Savvy shoppers wait in anticipation, while Australian retailers are gearing up for the onslaught. Amazon’s arrival is imminent.
Digital transformation is ultimately a cultural challenge that requires marketing and IT functions to unite and disrupt the status quo in order to create customer-led innovation.
That’s the view of a panel of marketing, IT and operational leaders, who took to the stage at the first CMO-CIO Exchange event in New Zealand to debate what it takes to innovate in the face of digital disruption.
One of the smart things Westpac New Zealand has done is bring a bunch of businesses together to achieve alignment, GM of marketing, product and transformation, Andy Kerr, said.
“What I’ve seen in working in large and more siloed organisations is that capacity to get cut through becomes a problem,” he told attendees. “With me sitting two desks away from the CIO, the capacity for me to really influence end-to-end, with his support, and to move quickly, is something we’re seeing a tremendous lift from.
“When I arrived into the role 14 months ago, I was preparing for a bit of trench warfare with the technology team to drive nimbleness. Instead, I found a CIO who was arguably more aggressive on the transformation journey. That, collectively, is letting us not just transform our businesses, but also has a broader impact on the overall bank.”
A big leap Westpac’s CIO has taken is to drive an Agile transformation through the organisation, Kerr said. “I think if we didn’t have that happening in parallel, our capacity to move as nimbly as we need to just wouldn’t be there,” he continued.
“The combination of bringing marketing, digital, data and product all together, then having an IT team working in lockstep with us, is showing benefits already and is setting us up for success for the next 2-3 years.”
The emphasis at Microsoft New Zealand in the face of digital disruption is also about changing organisational culture, chief marketing and operations director, Frazer Scott, said.
“As the CIOs in the room will know, the conversations we’re having through all of our sales organisations is how do you talk to the chief HR officer, the CMO and the sales directors,” he said. “That is where transformation is happening, but that needs to be a joint relationship. A lot of my job is around how to change that culture internally.”
Looking outside the square
Tackling digital transformation then requires an ability to look outside the square for disruptive opportunities that can be harnessed – even if they present a risk to your business model, according to Orion Health executive vice-president, integration, Dhaya Sivakumar.
He pointed to his first IT role in the travel industry, where his team created an ecommerce booking engine. As a travel retailer with 400 physical agency locations, there was no appetite to embrace the new digital channel and the project was shut down.
“So I left, joined a competitor, and we brought in an online booking company to New Zealand. My old company went bankrupt three years later, and we bought them,” he said.
“A lot of people are so focused on what they’re doing day-to-day, they lose sight of what’s actually going on in the background and around them. I don’t think it’s something you can teach, it has to be in the company blood. Everyone in the business has to be a CEO, not rely on people telling you what to do. You need to look outside the square. And that’s just not happening enough.”
Sivakumar is now hoping to bring this disruptive thinking to the way the healthcare software provider operates.
“I have a controversial view that we shouldn’t be doing healthcare software, I think we should let the software be developed by startups and other vendors, and we at Orion should provide the platform for that,” he said. “We launched three new third-party developers on our platform in the last month, and it’s dawning on customers that we don’t need to partner with behemoth US software vendors to do things, we just buy an open platform and go from there. It will do far more for the sustainability of healthcare.”
Cigna International Markets head of business innovation, Mike Grenfell, agreed fostering the right collaboration and culture for innovative thinking is challenging. While the health insurance industry Cigna operates in is ripe for disruption, the emphasis has historically been on achieving incremental efficiency internally and reducing costs, rather than being customer led, he said.
To help, Grenfell suggested looking at innovation across different tiers. “There is innovation happening on the ground floor, with people talking to and dealing with customers every day, then there’s business-model innovation,” he said. “You need to have that deliberate focus on business model innovation, which is where I’m looking. But it’s a challenge.”
Putting the customer problem at the centre
The customer has to be the glue uniting innovation efforts, Grenfell said. “Whether it’s when we think about products, which are moving towards experiences, or whether it’s digital transformation, the customer has to be at the centre,” he said.
“The way we’re starting to thinking about that in product development is by taking a more design thinking approach and a real understanding of what the customer is going through, drawing out customer insights, then rapidly testing those concepts with customers.”
A recent example of digital innovation at Westpac is the CashNav app, which stemmed from an engagement issue with under-30-year old consumers.
“The core problem these consumers wanted help solving is the fear of missing out,” Kerr explained. “They had little enough money to get from one pay cheque to the next, and there were things they really wanted to do, such as going to rock concerts, or going on holiday, they were unable to do because they didn’t have enough money.”
Banks typically solved that by selling credit cards or overdrafts, which in turn generate revenue. But millennials were resistant to any form of debt, Kerr said. “We realised if we could help them easily see where their money was going, we could make small adjustments day to day, so they had money at the end of the month,” he said.
Rather than build a solution itself, Westpac partnered with a New York based startup, Moven, and launched the app in under five months. Kerr said it's meeting its target of engaging with customers under 30, and said CashNav users are more frequent banking app users.
“The traditional way of solving banking problems would have led us down a path in our minds that would have solved the problem, and possibly generated more revenue in the near term. But I guarantee you, we’ll have customers for longer and longer-term sources and streams of revenue from much happier customers going about things the way we have,” he said.
It was cultural change that made this happen, Kerr argued. “Having a CEO who was very supportive of doing something different, and both myself and the CIO determined to have a different crack at things than how we’d done it before, is incredibly powerful,” he added. “It’s not very hard when you have two senior people wanting to give it a go, to spark that excitement in the broader organisation.”
Another thing that helped Westpac achieve disruptive product change is embracing what Kerr called “secret squirrel skunkworks”. This distinct team is plugged into the mainstream business every month or so and challenges general thinking around how to solve problems.
“It’s a great catalyst for flushing out who’s willing to transform,” he said. “My expectation over the next 12-24 months is we’ll see more and more of that thinking as we take ideas from proof of concept and into full production.”
How to be innovative
Grenfell recommended organisations get the right measurements in place for innovation. “If you aren’t taking a strategic opportunity, or you see a particular innovation opportunity, are there are ways that you can articulate and prove the assumptions underpinning that opportunity, prior to getting to far down the path?” he asked.
“Then we you do head down that path, you need to ensure you have the right measurements in place. That could be retention, engagement rather than revenue generation.”
Sivakumar’s advice for fostering innovation is to “have your team’s back”. “If you can figure out what the end customer actually wants and try to invent the system that will get you there, you’re on to a winner. It shouldn’t be about looking after the IT and infrastructure, it’s about what should your business be doing,” he said.
Scott agreed the CIOs successfully championing change are the ones thinking about the customer’s customers. “The great CIOs are thinking about what the customers are wanting, not what the internal processes are,” he said. “That’s where innovation and change can happen.”
As a final piece of advice, Grenfell encouraged marketers and IT leaders to think big and act small.
“My own personal experience of thinking big and acting big comes with challenges, but if you take small steps, learn, prove and build, you’ll get there,” he said.