Companies are increasingly launching digital initiatives to expand or build digital capabilities aimed at business efficiency or top-line revenue growth. And as digital transformation success stories emerge, the trend is gaining steam.
IDC estimates that all 40 percent of all technology spending will go toward digital transformations, with enterprises spending in excess of $2 trillion in 2019. “IT leaders who have not fundamentally changed their organizations to focus on digital will find that their business colleagues will turn to outsourcing to handle development needs,” says Joseph Pucciarelli, an IT executive adviser at IDC.
Going digital on such a broad scale requires CIOs to tackle change management and other challenges. Committing to digital often requires CIOs to partner with business peers more closely to achieve desired business outcomes — a striking change in its own right.
Indeed, a Gartner survey shows that 95 percent of 3,160 CIOs expect their jobs to change or be remixed due to digitalization. Respondents believe that the two biggest transformations in the CIO role will be the need to become a change leader, followed by increased and broader responsibilities and capabilities. Moreover, technology trends such as cybersecurity and artificial intelligence (AI) will significantly change how CIOs do their jobs in the near future.
The stakes are high. Leading digital companies generate better gross margins, better earnings and better net income than organizations in the bottom quarter of digital adopters, according to Harvard Business School. Leaders post a three-year average gross margin of 55 percent, compared to just 37 percent for digital laggards.
CIO.com checked in on 16 digital transformations underway at some of the world’s leading brands. Following are snapshots of their digital initiatives in progress.
Armstrong World Industries
When CIO Dawn Kirchner-King joined Armstrong World Industries in 2015, IT was an order-taking organization for the 150-year-old manufacturer of ceilings. IT was also a "black-hole cost center," in which business leaders didn’t know what they were getting for their money, Kirchner-King tells CIO.com.
Kirchner-King quickly adopted lean and agile principles espoused by Armstrong's manufacturing teams. She convened daily stand-up meetings with IT staff and business process leaders. The meetings provided a "sense of urgency we had not had before," and transparency for the business, who could see how their money was being spent, she says. This, in turn, made the business more comfortable in communicating their critical needs.
"With this transparency came a level of trust in what we’re doing," Kirchner-King says.
As for the technical projects, Kirchner-King upgraded ERP financial applications to the latest version of SAP, improved and extended a Salesforce.com CRM suite to Asia and Europe and migrated travel management to Concur. Customers will also note a new website. "Agile really brought speed and urgency to those projects," Kirchner-King says.
Kirchner-King says she re-allocated savings associated with the move to lean and agile to cybersecurity and other critical projects. IT is now exploring analytics to help Armstrong anticipate quality issues with its manufacturing processes, which generate 5,000 data points on details such as ceiling tile quality and thickness.
Putnam Investments CIO Sumedh Mehta says that CEO Bob Reynolds asked him for a business plan for technology that could help improve performance for the provider of mutual funds, institutional investment strategies and retirement services.
Mehta encouraged his business partners to ask for solutions they need, such as tools they could use to research and generate financial insights for Putnam's financial advisors. Mehta added "Facebook-like" collaboration tools to foster communication between IT and the business, as well as Google-like enterprise search capabilities and other tools to better automate workflow.
Projects underway include retiring legacy applications, migrating applications to the cloud and investments in data analytics. Putnam also established a data science center of excellence to explore machine learning technologies that help generate business insights for and about clients. Underpinning all of these moves is a broader shift toward agile in which IT and business build software in two-week cycles.
Mehta says the efforts have stimulated interest from business partners who are willing to embrace new ways of working. "By creating this level of change, we had a stronger engagement with our business folks because they were hungry to see what we worked on the night before," Mehta tells CIO.com. "Companies that embrace that change will become the digital companies of the future."
When Mark Schwartz took the helm as CIO of the U.S. Citizenship and Immigration Service (USCIS) in 2010, he revamped IT around agile, DevOps and human-centered design principles.
Eschewing the government’s one-contractor-to-rule-them-all model, Schwartz brought in vendors to compete for UCSIS’ business, a model he called Flexible Agile Development Services (FADS). High performers were permitted to add more teams, says Schwartz, who counted contractors' ability to collaborate with other vendors as part of the assessment criteria.
"The results were phenomenal," Schwartz says, adding that the teams embraced the challenge and shipped code more quickly. Schwartz also moved significant portions of the agency's IT systems to Amazon Web Services, including the organization's E-Verify application. "We went cloud-first on everything," says Schwartz, who in late 2017 joined AWS as an enterprise strategist.
Schwartz says he hopes USCIS and other government agencies institutionalize best practices so that tech "SWAT teams" don't have to come in from Silicon Valley to save the day, as so many did in 2014 when health care exchanges failed. "We need agencies to try to do the right thing and share best practices and I hope that continues with other agencies trying it," Schwartz says.
If you've ever wondered what digital transformation looks like at a telecommunications carrier, look no further than Sprint. The telco, under pressure from large rivals such as Verizon and AT&T and in merger talks with T-Mobile, is reinvesting in technology after years of significant cost reduction, says CIO Scott Rice, who is leading the charge. The focus is largely around analyzing data to improve the customer experience.
