Six Keys To Effective Reputational And IT Risk Management

In September of last year, I blogged about the IBM 2012 Global Reputational Risk and IT Study, which I explained was an “investigation of how organizations around the world are managing their reputations in today’s digital era, where IT is an integral part of their operations and where IT failures can result in reputational damage.”

I also wrote “corporate reputations are especially difficult to manage in an era when anyone with a smartphone and Internet connection can file their complaint with a single touch.”

That continues to be the case, but what’s new is that IBM has recently issued another report on further implications of this study and its findings, and more importantly, what organizations can do to get on offense when it comes to better managing their corporate reputation.

The Connection Between Reputational Risk And IT

When the corporate world first began paying attention to the concept of reputational risk in 2005, organizations’ focus tended to be on business issues like compliance and financial misdoings.

Today, the focus has shifted to include the reputational impact of IT risks. Virtually every company is now reliant on technology for its critical business processes and interactions. While it may take 10 minutes or 10 hours to recover from an IT failure, the reputational impact can be felt for months or even years.

Reputational damage caused by IT failures such as data breaches, systems failures and data loss now has a price tag. According to analyses performed by the Ponemon Institute, the economic value of a company’s reputation declines an average of 21 percent as a result of an IT breach of customer data — or the equivalent of an average of US $332 million.

The question now is not whether IT risks affect your corporate reputation, but what you can do to effectively prevent and mitigate these risks.

Six Keys To Effective Reputational And IT Risk Management

An analysis of responses to the IBM study revealed distinct correlations between the initiatives that organizations are undertaking to protect their reputations from the ramifications of IT failures and the overall effectiveness of their reputational and IT risk management efforts.

Based on this analysis, and the pattern it revealed among organizations that are most confident in their ability to prevent and mitigate IT-related reputational risk, there are six key initiatives that IBM recommends as part of every company’s efforts:

1. Put someone in charge. Ultimate responsibility for reputational risk, including IT-related items, should rest with one person.
2. Make the compliance and reputation connection. Measuring reputational and IT risk management strategies against compliance requirements is essential.
3. Reevaluate the impact of social media. In addition to recognizing its potential for negative reputational impact, social media should be leveraged for its positive attributes.
4. Keep an eye on your supply chain. Organizations must require and verify adherence of third-party suppliers to corporate standards.
5. Avoid complacency. Organizations should continually evaluate reputational and IT risk management against strategy to find and eliminate potential gaps.
6. Fund remediation; invest in prevention. For optimal reputational risk mitigation, companies need to fund critical IT systems as part of their core business

How IBM Can Help

When planned and implemented effectively, your organization’s reputational and IT risk strategy can become a vital competitive advantage. When you protect against and mitigate reputational risks successfully, you can enhance brand value in the eyes of customers, partners and analysts. Further, your organization can better attract new customers, retain existing customers and generate greater revenue.

IBM can help you protect your reputation with a robust portfolio of IT security, business continuity and resiliency, and technical support solutions. You can start with an IT security risk assessment, or penetration testing performed by IBM experts.

For business continuity and resiliency, you can begin with a Continuous Operations Risk Evaluation (CORE) Workshop and move on to cloud-based resiliency services. Our technical support solutions range from basic software support to custom technical support.

What makes IBM solutions work is global reach with a local touch. This includes:

• Over 160 business resiliency centers in 70 countries; more than 50 years of experience
• More than 9,000 disaster recovery clients, with IBM providing 100 percent recovery for clients who have declared a disaster
• A global network of 33 security operations, research and solution development centers; 133 monitored countries
• 15,000 researchers, developers and subject matter experts working security initiatives worldwide.

To learn more about the IBM Global Reputational Risk and IT Study go here.

IBM Opens Lab To Bring R&D To The CEO

One of the things we heard about extensively during our time on the ground at SXSW Interactive 2013 in Austin over the past week was the importance of the customer experience.

Whether that be in applications in mobile devices, in customer service via the social media, the physical experience of a brand’s product or service…the customer experience rules!

And this anecdotal data is supported by IBM’s own research, including last year’s Global CEO Study, which queried 1,700 CEOs from 64 countries and 18 industries and found that CEOs are changing the nature of work by adding a powerful dose of openness, transparency, and employee empowerment to the command-and-control ethos that has characterized the modern corporation for more than a century.

The study revealed that the advantages of this fast-moving trend are clear: Companies that outperform their peers are 30 percent more likely to identify openness — often characterized by a greater use of social media as a key enabler of collaboration and innovation — as a key influence on their organization.

Those “outperformers” are also embracing new models of working that tap into the collective intelligence of an organization and its networks to devise new ideas and solutions for increased profitability and growth.

In order to forge those closer connections with customers, partners, and a new generation of employees in the future, CEOs plan to shift their focus from using e-mail and the phone as primary communication vehicles to using social networks as a new path for direct engagement. And while social media is the least utilized of all customer interaction methods today, it stands to become the number two organizational engagement method within the next five years, a close second to face-to-face interactions.

