Powerball is a popular topic in this country, especially when the jackpot reaches record heights as it did earlier this month. With money on my mind, I thought now would be a good time to discuss how telecommunications, media and entertainment (TME) executives can open up internal funding sources to transform their IT departments from cost centers to revenue generators that deliver exceptional value to their business teams. 

More than ever, consumers are asserting greater control over brands via their preferences and buying behaviors, driving marketers and technologists to focus online, then on mobile, and finally across all omnichannel avenues. Just as market leaders are catching their breath, the shift to ‘customer-first’—or acquiescing for all intents and purposes total control of the brand drivers—as the new table stakes. As a result, companies must move from driving the brand from within to nurturing current customers to entice and influence a net gain of customers. The tools exist to do this without gambling away future business success.

Belt Tightening Not Enough—Uncovering Internal Sources of Funding
Against this consumer-driven TME backdrop, how should the C-suite plan their business growth and IT investments while also needing to keep pace with rapidly developing technology advances and retaining their top talent? A good first step is for business leaders to closely reexamine their liquidity and working-capital strategy to fund their IT investments and long-term growth plans. For many, that will mean taking a close look at internal funding sources instead of over-relying on debt and other external sources of capital.

This may require company leaders to reorganize or shift IT resources and identify new capabilities that are needed to run IT as a more accountable profit-and-loss business that supports top-line revenue targets in new and better ways. IT must have its house in order to free up innovation dollars to support marketing and other business units taking advantage of technology advances to reduce customer churn and improve customer experiences.

Three Internal Sources to Fund Your IT Transformation

1. Running IT as an Accountable, P&L Business
   Companies should make sure that IT is a well-oiled department that is more than aligned with the business and, in fact, is run like an actual business itself. At the same time, IT leaders should be held just as accountable for reaching sales goals, making marketing efforts more productive, retaining existing customers and obtaining new ones, project governance, and other critical business and financial objectives.
   
   Too often IT is running projects independent of company goals, creating pressure to support more and more applications and decreasing the efficiency of the team and budget dollars to accomplish corporate goals.
   
   
2. Outcomes-based sourcing to utilize talent outside the organization and increase efficiency
   Many IT leaders believe they know outsourcing cold. But too often they don’t. At least not from an outcomes or value-based perspective. Outcomes-based sourcing contracts are hard to negotiate effectively, but highly impactful when done with both parties winning is kept in mind. Outsourcing done poorly can create drag on your organization even with the outside help. Outsourcing done well frees up your high-value talent to take on bigger, more meaningful projects to move the business forward.
   
   
3. Insights-as-a-Service Model for competitive advantage
   Anything with “Big” in the names is likely synonymous with complex. Big data has yet to be fully leveraged because its large nature adds time, complex infrastructure and new skillsets to the analytical mix. Insights-as-a-service allows companies to bypass the complexity completely or in the interim while the bigger data support is being implemented. For less cost than building a data platform, and certainly at an expedited rate of weeks versus months or even years, Insights-as-a-Service models allows companies to buy answers without worrying about the infrastructure. This highly effective model has been used to move fast for quick wins within a quarter resulting in moving stock prices up.

Any one of these tools can open up internal funding sources and used together they are a powerful combination. Alone or united, these tools enable IT as well as the entire organization to be nimble. And nimbleness enables and fosters competitive advantage versus level-setting only to be on par with peers.

With Google, Apple, Facebook and other powerhouse brands set to enter an already crowded and hypercompetitive TME market now is not the time to sit back and wait for lady luck to be on your side.

Organizations are missing a valuable opportunity if mid-year planning only considers a budget or project review for the rest of the year. Asking “How are we doing against what we said we wanted to do?”, is necessary, but not enough for a well-run, forward-thinking organization.  Now is the time for company leaders to review their 2016 strategy and reposition for 2017 and 2018. Think of this as a shift from a dashboard approach to a focus on the business horizon.

2016 and Beyond Plans Defined

We help clients in healthcare and media, telecom and entertainment (MTE) shift their mid-year thinking using our SYNAPTIC strategy method, which considers both the plan in place and future factors. 

