New Role for CIOs: Creating Customer Value Beyond the IT Estate
Lisa Heneghan is the Global Lead for KPMG’s Technology Consulting Practice, where she leads a network of more than 10,000 practitioners to help clients turn digital transformation strategies into business outcomes.
With more than 25 years of technology consulting experience under her belt, Lisa focuses on Financial Services, where she helps major Insurance and Banking organizations navigate the complexities of digital transformation and take advantage of digital trends.
She frequently works with Boards as a trusted advisor to help bridge the gap between business leaders and their C-suite technology counterparts.
Heneghan is also leading efforts to increase diversity across the entire technology industry.
As sponsor of KPMG’s ‘IT’s her Future’ program, Heneghan wants to promote the business case for attracting more women into technology, and proactively develop the careers of women already working in the industry.
In this thought-provoking interview, Heneghan breaks down an issue that’s a high priority for many organizations: leveraging digital transformation to create customer value.
Read the entire interview below.
Appian: To get things started, let’s talk about the Women’s Leadership panel you’re participating in at the Appian World 2018 digital transformation conference in Miami in April. As Global Head of Technology at KPMG, what are the big ideas you want to focus on in that panel discussion?
“So, I think this is a fantastic time for organizational diversity to massively improve. To succeed in a world of pervasive digital disruption, companies must be customer-obsessed. And you can’t do that without greater diversity.”
So, one of the things I’m keen to explore is how the skills required in the technology world today are different than 5 or 10 years ago—and I think these skills actually match up very well with the inherent skills that women have.
Part of the challenge is breaking down the myth that women don’t want to be in technology. The inherent skills that women bring to the table are really needed in the digital economy—things like collaboration, openness to learning, building relationships. In the digital economy, these high-level social skills are more important than ever. This doesn’t mean we don’t also need more women with more traditional STEM skills as well, but the key is that there is a place for both.
Here’s the other thing I want to focus on. If you look at the most successful businesses, they recognize that the only way to be successful is to leverage diversity of thinking. And you need women as part of your team to do that.
Leveraging Diversity into Business Outcomes
I’m also keen to explore how to make diversity programs work. Most major organizations have some form of diversity initiative. But for many, it’s not something that lives and breathes and has momentum. At KPMG, we’re really trying to turn the business case for diversity into business outcomes, and we are making positive progress on this.
Appian: So, the diversity challenge goes beyond the notion of just doing the right thing. It also sounds like you’re saying there’s a business case for it.
Yes, absolutely spot on. Diversity is not just a “nice to have,” or about companies just doing it for the sake of equality. The truth is, you cannot be a digital, customer-focused business, if you don’t also have diversity of thinking.
Appian: As a senior executive focused on technology at KPMG, what’s your take on the concept of the Fourth Industrial Revolution, and why C-suite execs should care about it?
Heneghan: The first thing is, the boundaries between the physical and virtual world are blurring, and executives need to understand that the digital revolution is creating new pathways to value. This could be new customers, new markets, new revenue streams, new customer experiences, new business models.
This is forcing every organization to take stock of what’s being called the Fourth Industrial Revolution. Yes, some organizations may not be feeling the heat of disruption today. But they will absolutely feel it at some point soon.
“So, companies need to adopt a different mindset, stop thinking in functional silos, and adopt a horizontal model that’s customer-focused across the enterprise instead.”
Traditional Brands Still in the Game
Appian: Which gets at the next topic I wanted to discuss. When people talk about digital transformation or the Fourth Industrial Revolution, the tendency is to focus on startups and digital giants. But what about traditional, non-tech, companies. Where do they fit into the digital transformation narrative?
In financial services, everybody was saying that the startups, the FinTechs, the InsureTechs were going to massively disrupt the market. But what we’ve actually seen over the last year or so, is that this hasn’t caused the level of disruption that was predicted, and the large incumbents retain the stronghold.
We’re seeing more and more of these large traditional companies create new ecosystems that bring in innovation driven through these nimble startups.