Big Data, Big Opportunity

Given the data explosion being witnessed by many organizations, CEOs also recognized the need for more sophisticated business analytics to mine the data being tracked online, on mobile phones and social media sites. The traditional approach to understanding customers better has been to consolidate and analyze transactions and activities from across the entire organization. However, to remain relevant, CEOs must piece together a more holistic view of the customer based on how he or she engages the rest of the world, not just their organization.

The ability to drive value from data is strongly correlated with performance. Outperforming organizations are twice as good as underperformers at accessing and drawing insights from data. Outperformers are also 84 percent better at translating those insights into real action.

From Theory to Action

To this end, IBM today announced the creation of the IBM Customer Experience Lab, dedicated to helping business leaders transform the way customers experience their products, services and brands through the use of mobile, social, cloud and advanced analytics technologies.

IBM Research scientists and business consultants will co-create with clients to deliver systems that learn and personalize the experiences of each individual customer, identify patterns, preferences and create context from Big Data, and drive scale economics.

The IBM Customer Experience Lab will provide CEOs, CMOs, CFOs, heads of sales and other C-suite executives direct access to a virtual team of 100 researchers, supported by the deep industry and domain expertise of thousands of IBM business consultants addressing the opportunities of the digital front office.

In the new age of Big Data and analytics, organizations are reassessing how to move from addressing mass audiences to personalized relationships. The same technologies allow enterprises to engage in new ways with their employees, allow government agencies to build new relationships with citizens, or enable new models of interaction among students and educational institutions.

IBM Research is developing technology assets and capabilities that can help deliver front office capabilities as a service from a cloud, design novel products to match customer preferences, and leverage math and psychological theories of personality to improve marketing effectiveness.
Client Engagements

The Lab focuses on innovation breakthroughs in three primary areas:

• Customer insight. Applying advanced capabilities such as machine learning and visual analytics to predict differences in individual customer behavior across multiple channels.
• Customer engagement. Using deep customer engagement to drive insight and continuously deliver value by personalizing engagement, versus transactional experiences.
• Employee engagement. Embedding semantic, collaborative, and multimedia technologies to foster employee engagement and insight – in person and online.

Among the clients engaged with IBM on advancing their innovation process are Nationwide Building Society, the world’s largest building society serving 15 million members in the United Kingdom, and Banorte, one of the largest banks in Mexico with more than 20 million customers.

“Mobile and social technologies, and the ability to access information anytime, anywhere, is driving significant change in the way consumers bank and in the services they expect,” said Martin Boyle, Divisional Director of Transformation, Nationwide Building Society. “Our ability to innovate and anticipate, and not just respond, is what sets us apart from the competition and helps us to provide our customers with new and better ways to do business with us. By partnering with IBM, we can tap into its vast research and innovation expertise and facilities, which has already proved invaluable in our transformation program and will continue to be an important part in how we continue to innovate our service for customers.”

New Tools and Capabilities

The Lab provides IBM clients with an innovation process, assets and platform to give line of business leaders the exclusive ability to work side-by-side with IBM researchers and business consultants to analyze business challenges and jointly create solutions that integrate next-generation mobile, social, analytics and cloud technologies.

Co-creation with clients includes an innovation model called Innovation Discovery Workshops, which generate ideas, roadmaps, prototypes and solutions that draw on research assets, business consulting and IBM Software solutions in areas such as Smarter Commerce, Big Data, analytics, and Mobile First products.

The IBM Customer Experience Lab will be headquartered at the Thomas J. Watson Research Center in Yorktown Heights, N.Y., supported by researchers at IBM’s 12 global labs including Africa, Brazil, California, China, India, Israel, Japan, Switzerland, and Texas.

The Lab brings together skills across disciplines including service science, industries research, mathematics and business optimization, social, mobile, Smarter Commerce, data mining, cloud computing, security and privacy, cognitive computing and systems management. IBM invests more than $6 billion annually on research and development and employs about 3,000 researchers worldwide. IBM Global Business Services deploys business consulting, applications and delivery expertise globally, including market-leading business analytics, Smarter Commerce, mobility and applications management practices.

Visit here for more information about the IBM Customer Experience Lab, and follow IBM’s innovation breakthroughs on Twitter at @IBMResearch.

Big Study On Big Data

Perfect timing.

In advance of IBM’s massive event next week in Las Vegas featuring all things information management, Information On Demand 2012, IBM and the Saïd Business School at the University of Oxford today released a study on Big Data.

According to a new global report from IBM and the Said Business School at the University of Oxford, less than half of the organizations engaged in active Big Data initiatives are currently analyzing external sources of data, like social media.

The headline: Most Big Data initiatives currently being deployed by organizations are aimed at improving the customer experience, yet less than half of the organizations involved in active Big Data initiatives are currently collecting and analyzing external sources of data, like social media.