First, determine if 2017 and 2018 plans are well-defined and clearly communicated. Review and evaluate existing and future strategy across several dimensions:

• Landscape – Where will the company or department be active?
• Vehicles – How will goals be reached?
• Differentiators – How will the company or department win and standout from the competition?
• Roadmap – What will be the sequence of events?
• Economics – What are the level of returns and how will they be obtained?

Next, review the strategy against current and future risks and opportunities. This is where a more forward-looking approach is required because external factors are forcing organizations to (re)evaluate strategy and make course corrections. 

Industry Examples

Healthcare

In the healthcare domain, anticipating and adjusting for market and regulatory changes is necessary for success. Here are three shifts currently taking place across this industry.

• Uncertainty around meaningful use.

Early this year, CMS (Centers for Medicare and Medicaid Services) proposed that the meaningful use program be replaced with a Merit-based Incentive Payment System (MIPS) and introduced Advancing Care Information, which is “designed to simplify requirements, support patient care, and be flexible to meet the needs of physician practices”. Healthcare organizations will need to be strategic about how they leverage technology across changing reporting requirements, patient engagement and continuum of care to help achieve high-quality care outcomes.

• Value-based contracts.
  Revenues from value-based contracts are expected to rise even while healthcare organizations are facing continued pressure on their margins.  How will the organization measure quality, profit from this trend, and avoid penalties?
   
• Consumerism and the shift from B2B to B2C model.
  This trend is a remarkable shift in the marketplace once dominated by B2B.  Key to 2017/18 planning is hyper-targeting the right consumers and providing an excellent customer experience.  Technical platforms and business models including sales and marketing may have to change to meet this transformation.

Media, Telecom and Entertainment

This is another industry where tectonic changes are affecting strategy.

• B2B becoming a key growth segment.
  Multiple Service Operators (MSOs) such as New Charter (Charter/Time Warner Cable), Comcast and AT&T are experiencing a shift in the opposite direction from healthcare. The consumer marketplace is saturated and commercial clients represent the growth opportunity.  This requires organizations to consider how to exploit the commercial market and solidify its position with consumers.
   
• FCC ruling on set-top boxes.
  Even though the current ruling favors net neutrality, it will be several months—and appeals—before it’s finalized or overturned. MSOs already face greater competition from Alphabet, Apple, Google, and Amazon. These new competitive threats have to be factored into 2017/18 strategic plans and will be influenced by alternative devices and over-the-top (OTT) competitors.
   
• OTT competition.
  While content will still be king, profitable delivery of content when and where consumers want it is where the battle wages. Companies need to implement business models that take advantage of OTT services and monetize consumer data. Global subscription spending on Netflix and other subscription-video-on-demand (SVOD) services grew by 33.8 percent in 2014 and 32.3 percent in 2015 — that’s 77 percent in two years. MSOs will need to figure out how to stay relevant, and content providers will need to innovate their distribution models while updating their technical position.  Back office technologies cannot be overlooked at this time. Many billing systems, for example, are not robust enough to meet these challenges.

A Call to Action

CFOs and CIOs need to plan at least 18 months out to remain relevant, engaged, and nimble enough to ensure projects are aligned with evolving strategies. Starting now, before the 2017 budget cycle begins, consider these steps:

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• Engage business partners to understand their shifting and future needs. Abandon projects that don’t move the needle for the business, prioritize existing or new projects that do.
• Engage the ecosystem.  Look outside the organization to help predict and understand trends to create an informed strategy for the future.
• Outline the economics and develop a compelling business case considering these two key factors:

• IT Investment review: Is spending by area aligned properly? Can dollars be saved and shifted to higher-use investments?
• Workforce planning: Talent is at a premium. Don’t sacrifice a strategic initiative based on a misguided belief it has to be done in-house.  Successful sourcing programs can be implemented to shore-up strategic as well as commodity efforts.

Planning and reevaluating strategy 12-24 months out will serve the organization well into the future. It allows time to build the nimbleness needed to meet the demands of the company and, most importantly, customers.

