gallons of fuel and $31m
How does Vitality use IoT?
introduced a scheme where policyholders who took out health insurance with the company were given an Apple watch and had to download Vitality app
watch was ‘free’ provided they met the exercise target in a specified time
if target not reached, a contribution would be paid via direct debit to the insurance company
benefits:
- gave Vitality marketing edge in the insurance market
- increased number of members
- forced users to exercise thereby staying healthier and reducing the amount of health insurance claims
What is Big Data?
term for a collection of data which is so large that it becomes difficult to store and process using traditional databases and data processing applications
90% of the information in the world has been created in the last few years
what are examples of inputs that Big Data systems can include?
- social network traffic
- web server logs
- traffic flow information
- satellite imagery
- streamed audio content
- banking transactions
- web page histories and content
- government documentation
- GPS tracking
- telemetry from vehicle
- financial market data
What can the data from the Hybrid Fusion model, which generated 25GB of data per hour, be used for?
- computer model developed that projects CO2 emissions generated by the fleet of vehicles on roads worldwide for the next 50 years, helps balance fuel economy requirements and environmental considerations
- mathematical models have analysed millions of possible vehicle combinations to assist in the construction of a technology roadmap which has resulted in the development of new features such as Ford Auto Start-Stop
- Ford researchers have developed specific tools such as the Ford Fleet Purchase Planner, which analyses fleet customers’ needs and identifies their optimal vehicle choice
what are the features of Big Data?
volume - amount
velocity - speed and update
variety - structures and unstructured
veracity - reliability and accuracy
What are the benefits of Big Data?
driving innovation by reducing the time taken to answer key business questions and therefore make decisions
gaining competitive advantage by identifying trends or information that has not been identified by rivals
improving productivity by identifying waste and inefficiency, or identifying improvements to working procedures
How does UPS benefit from Big Data?
- over 15m minutes idling time were eliminated in one year, saving 103k gallons of fuel
- 1.7m miles of driving were also eliminated in the same year, saving 183k gallons of fuel
wha are the drawbacks of Big Data?
difficult to convert into useful information
lack of skills within the organisation
data security and data protection issues: breach of human rights and can be used to make judgements
what is blockchain technology?
decentralised, distributed and public digital ledger that is used to record transactions across many computers so that the record cannot be altered retroactively without alteration of all subsequent blocks and the consensus of all those who make up the network
added security in the digital era
BoE: technology that allows people who do not know eachother to trust a shared record of events
what is the main benefit of blockchain?
security
current IT systems are prone to being hacked and have little control over fully stopping it from happening if targeted
what are the key features of blockchain?
- transactions are recorded by all participants that makeup the overall chain, not just 2 parties
- when a transaction take place, ALL parties in the chain must agree to it for it to be accepted
- as new transactions take place, they form a block which gets added to the chain; the chain is never broken and so the transaction is permanently recorded and cannot be altered retrospectively
what is Bitcoin?
digital current, like Ethereum and Litecoin
no physical version: trades happen over the internet
decentralised
P2P payment network made up of users with Bitcoin account
stored in a wallet with an encrypted password
advantages:
- speed: no need for bank verification
- no prereqs for owning wallet
How can Bitcoins be acquired?
exchanging other currencies for bitcoins
- most common
- can be done using an exchange
bitcoin mining
- computer solves complex math problems, credited with coins
- ensures coins are generated at a consistent rate
what is the relevance of Blockchain technology to finance professionals?
provides clarity over ownership of assets and existence of obligations can dramatically improve efficiency
- reducing the costs of maintaining and reconciling ledgers
- providing absolute certainty over the ownership and history of assets
- helping accountants gain clarity over available resources
- freeing up resources to concentrate on planning and valuation, rather that record-keeping
what is data visualisation?
attempt to take data and help people to understand it better by presenting it in a visual context
patterns, trends, correlations and other relationships that might not be noticed in a narrative-type presentation can become clearer and more obvious when presented using some sort of data visualisation software
what are the common general types of data visualisation?
- charts
- tables
- graphs
- maps
- infographics
- dashboards
what are more specific examples of methods to visualise data?