One reason: Many organizations are struggling to address and manage the uncertainty inherent within certain types of data, such as the weather, the economy, or the sentiment and truthfulness of people expressed on social networks.

Another? Social media and other external data sources are being underutilized due to the skills gap. Having the advanced capabilities required to analyze unstructured data — data that does not fit in traditional databases such as text, sensor data, geospatial data, audio, images and video — as well as streaming data remains a major challenge for most organizations.

The new report, entitled “Analytics: The real-world use of Big Data,” is based on a global survey of 1,144 business and IT professionals from 95 countries and 26 industries. The report provides a global snapshot of how organizations today view Big Data, how they are building essential capabilities to tackle Big Data and to what extent they are currently engaged in using Big Data to benefit their business.

Only 25 percent of the survey respondents say they have the required capabilities to analyze highly unstructured data — a major inhibitor to getting the most value from Big Data.

The increasing business opportunities and benefits of Big Data are clear. Nearly two-thirds (63 percent) of the survey respondents report that using information, including Big Data, and analytics is creating a competitive advantage for their organizations. This is a 70 percent increase from the 37 percent who cited a competitive advantage in a 2010 IBM study.

Big Data Drivers and Adoption

In addition to customer-centric outcomes, which half (49 percent) of the respondents identified as a top priority, early applications of Big Data are addressing other functional objectives.

Nearly one-fifth (18 percent) cited optimizing operations as a primary objective. Other Big Data applications are focused on risk and financial management (15 percent), enabling new business models (14 percent) and employee collaboration (4 percent).

Three-quarters (76 percent) of the respondents are currently engaged in Big Data development efforts, but the report confirms that the majority (47 percent) are still in the early planning stages.

However, 28 percent are developing pilot projects or have already implemented two or more Big Data solutions at scale. Nearly one quarter (24 percent) of the respondents have not initiated Big Data activities, and are still studying how Big Data will benefit their organizations.

Sources of Big Data

More than half of the survey respondents reported internal data as the primary source of Big Data within their organizations. This suggests that companies are taking a pragmatic approach to Big Data, and also that there is tremendous untapped value still locked away in these internal systems.

Internal data is the most mature, well-understood data available to organizations. The data has been collected, integrated, structured and standardized through years of enterprise resource planning, master data management, business intelligence and other related work.

By applying analytics, internal data extracted from customer transactions, interactions, events and emails can provide valuable insights.

Big Data Capabilities

Today, the majority of organizations engaged in Big Data activities start with analyzing structured data using core analytics capabilities, such as query and reporting (91 percent) and data mining (77 percent).

Two-thirds (67 percent) report using predictive modeling skills.

But Big Data also requires the capability to analyze semi-structured and unstructured data, including a variety of data types that may be entirely new for many organizations.

In more than half of the active Big Data efforts, respondents reported using advanced capabilities designed to analyze text in its natural state, such as the transcripts of call center conversations.

These analytics include the ability to interpret and understand the nuances of language, such as sentiment, slang and intentions. Such data can help companies, like a bank or telco provider, understand the current mood of a customer and gain valuable insights that can be immediately used to drive customer management strategies.

You can download and read the full study here.

Update: Also check out the new IBM Big Data Hub, a compendium of videos, blog posts, podcasts, white papers, and other useful assets centering on this big topic!

IBM Survey: Social Media Impacting Threats From Reputational Risk

More than 400 respondents in 23 industries across the globe agree: managing reputational risk is crucial to their business, and managing IT risk is a major part of their efforts. And, social media is cited as a major factor for those shifting more focus to their reputational risk management efforts. Learn what these respondents are doing — and what they’re overlooking — in the 2012 IBM Global Reputational Risk and IT study report.

So here’s a question for you?  What is your organization doing to more effectively manage its risk profile?

IBM recently released its 2012 Global Reputational Risk and IT Study, and the findings suggest that companies are viewing their IT investments through a new lens.

First, some background, and then a summary of the findings.

This study is an investigation of how organizations around the world are managing their reputations in today’s digital era, where IT is an integral part of their operations and where IT failures can result in reputational damage.

The report was written by the Economist Intelligence Unit, which both executed an online survey and conducted client executive interviews.

That included 427 senior executive responses from around the world, 42 percent of those being C-level, with 33 percent of respondents coming from North America, 29 percent from Europe, and 26 percent from Asia-Pacific.

The survey included industries that ran the gamut, including banking, IT, energy and utilities, and insurance.

Impact of Social Media On Risk

Corporate reputations are especially difficult to manage in an era when anyone with a smartphone and Internet connection can file their complaint with a single touch.

With social media sites like Facebook and Twitter boasting over 1.4 million people combined, there is now a highly visible and immediate alterative to a company’s own communications regarding its reputation.

Because of that, more organizations have introduced reputational risk as a distinct category within their enterprise risk management frameworks.