Many organizations started their digital transformation journeys by setting up “digital garages” in separate parts of their organization, to serve as the digital front-end of their business. But that approach hasn’t yielded the benefits which were expected. You need integration across the business to deliver on the customer experience side of digital transformation.
“You might be able to deliver a wonderful front-end customer experience. But unless your entire organization can actually deliver behind that experience—through the middle office and back office—you’re not going to succeed.”
Without front-to-back digital integration, you’re not going to be agile enough to keep up with customer expectations. You also won’t have the right cost-save to do it. And the situation has forced existing, incumbent organizations, to start to shift their internal structure.
Appian: Back to digital transformation. The conversation tends to focus on the technology that’s enabling transformation. Technology is a critical part of the journey. But what about the people part of the story, the organizational aspects, the executive leader mindset? How do these things enable success at digital transformation?
Heneghan: Yes, this is an interesting point. Because at KPMG, we believe that digital transformation doesn’t just involve technology. It involves the entire organization and to successfully transform, we put people at the center of that journey.
And when I talk about people, I focus on two dimensions. The first one is customers. Very simply, without customers you don’t have a business. And when you consider digital transformation, everything you do around it must tie back to the customer. We’ve already touched on the importance of this kind of customer obsession—it’s a critical aspect of digital transformation
The second people element is employees. Because where I see digital transformation failing (and this is frequently the case) is when it’s treated as a technology implementation.
The Problem with Tech Only Approaches
Appian: What’s the problem with that approach?
“You could have the best digital systems in the world. But if you don’t have an organization that also has the employees, the capability, the processes, culture and mindset to leverage that technology, you’ll never realize the benefit of it.”
The ability of an organization’s employees to leverage digital and work in an agile way is absolutely critical for digital transformation success. And I don’t mean agile just in terms of the technology. I mean agile in terms of making business decisions, in terms of reacting to fast-changing conditions.
Appian: Sounds like you’re talking about automation.
Heneghan: That is certainly an element of this. Which brings me to the third dimension which is a little ironic I suppose. Everyone talks about automation, and how it will drive people out of the workforce. And, yet, the only way that automation will ever deliver value, is if it’s created and developed through human experience.
Appian: That sounds counterintuitive. What do you mean by developing automation through human experience?
Heneghan: You need people to shape and implement the technology solution —whether they be in your own organization or through partners. People bring that human dimension to automation. Digital transformation can only succeed if you think about it that way—from the people outward.
Appian: I want to pick up on something you mentioned. You talked about automation. And, of course, some cynics are saying that intelligent automation is going to kill more jobs than it creates. But it sounds like you’re saying that automation is not just about replacing people and driving efficiency, it’s also about delivering value.
Moving up the Value Chain
Heneghan: That’s right. It’s about moving up the value chain. If you look at robotic process automation, it’s about automating low-level tasks. As you remove humans from doing low-level tasks, the question is where else can humans add value?
“So, this means organizations must constantly focus on value, and how they can redefine or re-imagine their workforce to deliver value.”
Appian: But there’s still some fear and loathing out there. The critics see more peril than promise in the future of automation.
Heneghan: Yes, there’s a trust issue. For example, it’s going to take time for organizations and individuals to trust the decisions that come out of automation. So, there’s still a big role for people to play in this process over time. If I look at some of the data we gather through our annual CIO survey, it shows that as organizations adopt automation, they’re also increasing headcount within their IT function—even though they’re automating more IT functions. Don’t get me wrong. Ultimately there will be reductions in headcount in some areas. But at this stage, automation is less about reducing headcount and more about creating a platform for agility.
Appian: Speaking of automation, artificial intelligence and cognitive technologies are grabbing lots of headlines these days. What are some of the common misconceptions business leaders have about these emerging technologies and how to take advantage of them?
Heneghan: When people hear about artificial intelligence, they tend to think about science fiction movies, like The Terminator. But there are two categories of AI, general and narrow AI. General AI is about making decisions at a human level across a vast array of data.