Customer expectations are growing faster than your childhood chia pet. The need to keep up with customers’ existing and future demands is a challenge facing every organization. To do this effectively, an IT or business intelligence (BI) group must not only have a clear value proposition but also use it as the driver of everything the group does.

When an IT department analyzes and develops a value proposition, it reminds end users why the tasks they are undertaking matter. Most IT departments are so busy with day-to-day deliverables that they do not focus on what customers really want or need. A shift must occur. To become an indispensable company asset, IT must run its practice area like a business.

Start with the Outcome or Vision
What do IT or BI customers want from an IT or BI group to help them accomplish their goals? Is it time to market, nimbleness, large transformational efforts? Is it more data?  Do they want data delivered in a certain way or at a certain time? Would more dynamic or real-time use of data be desirable? Better understanding these needs helps create both an internal strategy for IT and the customer value proposition.

Discovery Meetings
CIOs must transform their departments from being order takers to being business partners—and ideally partners in innovation. It all starts with really understanding customers’ needs. Discovery meetings enable IT to interact strategically with customers by asking questions:

• What are your short-term and long-term business goals?
• What differentiates your business from your competitors now and going forward?
• What threats are you facing now and anticipate in the future?
• What are the sequences of moves and velocity required to achiever these goals, differentiate and address threats?
• How well are IT and BI systems supporting your goals currently and what shortfalls need to be addressed now and in the future?
• What are competitive or adjacent industry leaders doing that you might want to explore?
• What is the best way for you to engage with with IT as a partner?

This information-gathering stage is a foreign concept to some, common sense to others, but in our experience it is rarely pursued with the focused investment it requires - it is an essential step toward making IT and BI competitive assets to their enterprise.

Often, it is best for a third party to facilitate the discovery stage, and there are several reasons why are clients hire use to conduct the discovery:

1. Asking the right questions is crucial.
2. Communication between departments may be nonexistent or strained, and Capto can open up unbiased dialogue more easily.
3. Capto has the SYNAPTIC framework to guide these discovery sessions and help IT and BI departments hone in on the value proposition.
4. Neutrality is key and a third-party conducting interviews removes any bias
5. Finally, Capto can bring its experience from outside the organization and expands the breadth of thinking when developing the value proposition.

Use Feedback to Craft the Strategy
Discovery uncovers areas of opportunity. IT gets to rethink, rebuild, restructure and renew its value to the company. Ideally, IT can become that trusted advisor bringing solutions that extend their business partner’s thinking, meet current demands and address future needs proactively. Done properly, IT becomes a consulting partner to every business unit, fueling collaborative innovation, driving differentiation and increasing overall business value. Anticipating needs and employing forward thinking helps companies win.

Create the Value Proposition
The value proposition is a promise made to deliver a certain, prescribed value to a customer and a belief by the customer that the value will be delivered. It should be the foundation of your strategy and keeps you focused on outcomes for your customers—the various business units. In marketing terms, the value proposition should answer the question for your customer, “What is in it for me?” You should have a clear, consistent answer to this question for your business customer.

Once you have identified the problem, put the value proposition into terms your customers will understand. Use their language instead of yours. For example, streamlining processes might allow customers to allocate more of their budgets for other projects—ideally, even on developing more projects with you. Weave this kind of strategy into your value proposition and communications to the business units.

The benefit or outcome puts the value in the value proposition for your customer, which ultimately drives business results for the company as a whole.

Analytics have become “big” and “intelligent” over the years, but companies still struggle to squeeze the full value of their data analytics to meaningfully direct their go-forward strategies. While we see this trend continuing into 2016, there are some bright spots as technological advances enable companies to wade their way through the murky data lakes toward clearer waters.

Here is what Capto sees on the analytics horizon for 2016:

 

1.     Companies Will Invest A Lot Of Time And Money Without Proper Financial Returns.

The herd mentality will remain squarely in place in 2016 because when the latest technologies are “in” companies will invest big. But they will do so in traditional ways, ultimately missing the boat. However, the thought leaders will innovate in new ways to justify the expense and exploit the value of the insights across business disciplines to create a larger return.