The study suggests that companies have begun to pay closer attention to the links between IT failures and reputational damage, and also examines how executives are attempting to protect their brands from what could arguably be called “a preventable glitch.”

So, drum roll, please.  Here’s a summary of some of the key findings:

• IT risk management and investment directly supports a company’s reputation.  Reputational risk has evolved into an asset that is fundamentally supported by IT planning and investment.  78 percent say they included reputational risk in their own IT risk planning, and 75 percent say their budget will grow due to concerns for such. Eighteen percent indicate that spend will increase by more than 20 percent in the next 12 months.
• The CEO owns it but shares it. When asked to name the top 3 C-level execs who owned reputational risk, close to two-thirds say it was shared across the C-suite. 80 percent of CEOs indicated it was theirs to win, followed by 31 percent of CFOs, 27 percent of CIOs, 23 percent of CROs (Chief Risk Officers), and 22 percent of CMOs.
• Five characteristics of highly effective companies — they get reputational risk and invest in it. Of those who do, 83 percent indicated they have integrated IT into their reputational risk management regimes. They also perceive stronger links between IT threats and key elements of reputation (especially customer sat and brand reputation), and they also say they have strong or very strong IT risk management capacity (84 percent). Seventy-seven percent indicated they have well-resourced IT risk management functions, and are more likely to require vendors and supply chain partners to meet the same levels of control as they require internally.

Improving Reputational Risk Management: Best Practices

So what’s a concerned C-level exec to do? The study revealed several core strategies:

• Be proactive rather than reactive. That is, be prepared to invest in developing comprehensive reputational risk management strategies that include robust controls on IT risks, particularly those related to security, business continuity and tech support.
• Create an organization where IT managers collaborate with other risk management specialists. Together, they should be tasked with presenting a comprehensive profile of organization-wide reputational risks to senior management.
• Engage in scenario analysis, especially with new and emerging technology. Don’t wait for the worst to happen — there are plenty of case studies to be used as a basis for “what-if” planning.
• Assess risks across the entire supply chain. A failure by a downstream supplier can be just as devastating as an internal problem, and risk controls can be harmonized among key players.

A More Integrated, Holistic Approach

This more integrated, enterprise-wide approach to risk management — led by the C-suite on down — can help your organization increase the attention being paid to the direct reputational impact of IT risks, and help you mitigate those risks (including those stemming from the use of new technologies).

To learn more and to gain access to the full study, go here.

IBM Survey: Marketers Face Tech Dilemma

IBM just got the results in on yet another of its boundless surveys, this one concerning my favorite, the marketing industry.

Click to enlarge. While new social media and mobile devices are vital, the recent IBM “State of Marketing” survey revealed that 41 percent say keeping pace with the growth of these channels and device choices will be their biggest challenge over the next three to five years. This finding follows IBM’s 2011 CMO study where 65 percent of CMOs stated that they are under prepared for the growth of social and online channels such as Facebook and Twitter and new device choices including smart phones and tablets.

The lead: CMOs and CIOs must partner to connect with today’s elusive consumer across new channels (including mobile and social).  

Sounds obvious enough, but fully 60 percent of marketers point to their lack of alignment with the company’s IT department as the biggest obstacle to reaching today’s consumers.

On the mobile front: Mobile marketing seems to be working well, according to the findings, but marketers are preparing to move beyond coupons and deliver mobile advertising that reaches customers on smartphones and tablets.

34 percent of respondents stated that in less than 12 months, they intend to deliver mobile ads, the highest rate of new marketing tactic adoption in the five-year history of the study.

Overall, 46 percent of respondents are currently using mobile web sites followed by 45 percent mobile applications, up from 40 percent and 44 percent respectively since last year.

Social Media Growing Pains

While the mobile channel is thriving, marketers lack this same clear consensus on how to best utilize social media, which will result in ongoing experimentation with these channels.

When  looking toward the remainder of the year, 26 percent intend to launch applications on 3rd party social network sites, 24 percent plan to incorporate user-generated content into their social media efforts, and 23 percent are looking to launch social media ads or share links in email and web offers.

Dipping their toes in the water, checking things out, but not necessarily diving in.

IBM digital marketing consultant Todd “Turbo” Watson provides his own response and recommendations concerning the results from IBM’s 2012 “State of Marketing” study.

The State of Marketing 2012

This IBM “State of Marketing 2012” study surveyed more than 350 marketing professionals across a wide range of industries and geographies.

Notably in the study, 51 percent of respondents who identified their companies as high-performing indicated they have good relationships between marketing and IT, 10 percent higher than other companies.

This figure validates the importance of the marketing and IT alliance which gives top performers greater responsibilities for the products and services, price, place and promotion (the 4Ps), and communication across the purchasing cycle.

As a result, marketers from these higher performing companies are nearly three times more likely to be pro-active leaders in driving their organization’s customer experience across all channels.