Sprint is using Elastic Stack open-source software to churn through 50 terabytes of data generated by logs, databases, emails and other sources to gauge the performance of Sprint.com. That data helps IT staff determine where glitches are impeding Sprint’s ability to facilitate transactions, ranging from basic browsing, to phone purchases, to upgrades consumers are trying to complete online. Analyzing bugs and other delays helps Sprint determine when and why a customer is abandoning a transaction. Previously, each application team monitored its own software performance, creating large data silos that couldn't be leveraged to bolster performance, Rice says. “It’s a redesigned [customer] journey based on data,” Rice adds.
Sprint has also created a Hadoop-based data lake to analyze customer data, in an effort to improve the way it recommends products to consumers. For example, a 10-year user of Android phones will get Android phone offers. "It's about building a breadth of information about you and your relationship with us,” Rice says. Sprint’s transformation is continuing across all aspects of the business and the “IT organization is right in the middle of every transformation project," Rice says, adding that he is moving most of the organization to agile development conducted in small, self-directed teams to improve software delivery.
Town of Cary, N.C.
You might not associate the term “digital transformation” with a municipality but Town of Cary, N.C., CIO Nicole Raimundo is trying to create a slice of Silicon Valley in the south. She’s eliminating more than 100 disparate legacy applications the town uses to operate, including work orders, permits and onboarding, in favor of Salesforce.com. “I embarked on a platform strategy that would enable us to very quickly get quick wins,” Raimundo tells CIO.com. The platform, which includes field service, IT service management, marketing and collaboration tools, is intended to help Raimundo get a 360-degree view of Cary’s citizens, including utilities payments, parks and recreation class registration and other details.
Raimundo and her staff of 30 also built a “skill,” essentially a small app for Amazon Echo that will allow citizens to start the process of opening up work orders and other tools without using the phone to initiate such business processes. And, recognizing that people increasingly wish to facilitate transactions through messaging tools, she is also exploring the use of chatbots to let citizens initiate processes with town departments through their phones. “Our goal is to meet our citizens where they are,” she says. Also afoot: internet of things, including smart lighting, smart parking and smart recycling on the town’s municipal campus, which she says serves as a sort of innovation lab for emerging digital tools.
As part of this big culture shift, Raimundo has also created open workspaces and has employed agile and design thinking processes to propel minimum viable products. The Town of Cary has also hosted hackathons, ideally to lure talent from the local Research Triangle Park, which includes Red Hat, Cisco Systems, IBM, Microsoft and other top tech vendors. “Those are drivers to bring in the talent we want,” she says.
CIO Nicholas Colisto has his hands full at Xylem. The maker of water management solutions includes five business units that have added several disparate systems over time. “The business was having trouble making [technology] decisions because they were so fragmented,” Colisto says.
Colisto’s staff has spent the past several years consolidating legacy IT systems in favor of a single platform focused on fostering customer engagement, operational efficiency and growth. The Xylem Integrated System (XIS), or Xylem One, as it’s also known, leverages social, mobile, IoT, analytics and other tools in a service-oriented architecture to help connect employees with customers. XIS helped the company generate over $30 million of net value in 2016. “We created a business operating platform,” Colisto says.
In 2018, IT will continue to execute initiatives across all priorities, but there will be more emphasis on business simplification efforts to better establish a continuous improvement culture, Colisto says. This will include a Global Business Services (GBS) unit designed to provide a new service delivery model and roadmap for savings through process improvements, standard technology platforms and robotic process automation (RPA).
When CIO Marty Boos joined StubHub five-plus years ago the ticket retailer’s infrastructure was struggling to handle the sheer volume of a business that processes thousands of ticket transactions daily for concerts and sporting events. Leveraging Linux servers and technology from VMware, Akamai and Oracle, Boos built a private cloud that scales elastically. To better support global transactions in the wake of StubHub’s purchase of Ticketbis, Boos is close to picking a public cloud vendor to process payments locally in 44 countries worldwide. “We’re going to use that to get the transaction closer to the consumer,” Boos says.
The private but soon-to-be hybrid cloud supports several customer-facing initiatives. With more than 50 percent of StubHub’s traffic funneling in from mobile devices, Boos’ team is enabling sellers to use their phone to take a picture of tickets and post them online. The IT department is also working with business development teams to add music and other content to reimagine StubHub.com as more of a destination website, and mulling how to enable groups of Facebook friends to purchase and pay each other for tickets. “A lot of what we’re doing is making discovery and planning processes easier for customers,” Boos says.
Frank Olszewksi is preparing for the day when the construction industry finds itself “Uber-ized” and “Airbnb-ed” by digital trends in service delivery. To prepare for that day the HD Supply CTO has shifted a virtualized and software-defined data center into a co-location facility (so he doesn’t have to manage data centers) where the hypervisors and container technologies are programmable. That is, Olszewski’s engineers can shift, spin up and wind down compute resources by clicking a few buttons.