Appian: So, is General AI still in the realm of science fiction?
Heneghan: Well, it’s still in the infancy stage. What we mostly see today is the application of narrow AI—the ability of machines to mimic specific elements of human capabilities, based on a very narrow set of data. So, I think there’s a misconception of how broad AI capabilities are today. General AI could end up being the best or worst thing for society. And nobody really knows how this is going to play out.
Rethinking the Traditional Workforce
Appian: One of the other emerging technologies you mentioned is robotic process automation (RPA). Many companies are now pivoting from business process outsourcing to digital labor. How is this pivot going to impact business operations in the future?
Heneghan: I think RPA is forcing businesses to rethink how they view their workforce. I’m seeing more workforce transformation programs than I’ve seen in the last 20 years. Organizations are being forced to rethink where value is delivered, and how to differentiate themselves from their competitors.
Appian: Can you give a few examples?
Heneghan: We’re seeing organizations begin to formalize roles around ethics. We’re beginning to see ethicists on the boards of organizations, as companies try to figure out how to take advantage of new technologies and protect the reputation of their brand. This really calls for broader levels of risk analysis than organizations traditionally do.
Appian: What about the notion that digital transformation is an IT responsibility. Based on your research and expertise, where should ownership of digital transformation sit in the organization?
Heneghan: In my view, it must be owned by the CEO.
“Because, inherently, digital transformation is not limited to functional transformation. And if you confine it to an individual silo in the business, it will not deliver value.”
Appian: Which gets back to a point you made earlier.
Heneghan: Yes, to be a digital business, you have to think in a horizontal manner, Because that’s how the customer journey moves—horizontally across channels and across your organization. Everything you do digitally tends to ripple across the entire organization. So, we strongly believe that digital transformation should involve the front office, the middle office and the back office. In other words, ownership of the process must start at the top of the organization.
Appian: Speaking of the top of the organization, where do CIOs fit into the picture? What role do they play in the digital transformation story?
New Role for CIOs
Heneghan: CIOs are an important part of the leadership team. But it’s also about who can drive value into the process.For CIOs, it’s about moving beyond the traditional role of controlling and managing the IT estate and thinking horizontally and more strategically instead. I believe their enterprise view of technology in the organization can provide immense value – so they have a great opportunity to broaden their influence. Tying compensation to digital transformation is also part of the equation. Many of my major clients are linking compensation of their Executive Committees to the delivery of digital transformation programs. And that’s how it should be.
Appian: In wrapping up our conversation, I won’t ask for any predictions. Let’s talk about your expectations. Which digital trends are on your radar for 2018 and beyond?
Heneghan: If you’re talking about technology, there’re the obvious trends like machine learning, Internet of Things, technologies that are developing quickly. But another application area that we’re seeing a big shift in, is the development of digital twins (virtual models of a product, process or service).
This trend is particularly relevant around the supply chain. Digital disruption is starting to hit many industries, and they’re beginning to see what these technologies can do. So there’s a real need to understand how digital trends are going to play out for your organization.
Appian: How would you describe this digital twin concept? What would you compare it to in terms of how organizations operate today?
Heneghan: It’s like creating a sandbox to visualize and demonstrate the impact of digital transformation. It’s a practical approach to utilizing some of the more advanced technologies. (Gartner predicts that by 2021, half of large industrial companies will use digital twins to improve business outcomes.)
“I also think we’re going to see quantum computing starting to come to life faster than we expected. And I’m expecting some of the significant players in this area to make major announcements, potentially this year.”
So, I think some of the things that seem farther away might hit reality sooner than you think. Which can start to challenge some of the thinking around the viability of blockchain and other technologies.
(Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities. This article represents the views of the author(s) only, and does not necessarily represent the views or professional advice of KPMG LLP.)
About this series
This interview is part of our ongoing thought leadership series on all things digital transformation.