“This research indicates that as new channels continue to mature and consumer habits evolve, marketing and IT have no alternative but to emerge from their traditional silos and form a strong partnership that puts the business in a position to succeed,” said Yuchun Lee, Vice President, IBM Enterprise Marketing Management Group.

“CMOs and CIOs, an ‘odd couple’ in some respects, will be the catalysts in forging this union and enabling the types of personalized multichannel brand relationships that today’s customers demand.”

Here are some other interesting results found in the survey:

• Marketing and IT Lack Integration: While 48 percent of respondents believe that improved technology infrastructure or software will enable them to do more, nearly 60 percent indicated that lack of IT alignment and integration are significant barriers to the adoption of technology. This void further reinforces the notion that CMOs and CIOs must forge stronger, more aligned relationships that put the business in a position to succeed.
• Marketing and IT Lack Unified Vision: While 71 percent believe integration across owned, earned and paid channels is important, only 29 percent are effectively integrating these different channels. When asked why, 59 percent said that existing systems are too disparate to integrate these channels. This is most evident in areas such as mobile and social where only 21 percent and 22 percent of respondents run these tactics as part of integrated campaigns with the remainder conducting them in silos, discretely and on an ad hoc basis, a practice which inhibits their ability to deliver effective cross-channel campaigns.
• Marketers State Social and Mobile are Biggest Challenges Moving Forward. While new social media and mobile devices are vital, 41 percent stated that keeping pace with the growth of these channels and device choices will be their biggest challenge over the next three to five years. This finding follows IBMs 2011 CMO study where 65 percent of CMOs stated that they are under prepared for the growth of social and online channels such as Facebook and Twitter and new device choices including smart phones and tablets.
• Marketers Ignore Social Media Insights: While marketers continue to experiment with social media channels, 51 percent are not using this data to inform decisions about marketing offers and messages. This may represent a missed opportunity for marketers looking to best meet the needs of today’s customer.
• Marketers Fail to Turn Data into Action. When asked how they are using online visitor data, 65 percent of respondents are doing the basics, reporting and analyzing their data. Despite that number, only one third are using this data to target one-to-one offers or messages in digital channels and less than 20 percent are using this online data to make one-to-one offers in traditional channels.

The Recommendations: Let The Customer Lead and Tear Down Those Walls

So, what’s a poor, social-media starved, completely unintegrated, IT-deficient CMO to do?

Lead with the customer experience.  Collaborate with your other business functions and work to expand the role of marketing throughout the purchasing cycle.  Make marketing everybody’s job (because they should all have a stake in its outcome), and use business analytics with agreed on core KPIs that helps convey to everyone your progress (or lack thereof).

Break Down Those Walls…And Silos. Think about your customer experience from their perspective, map your engagement with them, and then figure out where the gaps and inconsistencies are. You can have the best TV ads in the world, but if your customer service rep hasn’t been enabled to address that wonderful Facebook campaign you were running, no amount of apologizing can make up for such basic gaps and gaffes.

Embrace a tech marketing platform. Use technology to your advantage. Stop practicing the art of southern engineering (using chewing game and baling wire to build your campaign). Partner with IT to more aggressively eliminate silos and integrate and bring on board those new technologies that will help you automate your marketing. In the process, learn how to speak to your CFO in their terms, and be increasingly prepared to explain the value of your marketing in (numerical) terms they can appreciate.

You can download the full study results on SlideShare.

Just How Big IS Big Data?

So just how big IS big data?

This is your opportunity to find out, and, to contribute.

IBM’s Institute for Business Value is conducting a study on big data, and we’d like to hear from you.

The idea behind the study is simple: To develop a fact-based analysis of big data activities in the global marketplace.

Through this research, IBM hopes to help the marketplace better understand some key tenets behind the big data movement: To gain an organizational view of big data and organizations’ primary objectives for investments in this burgeoning area.  To understand better the drivers and leaders of big data activities. To understand the current and planned state of big data activities, and patterns that suggest best practices of big data implementations.

The survey is slated to run through June 29, 2012, and takes approximately 10-15 minutes per respondent.

All responses will be viewed in the aggregate, and individual responses will not be disclosed beyond the survey analysis team without expression permission of the respondent.

The audience for the survey: Global business executives, management and analysts, as well as IT professionals, across all levels of the organizational hierarchy (from C-suite to data analysts).

Once the fielding is completed, the survey results will be analyzed by a wide team of subject matter experts from within IBM, along with a team of faculty from a globally recognized university.

This data will be combined with interviews and case studies to develop a final reporting of findings and big data benchmarks to be published in October of this year.

So, in short, this is your opportunity to be part of the benchmarks that will define the big data era, one that you can use to compare with your own organization.

All participants will receive a copy of the final study, and will also be eligible to download the IBM e-book entitled “Understanding Big Data.”

Here’s the link if you’d like to be part of this exciting big data discovery!

Live From Pulse 2012: IBM Study — Cloud Computing to Rewrite Corporate Business Models

The number of enterprises turning to cloud computing to revamp outdated business models will more than double in the next three years, as business leaders move to capitalize on the rapid availability of data and the growing popularity of social media, according to a new study released today by IBM.