- bubble clouds
- cartograms:map in which chosen mapping variable is substituted for land area
- heat maps: volume by location/events
- histograms
- radial trees:hierarchical relationships from central point
How can data visualisation help pharmaceutical companies?
can be used in the industry to compare gene sequence from multiple patients in real time
enables the pharmaceutical companies to analyse new trends and take better-informed decisions on drugs trials
helps them to modify their research methodologies as per the results of trials so far and therefore enables them to bring their drugs to market more quickly
what is 3D printing?
aka Additive Layer Manufacturing (ALM)
process whereby 3-dimensional solid objects are created from digital files
each item produced is created by laying down successive layers of materisl, each of which is a thinly-slices horizontal cross section of the final object
end product is gradually built up by repeatedly adding there cross sections
what are the real life applications for 3D printing?
Airbus Group uses 3D printers for tooling, prototyping and making parts for test flights and aircraft in commercial service
more than 1000 of the plan’e’s components are no 3D-printed
reducing manufacturing waste and making aircrafts lighter, resulting in greater fuel efficiency and less harmful to the environment
what are the benefits of 3D printing?
reducing waste- much lower wastage of raw materials compared to trad method
eliminate transport costs - goods are made on-site
less environmental impact - less travel miles means lower carbon emissions
shorter lead times - components can be made in-house to specific requirements
increased profitability - no supplier profits as part of overall cost
social benefits - in certain sectors of industry e.g. housing
what are the drawbacks of 3D printing?
cost - 3D printers can be expensive
quality concerns - over strength and reliability of the product, no universal standard
lack of skills - difficult to recruit/train staff with necessary skills
legal concerns - 3D printing may enable legal ‘theft’ of intellectual property
environmental impact - over energy used to operate 3D printers and reliance on plastic
ethical concerns - over lack of proper testing e.g. pharmaceuticals industry
what is process automation?
also known as Robotic, Digital or Business Process Automation
the use of digital technology to perform a process or processes to accomplish a workflow or function
put it another way, processes that used to be done manually become automated
what are the benefits of process automation?
productivity - mundane tasks can be automated leaving people to work on more value-adding tasks
accuracy - risk of human error eliminated
consistency - no variation in quality/standard of output
audit trail - complete log kept of all tasks performed
flexibility - better positioned to deal with variations in demand
staff retention - eliminating mundane activities leads to more motivated staff
availability - automation can work 24/7, 265
cost saving - significant cost savings can be produced through automation, as certain roles can become redundant in the organisation
how can process automation be used in finance departments?
automate month end process:
- collate template
- calculate variances
- commentary provided with no human interaction
what are the challenges of process automation?
lack of integration in IT - investment required to align automated processes with existing IT systems
lack of standardisation - in some industries, bespoke output is required
reluctance to reduce headcount - staff resistance if they feel job security is threatened
cost - initial investment cost may be expensive
lack of skills - may be difficult to recruit/train staff with necessary skills
what are the responsibilities of leaders?
need to demonstrate a number of abilities if they are to successfully adopt a digital strategy or to survive digital disruption within their organisation’s industry:
inspirational leadership - inspire confidence that digitisation is the right strategy
competitive edge - persuade people to innovate and learn from failure
establish a strategic direction - in a different way to which the organisation has historically e.g. shorter planning horizons
influence external parties e.g. providers of finance
collaboration - as part of a wider ecosystem
business judgement - adopt a new business model
execution - e.g. setting of different targets and KPIs
building talent - suitable recruitment/training
what is the economics of digitisation?
the ability to earn revenue should be seen in a broad context: not simply a function of volume x price. Organisations should be willing to adapt and recognise new ways in which sales can be recorded
what nine revenue models are possibilities for an organisation?
transaction - a traditional approach, whereby goods are sold from one party to another
capacity leading - the organisation has a form of resource, such as machine time, asset availability of human time, and supplies such capacity to customer
licensing - another traditional source of income
subscription - buy for a period of time without extended tie-in e.g. can cancel Netflix payments at any time
commission - for matching sellers to customers eg. Amazon lets 3rd parties sell via its website
advertising .g. BT generates advertising revenue via its email platform
trading - use of technology to buy when prices are low and sell when high
donation
subsidies e.g. fo public sector organisations
How has Michelin adapted its business model?
from being a manufacturer and seller of tangible goods to selling outcomes
offers a package that has branded EFFIFUEL, which includes sophisticated telematics, training in how to drive efficiently, and a tyre management system
claims that purchasing such a service can save significant costs in operating trucks and also in terms of carbon dioxide emissions
what is the real advantage of the ecosystem?
able to deliver greater value than the individual participants acting alone
what is a digital ecosystem?
should consider broader ecosystem if customer expectations are to be satisfied
business leader must consider each participant in the ecosystem and how it impacts on their own organisation’s strategy
what are the 3 key questions with regards to each participant?
