Friday, February 26, 2016

Digital Transformation - A Revolution in Precision Through IoT, Mobility and Analytics

Fog of War
Sensors allow us to digitally monitor our physical world, and take real-time action on the data from afar.  Plant managers, in fact, can manage multiple manufacturing locations around the world in real-time via sensors and Internet connectivity.  Drone pilots in the Nevada desert; project military force by flying combat missions around the world via sensors and remote control.  Trucking companies can track and manage, via telematics, thousands of trucks, trailers and their cargo all across the country in real-time.  As automation increases due to advances in sensors, bandwidth, artificial intelligence, algorithms and machine learning - precision becomes not only possible, but also all-important.

The “fog of war” describes a chaotic and competitive environment filled with unknowns, uncertainty and imprecise data.  In a not so distant past, military leaders suffering in the "fog of war," desperately sought answers to four key questions:

  1. Where are my enemies?
  2. Where are my friends?
  3. Where are my forces?
  4. What are their strengths?

These unknowns and uncertainties impacted the strategies and tactics military leaders employed. Their focus, and many of their resources, were dedicated to defending against the unknown.  Today mobile apps, sensors and analytics are reducing the “fog of war” in many industries and markets by making more of it “known.”  How then is the revolution in precision transforming businesses and strategies today?

Many companies have not evolved from antiquated business models based on the “unknown and imprecise”, and continue to throw good money after bad by following "estimate-based" models. Sears’ reported this quarter that their sales decreased, and on-hand inventories increased.  These numbers seem to reflect an estimate-based model lacking precise market knowledge.

Many companies continue to follow old school estimate-based models and business case studies that don’t incorporate the availability of massive quantities of real-time data available today.  They have yet to change their strategies and tactics to support the new precision models.

The retailer Macy’s, is also facing a challenging quarter. In response they announced a new business strategy focusing on individual customers and personalizing their experiences (read more on personalization in Cutting Through Chaos in the Age of Mobile Me).  In the past Macy’s focused on selecting inventory and marketing to “regions,” not “individuals." Macy’s regional approach highlights the challenge many companies face exploiting precision data. Edward Deming, the father of quality improvement, once said, “The big problems are where people don't realize they have one in the first place.”  But in this case it seems Macy’s recognized the problem.

Mass marketing to regions is the antithesis of precision.  It is an “estimate-based” strategy formulated in a time when there was inprecise data.  It is not a strategy for today.

Ignoring today’s “revolution in precision” is like a manufacturer ignoring the “continuous quality improvement” (CQI) movement over the past 60 years. CQI is the process-based, data-driven approach to improving the quality of a product or service. It operates under the premise there is always room for improving operations, processes, and activities to increase quality. CQI teaches the importance of measuring everything and working with precise data to document reality and to recognize progress. The American automobile industry tried ignoring CQI for many years and suffered the consequences, while the Japanese auto industry excelled at quality. In another classic quote from Edward Deming, he said, “It is not necessary to change. Survival is not mandatory.” Taking advantage of precision is a must if surviving is in your plan.

The revolution in precision we are experiencing today is the result of our ability to precisely measure, in real-time, all kinds of new things that impact our business as a result of the Internet, mobile devices and connected sensors. These developments make precise data available from all corners of the globe in real-time. Precise data today makes traditional estimate-based business models, strategies and tactics obsolete.

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Kevin Benedict
Senior Analyst, Center for the Future of Work, Cognizant Writer, Speaker and World Traveler
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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I am a mobility and digital transformation analyst, consultant and writer. I work with and have worked with many of the companies mentioned in my articles.