Olszewski says that this construct, combined with customer-facing mobile technologies will prepare HD Supply’s maintenance staff and field service agents to take pictures of parts with their smartphones, which query the company’s back-end systems to find out what fulfillment center they are located in. Ideally, this will enable HD Supply to provide same-day delivery to its customers. In the future, Olszewksi says that HD Supply may rent others’ distribution centers “Airbnb” style, as needed. “I need to be ready to handle these workloads, six or 12 months from now,” Olszewski says. “We will test, investigate and play with a few things.”
At JetBlue, CIO Eash Sundaram has deployed high-speed internet and streaming, mobile payments, and other tools to improve passengers’ experiences. Earlier this year the company launched JetBlue Technology Ventures (JTV) to invest in startups seeking to bring to the travel market machine learning and analytics as well as new approaches to customer service. Think of it as another channel for innovation. "If you just pile everything into the mothership, things don't move as fast as you want them to move," says Sundaram, who has also set his sights on near field communication as a replacement for self-service kiosks and check-in desks.
For a deeper look at JetBlue’s digital transformation, see: “JetBlue CIO drives innovation through IT’s ‘toolkit’.”
Domino’s Pizza has incorporated capabilities to allow consumers to place orders from any computing device. The company's AnyWhere platform allows you to place orders through smartphones, smartwatches and smart TVs, by entering orders into the Domino’s website, and by tweeting and texting emojis. “Choice drives our whole mobile and digital platform,” Domino’s CIO Kevin Vasconi tells CIO.com. “Millennials love that.” Domino's current challenge? Getting Dom, its voice-activated virtual assistant, to understand and facilitate all of the different ways people order food through speech.
For more about Domino’s digital transformation, see “Why Dominos' virtual assistant struggles to understand your orders.”
Target's digital journey has suffered through its fits and starts and a devastating data breach in 2013 didn't help matters. To help jumpstart its digital transformation, the retailer hired CIO Mike McNamara from Tesco, where he had led several digital initiatives for the U.K. grocery chain. McNamara spent much of 2016 flipping the software development model from outsourced to insourced and spearheading custom software development, including new supply-chain applications to better align inventory availability with consumer demands.
Check out “Target CIO adds custom apps, fresh talent to fortify supply chain” for more about Target’s digital transformation.
Like Target, Wal-Mart has been refashioning its software stack as a custom platform, which includes a new search engine and several cloud applications. Based on OpenStack, Wal-Mart's new ecommerce platform is designed to help the retailer compete better with the OpenStack cloud platform. In fact, open source is a huge part of Wal-Mart's digital transformation. The group earlier this year launched OneOps, a platform that lets programmers test and switch among different cloud providers, a crucial benefit as companies embrace hybrid cloud models.
For more on Wal-Mart’s digital transformation journey, see: “How Wal-Mart enables ‘innersource’ with GitHub.”
Capital One has built a huge banking and credit card business thanks to solid customer service, with a major assist from digital capabilities. Its mobile banking app was among the first to support Apple's TouchID biometric software. In 2016, the bank was the first to enable voice-activated financial service transactions via Amazon.com's Alexa virtual assistant. Now CIO Rob Alexander is overseeing a major shift to devops to facilitate faster software creation. “Winners in banking are going to be the ones that recognize that technology is really going to play a central role in how consumers want to bank in the future,” Alexander tells CIO.com. “We’ve got to be great at building software.”
Check out “Capital One shifts to DevOps to keep pace with customers” for an inside look at Capital One’s digital transformation.
Pharmaceutical retailers are rarely mistaken for digital innovators. CVS Health is trying to change that by consolidating its websites and mobile applications. It later hired CDO Brian Tilzer to lead the company's digital strategy but rather than whine and lament what many in his position view as a threat, CVS CIO Stephen Gold welcomed the addition to the executive suite. To that end, Tilzer and Gold opened a digital innovation lab in Boston in 2015. Early projects, including digital prescription and insurance card scanning and integration with Apple Watch, have come to fruition. The company also integrated technology from startup Curbside into a mobile app that lets shoppers order and pick up products in front of a CVS store. Gold says the innovation team’s remit is to fail fast. “Part of the output of innovating is going to be things that don’t work and that’s fine as long as you discover that early in the process as opposed to late in the process,” Gold says.
For more about CVS’ digital transformation journey, see “Customers' digital behavior drives CIOs to partner with CDOs, CMOs.”
CVS’ chief rival Walgreens has been steadily transforming its business as well, with CIO Abhi Dhar assuming the reins of the company’s digital strategy in 2015. With what he describes as a “maniancal focus on customers,” Dhar has redesigned the company’s mobile app to allow consumers to manage their medication schedules from their Apple Watches and enabled Balance Rewards members to earn and redeem points using Apple Pay.
Check out “Walgreens CIO starts with the customer and works backward” for more on Walgreens’ digital transformation.
Subway’s transformation is only in its infancy but CIO Carman Wenkoff is leaving little to chance. He’s hiring more than 150 technology, marketing and operational professionals to help overhaul the company’s mobile app and redesign the sandwich chain’s stores for the future, including self-service kiosks and other capabilities. Wenkoff this summer also tacked on the title of CDO, which he says will help bring coherence to the business strategy.