- the precise role of the participant e.g. unique software skills, a distribution function, cloud computing capacity
- the reach of each participant e.g. can it operate globally or only locally? Can it deal in B2C transactions or is it simply limited to B2B?
- the capability or key value proposition- what is the key value that each participant is able to deliver?
How did Nest develop a digital ecosystem?
US-based provider of home automation products, from thermostat to cameras to smoke alarms
created a new technology platform that offers homeowners a unique experience because it has correctly brought in other companies such as Mercedes Benz and LG to bring capabilities that Nest itself does not possess
What are the key factors in the digital revolution?
mobile and internet penetration - mobile phone ownership and access to the internet, especially in emerging economies
growth in the number of connected devices - enabling real-time customisation of products and services
data analytics and the cloud - increased need for data analytics
user - interfaces - the ways in which humans interact with machines e.g. through voice recognition produces efficiencies
global accessibility - rise in living standards increases connectivity
increasing urbanisation - more people living in urban rather than rural areas
what does a digital customer want according to the WEF/Accenture analysis?
contextualised interactions - product or service tailored to their own needs
seamless experience across channels - from research to purchase to payment to delivery
anytime, anywhere - access to real time information
great service - there is less customer loyalty these days, poor service once can lose future trade
self-service - customer will invest time to get exactly what they want
transparency - of both product information and how personal data will be used
peer review and advocacy - important attached to previous reviews
How can organisations keep up with, or ahead of, customer expectations?
design thinking - designing many experiences for one customer
experiential pilots - continuous innovation and development of prototypes, with monitoring of customer reactions
prototyping - being prepared to release initial versions of a product before it is finalised, and incorporating feedback into second version
brand atomization - offer products/services on both own platforms and those of others
what is digital traction metrics?
traditional financial measures may be difficult to use for digital initiative
management team will need to consider how to adapt their performance measurement mix and look for alternative measures to be included
what are the 3 areas which combine to form digital traction metrics?
SCALE- the number of people showing interest in a product e.g. the number of visitors
ACTIVITY USAGE - the frequency with which a user interacts with the organisation e.g. daily active users (DAU)
ENGAGEMENT - the degree to which the user has engaged with the organisation e.g. net promoter score (NPS)
what are the financial metrics that measure the financial impact of attracting and keeping customers?
Cost to acquire a typical customer (CAC) - sales & marketing expenditure / number of new customers won
Lifetime value of a typical customer (LTV) - average monthly recurring revenue x average customer lifetime
between LTV and CAC, which must be greater for an organisation to be profitable? what ratios should be looked at?
LTV> CAC
LTV:CAC - insight into profitability and cash flow
Month to recover CAC - CAC/average monthly recurring revenue i.e. payback period
Which 2 features have become apparent with regards to employing staff?
- much greater transparency about employment opportunities for those seeking a new challenge, with applicants becoming more and more informed thanks to increased levels of ‘inside information’. This has come about because of the presence of agencies and peer reviews
- the competition for digital talent is increasing; there is a global skills shortage in this area to cope with the increasing demand
What do senior leaders need to focus on to make digital strategy possible?
- Attract and retain talent - supply of digital skills is less than demand, so it is a highly competitive market
- Become an employer of choice - understand what ‘millennials’ want from a job/career
- Create a workforce with digital skills - appreciate the role of the broader ecosystem (universities, colleges, schools have a role to play)
- Bring leadership to the digital age - be prepared to adapt leadership styles and organisational structures
- Foster a digital culture - appreciate what makes a digital culture different e.g. a strong mission statement and a clear sense of purpose
How does WEF propose that an organisation becomes an employer of choice in the digital era?