Organizations clearly intend for cloud to improve their business capabilities, in addition to enhancing internal efficiencies.

Businesses that embrace the transformative power of cloud will have a significant advantage in the race to introduce new products and services and capture new markets.

To better understand the shift in how organizations use cloud today and how they plan to employ it in the future IBM, in conjunction with the Economist Intelligence Unit, surveyed more than 500 business and technology executives worldwide. The findings were compiled in a new study, titled “The Power of Cloud: Driving business model innovation.”

“Companies are starting to understand — cloud isn’t just about gaining efficiencies and cost savings; it’s about driving the kind of fundamental innovation that provides lasting marketplace advantage,” said Saul Berman, IBM global strategy consulting leader and co-author of the study.

Changing Motivations for Cloud Adoption

According to the study, as they strive to better meet customers’ needs and drive future growth, business leaders will increasingly tap cloud to develop new business models that can exploit the capabilities resulting from these digital trends.

While 16 percent of the executives surveyed indicate they are already using cloud capabilities for sweeping innovation, such as entering new lines of business or reshaping an existing industry, by 2015 35 percent intend to use it to transform their business models. 

While a little more than half of the respondents indicated “improving organizational efficiency” as a top business challenge today, only 31 percent anticipate it will be a top challenge in three years. Instead the study indicates that their focus is shifting to growth and competitive initiatives in the future. The objectives cited by survey respondents for adopting cloud are in line with these business goals, indicating that business needs will soon rival IT motivations for cloud adoption:

• 62  percent of survey respondents said increased collaboration with external partners is a key objective for adopting cloud;
• 57  percent cited competitive cost advantages through vertical integration as a major motivation and;

• 56 percent pointed to opening new delivery channels and markets as an important objective.

Examples cited in the report showcasing how cloud is being tapped to drive new revenue streams and enhance business models include an online marketplace for handmade goods that has taken advantage of cloud’s cost flexibility to gain access to more powerful analytics online.

The company is able to cost-effectively analyze data from the approximately one billion monthly views of its Web site and use the information to create product recommendations, providing it with access to tools and computing power that might typically only be affordable for larger retailers.

The study also cites an online health information network that enables the exchange of health information and transactions among healthcare providers, employers, payers, practitioners, third-party administrators and patients in India.

By connecting more than 1,100 hospitals and 10,000 doctors, cloud computing’s capabilities are facilitating better collaboration and information sharing — helping the network to pursue a more collaborative business model and deliver improved care at a low cost.

Masking Complexity, Enabling Consumer Needs

The study’s authors point to cloud’s capabilities to mask complexity and enable user-defined experiences, as well as its overall scalability and cost flexibility as key reasons companies are planning to move it into front office operations in the near future.

“Cloud has the power to open doors to more efficient, responsive and innovative ways of doing business, and we believe the companies that will come out on top will be the ones that find ways to leverage it as a key point of differentiation in driving business value,” Berman said. “Whether they choose to tap cloud to optimize, innovate or even disrupt their business models, they need to start working on it now.”
 
Visit here to download and learn more about the study.

IBM And MIT Sloan: Corporate Culture Key to Success with Analytics

IBM continues its business analytics drumbeat with some new research released today by MIT Sloan Management Review and the IBM Institute for Business Value which reports that organizational challenges, more so than technology hurdles, are holding companies back from fully integrating analytics across their enterprises.

The ability of organizations to create a competitive advantage with analytics has surged in the past 12 months, according to new research from IBM and MIT Sloan Management Review. This chart shows the percentage of respondents who cited a competitive advantage using analytics, year over year, grouped by analytic sophistication levels.

According to a global survey of more than 4,500 executives, managers and analysts from more than 120 countries and 30 industries, 44 percent of organizations say cultural barriers to enterprise-wide analytics adoption, such as the requirement for new leadership competencies and organizational resistance to new ideas, are the primary barriers.

In contrast, only 24 percent point to technology concerns.

The new report, entitled “Analytics: The Widening Divide,” builds on the findings from the original study by MIT SMR and IBM in 2010 to understand how companies are embedding analytics in more of the enterprise’s processes and operations.

The 2010 study found organizations fall into one of three levels of sophistication: basic users referred to as Aspirationals, followed by the more Experienced users, and the most advanced users referred to as Transformed.

Year-to-year comparisons reveal that the more sophisticated users are expanding their deployment of analytics and widening the performance gap over their peers.

For instance, from 2010 to 2011 the percentage of respondents who cited a competitive advantage using analytics grew 23 percent for Transformed and 66 percent for Experienced organizations.  These same organizations are more than twice as likely to substantially outperform their competitive peers.  

In contrast, Aspirational organizations lost ground in competitiveness, falling 5 percent since last year.