2.     More Companies Will Get Into The Big Data “Service Bureau” Business.

Big data is today’s version of the cloud. Because there is a tremendous business opportunity, there will be a lot of investment in this space. Companies such as IBM need to learn how to deliver, value and sell this new business segment. The economic models simply haven’t matured yet. That said, we predict IBM’s Watson and others will be delivering true “insights as a service” in the next few years.

3.     Multiple Positions Will Be Vying To Lead Big Data Initiatives.

With so many elements of business gaining tremendous value from big data—e.g., marketing, supply chain and customer service—internal competition to own or develop separate analytics capabilities will increase – leading to multiple sources of the “truth.”

4.     Easier Technical Tools Will Help Business Units Circumvent IT, Yet Again.

With easier, cloud-based tools, businesses can access and analyze data themselves and simply remove IT—which is frequently viewed as the roadblock—from the equation.  Until IT figures out how to clearly define its value proposition and more nimbly serve its internal business customers, there will continue to be ongoing frustration with the “IT bottleneck” and other business units will look for ways around it.

5.     Getting To The Truth Vs. Debating The Facts.

With different perspectives and needs, there will be confusion on how to obtain and begin to use the same set of facts. Worse still, the arguments will likely center on which data set is the right one to use instead of how we could use the data we have to move forward. Without like-minded direction on the data strategy, companies will get stuck and not be able to capitalize on the insights due to multiple sources of “truth.”

While there will be major investment, forward movement will be challenging. The companies that move faster will be those that collaborate, avoid silos and approach the insights gained from data as a foundational element to their 2016 strategy.

Big data projects can deliver competitive advantage to match the buzz. This is especially true when the initial strategy is focused on using the right combination of internal and external data sources and making sure that the data leads to desired market outcomes in a timely fashion.

Big Insights, Faster

The first mistake companies can make is only using their data that, in essence, gives them tunnel vision—the inability to seein more than one direction. When Capto approaches a big data project, we seek nontraditional data from third-party resources to augment a client’s data assets and pinpoint those leave-your-competitor-in-the-dust insights. Supplementing third-party data sets with existing data gives a company a different perspective and set of insights that are not possible using only internal, traditional or overly curated data sets. This merger of information provides new insights, adds relevance and advances outcomes in the way big data is intended to be leveraged but rarely is. 

For example, Capto recently helped a client mix its existing data with external macroeconomic, social and weather data to improve their predictive churn models, ensuring that customers likely to churn receive incentives, and those unlikely to churn do not. The combination of existing and new information, analyzed in new ways, affected the client’s ability to incentivize customers it wanted to keep: those that paid their bill on time, bought additional services and had competitive alternatives. At the same time, the client did not want to incentivize customers without alternatives or who otherwise underperform. Knowing how to hyper-target high-value customers made the client’s retention program more efficient and profitable. Overall, that shift in focus would lead to improved the company’s already industry-leading performance by three basis points.

Making the Business Case

This is only one way to strategically use big data to develop quick, informed business solutions. Using case studies like this and developing your own forecast for the positive impacts on your organization are all part of building a business case. Your chief marketing officer or marketing leader is most often the champion for effective data investments, and it is incumbent upon that person to sell the idea up and down the organization.

Often that means enlisting outside resources to answer key big data project questions like:

• What will, or should, this cost, and what is the best way to quickly bring capabilities to my business?

• What people and skills are required to be successful?

• How long will, or should, it take?

Answering questions such as those requires a blended skillset of financial, marketing and technical expertise. This is where Capto can help. Our background in M&A allows us to quickly assess business opportunities, and as a result of our years of technical expertise, we can realistically determine what can be done, when it can be done and how much it will cost to do it. With those answers, the chief marketing officer or marketing leader can make a strong case to the chief information officer and the rest of the C-Suite to gain buy-in and drive execution.

Once you have buy-in, finding the right supplemental data sets is key. Stay tuned for our next post on determining key data sets for profitable and fast big data projects.