- Formulate a long-term working strategy for millennials - identify the relevant positions that employee will occupy during their career with the company and then create suitable promotional opportunities
- Work with staff to formulate company values together - this means listening to, and taking note of, the aspirations of those working for the business. Senior management should do this in person, not just as a communication sent company-wide
- Empower the workforce - and give them incentives to perform e.g. via long term company share plans, project leadership responsibilities or training opportunities
- Build workspaces that attract digital talent - that related to the physical layout and appearance of the working environment. Flexibility and a dynamic appearance i the workplace inspires creativity and collaboration Thought should also be given to allowing staff to work from home on occasions and flexible working hours
- Create policies that support collaboration and knowledge-sharing tools - this can include encouraging staff to use platforms such as Facebook@work, Yammer or Sprinklr, or hardware preferences such as using your own laptop in the workplace
How did Zappos become an employer of the choice?
online clothing retailer
strong corporate culture: task-oriented management structure, employees operate with customers how they want, can use Zappos twitter how they want, can be creative
What did 3/4 of CEOS cite as a threat to their business in a PWC survey?
skills shortages
81% claimed to be looking for a broader range of skills when recruiting
What roles might now be relevant to these aspects of an organisation?\
commercial technology web marketing facilitation HR
commercial
- E-business manager
- digital account manager
- digital product manager
- fraud manager
technology
- scrum master
- data scientist
- Chief Data Officer
- Data protection officer
web
- web project manager
- web designer
- webmaster
- developer
marketing
- digital marketing professional
- digital copywriters
- media acquisition manager
- user experience designer
facilitation
- service design thinker
- content curator
- editorial manager
- Chief Listening Officer
HR
- design learning manager
- digital work experience officer
- employer brand director
How does Lockhead Martin create a workforce with digital skills?
American aerospace and defence company
has a programme whereby its engineers, scientists and IT professionals volunteer to meet with schoolchildren between 9-12 with a view to building their interest and confidence in science and technology
sustained throughout school and college
How can organisations focus on making in-house training a critical activity within their talent management programme?
develop required competencies within the workforce-consider current skills and those needed, create training strategies that are adapted to these, look ahead and question where high value work is likely to be in say 3 years’ time, train accordingly
mine your own organisation for hidden talent -this will incorporate assessing employee’s abilities and matching these to skills required
bring new skills into the organisation - can be done by hiring competent staff, running exchange programmes and sharing insight. Rotating staff internally with other digital companies and sharing insights is a common practice within tech giants such as Google and Amazon
what is the traditional approach to leadership in an organisation?
hierarchical and autocratic
-clearly defined and work on a top-down basis
What was Steve Jobs’ philosophy on leadership in the digital age?
We run Apple like a startup. We always let ideas win arguments, not hierarchies. Otherwise, your best employees won’t stay. Collaboration, discipline and trust are vital.
According to the WEF, which 6 roles should CEOs fulfil in the digital age?
Creator of vision and mission - the company’s mission statement should be expanded to encompass a transformatino purpose
Strategic planner - this is nothing new, but the focus will change. There should be a move from 5 year to 1 year planning cycles, driven by data and analysis. Greater focus should be on experimentation rather than long-term planning
Driver of information-based business models -find and develop new products that are (fully) data and information based for scalability
Enabler of the shift to on-demand operating models - the CEO should champion the benefit that can be gained from communities in the workplace, crowdsourcing and staff on demand
Innovation promoter
Operational excellence driver - identify ways in which automation can be introduced into processes in all departments of the organisation
What factors distinguish digital culture from others?
- having a strong mission statement and a clear sense of purpose
- lean business structures, with small, cross-functional teams as opposed to individual divisions working as separate silos
- a diverse workforce with good digital skills
what 4 areas can leaders focus on to move towards a digital culture?
Communication - encourage digital communication, shouldn’t replace F2F, should be honest and open style: social media, blogs, forums, webcasts and videos, shared mailboxes
Journey management - the leadership team needs to be at the forefront. To take effect at operational level, middle mgmt need to be encouraged to think in different ways.Creativity neeeds to be released, and training should be provided so that middle managers recognise how to achieve this. Further support can come from implementing the right HR policies, rules etc
Make change visible - visual aids such as diagrams and charts on office walls, highlighting the ‘journey’ that the business in undertaking
Continuous change monitoring - using tools such as feedback surveys and performance monitoring to highlight gains made