“Our new research shows that the early and aggressive adopters of analytics make significant gains in both performance and overall competitiveness,” said Fred Balboni, IBM’s global leader, Business Analytics and Optimization.  “These indicators point to an urgent need for organizations to foster a data-oriented culture and drive an analytics strategy that embeds fact-based insights into decisions and processes at every level of the business.”

“We’ve found that there are three legs to the competitive analytics stool: a data-oriented culture, information management competency, and analytics expertise,” said David Kiron, executive editor for MIT Sloan Management Review.  “Companies that have all three use analytics to deliver advantage in the marketplace.”

The study found that the majority of organizations are using analytics to manage their financial and operational activities, but are less likely to rely on analytics-based insights for decisions in other key areas.

On average, less than 25 percent of Aspirational organizations, and one-half of Transformed organizations, say they rely on data and analytics to make decisions involving customers, business strategy and human resources.

Even Transformed organizations are not using analytics to their fullest potential, indicating ample opportunities for advanced users to do more and for less sophisticated organizations to create a competitive advantage by targeting analytics at key strategic activities.

While Transformed organizations use analytics more broadly across the organization than their peers, they differentiate themselves by intensely focusing on applying analytics to three areas:

• Increasing the speed of decisions – Transformed organizations are more than three times more likely than Aspirationals to focus intensely on making better decisions, faster.
• Managing enterprise risks – Eighty-six percent of Transformed organizations are addressing the full range of organizational risks that can impact their business, while none of the Aspirational organizations have the same level of focus. Transformed organizations are using analytics to not only mitigate, but also anticipate risks.
• Engaging customers – Transformed organizations are outpacing their peers in leveraging the enormous amounts of data available today to understand and engage with their customers in new ways.  Two-thirds of them are putting analytical insights into the hands of customer-facing employees to drive sales and productivity — compared to one-fourth of Aspirationals.

The study examines how Transformed organizations are creating an advantage in the marketplace.  The analysis shows that of all the characteristics exhibited by this group, their proficiency in six areas (represented by the percentage of Transformed companies that say they possess these characteristics) distinguished them the most:

• Ability to analyze data – 78%
• Ability to capture and aggregate data – 77%
• Culture open to new ideas – 77%
• Analytics as a core part of business strategy and operations – 72%
• Embed predictive analytics into process – 66%
• Insights available to those who need them – 65%

To access the full report, visit MIT SMR or IBM.

Go here for more information on the MIT SMR/IBM joint New Intelligent Enterprise project.

IT Budgets, Rex Ryan, and Vegas Sports Books

Okay, I went back and checked my NFL playoff picks for the weekend (see my last post).

Three out of four ain’t bad, and who would have thunk the New York Jets were going to beat the New England Patriots, especially after the season Tom Brady has had.

But kudos to Mark Sanchez, Rex Ryan, and the entire Jets organization — that was a helluva win and in Foxborough no less (New England’s home turf).

After watching “60 Minutes” last night and the story on sports betting guru Billy Walters, however, I don’t think I’m quite ready to start making book at $200K+ a game!

As to spending on IT in the small- and medium-sized business market, IBM just completed a global study of more than 2,000 midsize companies representing more than 20 countries.

The verdict? More than half of midsize companies are planning to increase their IT budgets over the next 12 to 18 months.

The study, entitled “Inside the Midmarket: A 2011 Perspective,” found that 70% of midsize companies were actively pursuing analytics technology to better understand their customers, make better decisions, and become more efficient.

No shocker, the study also shows growing adoption of cloud computing among midsize firms, with two-thirds either planning or currently deploying cloud-based technologies to improve IT systems management while lowering costs.

Midsize firms are balancing their IT spending across cost reduction and efficiency, customers, innovation, and growth.

A few other choice tidbits:

• Security (63%), customer relationship management (62%) and analytics / information management (59%) were cited as their “Most Critical IT Priorities.”
• 75% plan to upgrade their core IT systems to improve performance, security and reliability.
• Top expected benefits from cloud computing include cost reduction, better manageability of IT, improved system redundancy and availability.
• Top barriers to IT adoption cited were cost, difficulty in acquiring and deploying technology solutions, and lack of IT skills and resources.

These observations suggest a far cry from a similar survey from nearly two years back, when the conversation was dominated by cost-cutting and efficiencies, rather than business expansion and gaining greater insight.

Observed Andy Monshaw, general manager of the IBM Midmarket group, “The survey findings show that midsize firms are tackling a new set of opportunities to advance their role as engines of economic growth.”

Visit here to download the full study and learn more.

IBM Industry Summit: Ginny Rometty On The Business Evolution Towards A Smarter Planet Agenda

At the kickoff sesion of this morning’s IBM Industry Summit, IBM senior vice president of sales, marketing and strategy, Ginny Rometty, articulated a vision for organizations around the globe on how they could practically execute against the smarter planet agenda.

IBM Senior Vice President Ginny Rometty guides the IBM Industry Summit audience as to how companies can navigate their way to smarter business in the "new normal."

