5 ways digital services are transforming your business Tim Murdoch HEAD OF DIGITAL SERVICES

5 ways Digital Services are transforming your business

1. Why Digital Services are transformational

2. Themes that are driving digital innovation

3. Practical tips for successful innovation and

transformation with Digital Services

IoT is the “4th Industrial Revolution”

A global impact in every market

IoT will be everywhere

$Trillions each year

…. but why ?

[McKinsey 2015]

IoT means data … lots of it

75 billion connected devices by 2020

Generating over 40 Zetabytes of data

– 1/3rd sensor and device data

– 1/3rd images or media

– The rest is text or enterprise

40,000,000,000,000,000,000,000 bytes = 40 billion terabytes

– Zetabytes / petabytes / exabytes / terabytes / gigabytes

[IBM 2017]

Data that can be analyzed to find out what is going on

Acceleration

Data that leads to AI and automation …

A study of 702 occupations estimated jobs at risk

47% US

49% Japan

35% UK

This includes highly-skilled jobs [Carl Benedikt Frey and Michael Osborne, 2013]

Automation is becoming augmentation

30% of tasks for 60% of all jobs can be automated

Including 25% of CEO activities [McKinsey, 2017]

Computing

Automation & Processing

Internet

Co-ordination & Integration

Things

Connected devices

Services

Engagement & organisation

This value is delivered through services

Data and intelligence are useful because the of services they enable

And these services are digital

Service transformation for high-value equipment

The aftermarket for managing and servicing

equipment is far larger than the original sales value

Telematics and M2M for high-value equipment

Rolls-Royce’s aero engines, MAN trucks,

Caterpillar off-road products,

Alstom’s Train-Life Services

Xerox moved from photocopier manufacturer to

“technology-led service provider”

IoT means this is growing rapidly everywhere

Value of

original market

Aftermarket

value ratio

Cars 13

Trains 21

Tractors 30

Civil aircraft 150

Digital Services are disruptive

As an example, consider the current transformation of the automotive sector

1,020 1,500 1,900

1,400

109

5,500

7,500

9,200

2017 2021 2025 2030

Automotive Manufacturer

Autonomous Mobility as a Service

Market Capitalisation ($Billion)

Source: ARK Investment Management LLC

1. Servitization of equipment

Phillips LED lighting at Amsterdam Schiphol Airport

Selling “light” not “light bulb systems”

Schiphol saves 50%

Phillips earn a new source of revenue that was

going to the energy companies – but no longer

QoS of machines …

Jet engines, trains, buildings

Cars, coffee machines

2. Digitization of services

Uber, AirBnB, Amazon, Alibaba…

Digitize, mobilize and automate to encapsulate

the service, becoming repeatable and optimizable

Focusing on the design of the User Experience

(both Customer - CX and Employee - EX)

Reducing error, cost and delay that comes

with human organization

Often such services aggregate and intermediate

Delivering savings to their customers, and

New revenues for them at the expense of

other companies

3. Mass personalization

Algorithms personalize experiences

– Preference settings (identity)

– Sensor data (IoT)

– Contextual modelling (cookies, location …)

– Behavioural insight (continuous analysis)

Digital offers the opportunity for real time

personalization, preference & nudge

– From drug delivery and lifestyle choices

– Through fitness coaching

– To predicting when I will need a car

The mass market of 1

4. Augmentation

Surgical robots …

– Augmenting human capability

(physical and mental)

– Adding control (micro level)

– Increasing safety (avoidance)

– Progressing to full automation

Augmenting the human

– Human and machine together

– Intellectually and physically

– Interpretation of radiology images by AI

is better than human, but not perfect

– together they are better

5. Automation

Autonomous manufacturing, cars and drones

– Replacing human physical activity, and

– Increasing speed, consistency and reliability

of decision making

– Reducing costs and enabling re-shoring

‘Replacing’ the human in the process

– Freeing up people to focus on human

valuable services

– Allowing the barman to become the host

rather than cashier …

– Enabling the nurse to deliver ‘care’ rather

than medicine …

6. Networks and ecosystems

Apparent “peer 2 peer” systems

– Networks managed by middlemen

– eBay, AirBnB and facebook (commercial)

– Patient Knows Best or Wikipedia (for ‘good’)

Blockchain and Smart Contracts

– Truly self-managed networks with no middleman

– Trust is distributed and shared across all parties

– Every transaction is transparent and verifiable

– Every piece of information can be protected

– Smart Contracts allow self-managing workflows

– Truly patient-centered pathways for every individual

Patient

record

Hospital

Consumer

IoT

Physician

Carer

Family

Medical

IoT

16 Commercially confidential

Digital Services

MASS

PERSONALIZATION

Mass market of 1

Preference vs choice

Behaviour and nudge

ECOSYSTEMS

AND NETWORKS

E-payments

Identity and KYC

Social networks

New business models

AUTOMATION

Robotics

Bots

Drones

Smart infrastructure

AUGMENTATION

AR and VR

Human interfaces

Prosthetics

Remote machines

DIGITIZATION

automating and augmenting human activities

new ways of delivering operational and

professional services

adding value by adding services

new ways of selling, managing and using both

large equipment and small devices

SERVITIZATION

Tips for successful innovation and transformation with Digital Services

1. Technology vs Experience

2. Design thinking vs Lean start-up

3. In-house vs Co-creation

4. Horizontal platforms vs Vertical integration

1. Technology vs Experience

Service is indeed about the continuous improvement of user experience

– Customer experience (CX) and employee experience (EX)

But don’t underestimate the importance of technology to deliver this …

You’ve got to start with the

customer experience and work

back toward the technology “ .”

As an engineer I’m constantly

spotting problems and plotting

how to solve them

“ ”

1. Technology vs Experience

Defensible, standout and breakthrough services are built on hard technology

(World’s largest online grocer) Ocado’s robotic warehouse

Compared with warehouse walkers and in-store pickers

2. Design thinking vs Lean start-up

Launch

Learn

Discover

unmet user

needs

Design

Product or

service to

meet needs

Prototype

Refine

through testing

Test with selected users

Design thinking

(for devices)

Trial

Design

New customer

proposition

Prototype

Minimum

viable product

Learn

Measure

and refine

Test with paying users in the market

Lean start-up

(for services)

Trial

Launch

Enhance

2. Design thinking and Lean start-up

Design thinking

and lean start-up

(for products

which are devices

with services)

Learn

Discover

unmet user

needs

Design

Product or

service to

meet needs

Prototype

Refine

through testing

Test with selected users

Design

New Customer

proposition

Prototype

Minimum

viable product

Learn

Measure

and refine

Test with paying users in the market

Different sorts of innovation require

different methods of engagement

Loncin engaged with their suppliers to

reduce manufacturing costs by 70%

and now own 60% of the Vietnamese

motorcycle market

3. In-house vs Co-creation

Gartner predicts 75% of top

companies will leverage

crowdsourcing by 2018

Proctor & Gamble have used

co-creation to drive the Febreze

air-freshener brand to $1bn /yr

Technical Complexity

Use

r V

alue

Hackathon

Start-up or

Spin Out

Development

Programme

Co-creation

Continuous

Improvement

Partnership

3. In-house vs Co-creation

Digital innovation often emerges externally

Google buys proven but early-stage companies such as Deep Mind

Across London, mainstream banks now drive the Fintech start-up scene

Vodafone’s M-PESA was delivered with a team spanning 5 organizations

Ultimately, you need a portfolio approach that

Engages and empowers internal teams and staff, and

Collaborates, partners and co-creates with others

And in both cases, you need to

Drive speed, agility and experimentation by bringing multiple disciplines

together as a single team working openly and set apart

80% of corporates are active or

looking to work with start-ups [Accenture, 2017]

Build a platform that others will use

– Be like Apple, Facebook or Amazon

IoT platforms …

– Over 100 venture back IoT platforms

– Plus Hitachi, Siemens, Bosch, GE, IBM,

Samsung, Microsoft and others

– What does this mean for data ownership and

strategic independence in IoT ?

A key difference is often lost

– A platform for systems is not a platform for customers

– Developers follow customers

– Open APIs make systems easy to integrate

4. Horizontal platforms vs Vertical integration Big companies fail too: • Microsoft (Windows Phone)

• Vodafone (live)

• Blackberry

• …

Ample opportunity to integrate: aggregators such as Validic

standards such as HyperCAT

Closer examples – SAP and Salesforce

Go direct to customer

– Own the entire customer journey and experience

– Continuously improve the end-to-end proposition

Digital-first companies are actually customer-first, delivering

– ease of use, clear pricing and

real-time and personalized services

Focus on customer through a balance of

– Agile multi-functional teams

– Building on open platforms

– Using flexible technologies

4. Horizontal platforms vs Vertical integration

73% want their mobile operators to be more like digital-

first companies [Matrixx, 2017]

When markets and technologies

shift, vertical integration puts you

closer to the source of value

Whether we like it or not,

we must all become

digital companies

now ….

#InnovationDay