But first, she helped to rearticulate the problem statement through an example many may have already forgotten, the rice shortage crisis from early 2008.

Rometty explained she was traveling in Asia, and befuddled that in this day and age there would be a run on rice.

Once back at her office, she polled several colleagues from IBM Asia, and asked them what they thought was the cause of the shortage: Market speculation, climate change, growing demographics, what? In truth, it was all these things, but the “system of systems” had been overrun by its own complexity.

And ironically, a report released over a year later from the U.S. Dept. of Agriculture stated that 2007-08 had been a record crop for rice!

Too much complexity, indeed.

There were huge inefficiencies in the vast distribution and supply chain system for rice, and not unlike the global financial crisis, it was those inefficiencies and interconnectedness that led to the rice riots to occur in the midst of the greatest rice crop in years.

With that as the backdrop, and the problem statement established, Rometty then began to explain what organizations around the globe must do if they wish to embrace the complexity of such “systems of systems,” and start to capitalize on the new opportunities they present.

Because this one example was emblematic of broader, but common challenges facing the world: All the systems that govern our businesses are really interconnected.

Also, companies everywhere have started to realize the increasing costs of their longstanding inefficiencies.

Which leads to the third understanding: We have to change. This is clearly not sustainable.

Rometty mentioned a study which revealed that since the global crisis hit, one-third of all CEOs have been replaced (Monster.com, anybody?)

To respond (and keep their jobs), CEOs must start to focus their energy on productivity and structural change, continued Rometty.

“You’re going to either take a market, or make a market.”

Therein lies the promise and the aspiration of a smarter planet. It really is a new way of thinking about your business and its opportunity in the world.

So how as a business do I get started on this concept of a smarter industry, Rometty asked?

Rometty answered the question by outlining the fact that IBM has done over 600 engagements around the globe, and half were done with partners like those in the room here in Barcelona.

Rometty then fully hit her stride and outlined for the CEOs and partners gathered in the room the three general phases people go through as they move towards a smarter business:

1. Instrument to Manage
2. Integrate to Innovate
3. Optimize to Transform

The first step is simple: Understand the performance of your business by instrumentation.

You can’t know how fast you’re driving if your car doesn’t have a speedometer.

That’s why IBM has related this idea of embedded technology (RFID, sensor data, etc.)  To bridge the digital and analog world, we have to instrument, measure, and then manage it.

As an example, Rometty mentioned a Vietnamese seafood company which uses RFID sensors to monitor, from trawler to market, its fish catches to ensure quality control, manage inventory, and prove the premium value of its catch.

Second, companies must integrate to innovate. Organizations must be willing to evolve and adapt horizontally, across all their systems and structures, so that they can then be prepared to apply business analytics more effectively.

Rometty mentioned Toyota, which built an industrial waste efficiency project that the company spun off as a separate business unit, Ecomanage Network Corporation, to help other manufacturers facing the same waste management challenges.

Rometty also mentioned how supercomputing capability has evolved during the past decade. We’ve gone from Deep Blue, a supercomputer playing a chess game (but one with ultimately finite moves) to “Watson” (named after IBM’s founder, Thomas Watson), the new supercomputer learning how to play against humans with infinite possibliities in the “Jeaopardy” TV game show.

The host provides the answers, Watson has to come up with the questions.  Watson’s currently in training against other humans, but Rometty indicated that “She’s learning quite fast.”

Much laughter in the audience before Rometty moved on to the third step: Optimize to transform.

Now that you’ve built a foundation using instrumentation and new analytics, you can now move on to the art of the possible: Optimizing your system towards a specific business goal.

Predictive analytics is very different from the “looking backwards” model businesses have historically depended on.

The next decade, argued Rometty, will be one of predicting the future before it happens.

Unless you think she was now on to soothsaying, Rometty mentioned the Singapore Land Transit Authority, where technology is helping Singapore predict bus arrival times at a 98% accuracy rate, and helping commuters understand bus seat inventory via their mobile devices.

So what’s required to pull off this transformation, Rometty asked?

Three things. Leadership featuring an analytics based-culture. Systems thinking. And new forms of collaboration.

With regards to analytics, it’s actually simple to say (harder to do): Get your company and its people to move from guessing about your business via HIPPO (Highest Paid Person in the Room) and gut judgment, to one based on facts and trusted data that yields action.

Two, don’t get caught in the rice shortage paddy! Develop a culture of systems thinking so your organization is more adept and able to respond to unexpected crises, no matter their orientation.

And three, build a culture of collaboration. Your partners, your suppliers, your customers, all are key constituents in a supply chain of new ideas and possibilities for your business, but only if you facilitate and tap into their expertise and insights.

Pioneering companies which rethink their business systems and models, reinvent their outdated processes, and leverage analytics effectively moving will be poised to move beyond the “new normal” and instead realize new growth and outcomes for their companies.