Executive need to listen

ARTICLE | May 12, 2020 | 13 min read

How industries transform

Many industries have digitized their operations. Now comes the hard part.

By Peter Burrows, technology journalist and author

As Asish Ramchandran lay in a hospital bed recovering from a punctured lung, his thoughts kept drifting to how the hospital used technology to improve his care. He couldn’t help it: As a principal in the technical services consulting practice at Deloitte, Ramchandran spends much of his time thinking about the digital future.

During his stay at Stanford Hospital, which had opened just weeks before, Ramchandran could order meals, turn off lights, adjust shades, and view test results and doctors’ notes—all from his phone.

But it wasn’t just the patient experience that blew him away.

If a machine in his room started beeping unnecessarily, his nurses could turn it off from their phones rather than schlep to the room to hit the reset button. The “handover management” process was completely automated so that at the end of a long shift, tired nurses didn’t have to spend another 20 minutes bringing their replacements up to speed.

Thanks to a new robotic prescription-filling system, pharmacists could spend more time using their expertise to consult with doctors. And when doctors appeared at Ramchandran’s bedside, their iPads already showed data relevant to their specialty.“It was amazing,” says Ramchandran. “Executives in every industry can learn something from what’s going on there.”

Looking back, the experience reinforced a lesson companies often overlook.

While it’s natural to follow industry trends and keep a close eye on competitors, there’s often more value to be gained by applying lessons between industries.

There’s no lack of opportunity to experiment. Last year, research firm IDC said it expected organizations across all industries to spend more than $7.4 trillion on digital transformation initiatives between 2020 and 2023, more than half of all corporate technology spending.


Is your organization prepared to tackle digital transformation?

Nearly twice as many companies focus on boosting productivity or tightening up operations, versus using technology to create new strategies or customer experiences, according to a 2018 study by Deloitte.

While the COVID-19 crisis will surely strain corporate budgets, it will also challenge leaders to think differently about their digital bets. Today, millions of people around the world are experimenting with new digital tools and apps to get work done remotely, to find and buy necessary items, and to stay connected with friends and loved ones. When the crisis subsides, they won’t likely return to earlier tools and behavioral patterns.

“We’re having a worldwide crash course on how to temporarily become more digital,” says Sam Ransbotham, a professor at the Carroll School of Management at Boston College. “In many cases, temporary will become permanent.”

Where can CIOs find outside inspiration? We took a close look at four major industries—financial services, telecommunications, healthcare, and government—to see what lessons they offer.

These industries share some interesting characteristics:

- They tend to be farthest along at digitizing back-office processes to cut costs.

- They are increasingly embracing the concept of open data, a practice that will help seed innovation with artificial intelligence applications.

- They can all do more to improve the experience of their customers.

Yet there are also sector-specific innovation trends worth mining:

  • Financial firms tend to be standouts in cybersecurity, but relative slackers on rolling out new features and services.
  • Government agencies do a good job creating broad visions for how services should be delivered, but struggle to free themselves of legacy systems and workflows.

Ramchandran urges executives to be on the lookout for lessons from out-of-the-way places. “Nine out of 10 CEOs ask me to tell them something they don’t know,” he says. “They know their industries cold.”

In many ways, the financial services industry has been the pace car of digital transformation. With billion-dollar IT budgets, sky-high privacy and compliance requirements, and products begging to be digitized, banking leaders have been among the most aggressive implementers of data analytics, blockchain, and machine learning.

More than half of financial services firms (55%) say they’re using AI to automate finance and accounting tasks such as report generation and fraud detection, and 45% are using it for predictive analytics, according to a survey by ESI ThoughtLab and ServiceNow. Both results are far ahead of other industries. Ramchandran, who works frequently with financial service customers, says he routinely sees 30% to 35% improvement in operational efficiency from digital initiatives.

Banks now hope to apply the same wizardry to one of their biggest challenges: customer experience. Nearly half of bank customers say they would use financial services from tech companies such as Apple or Amazon if they provided a better experience, according to a recent poll. More than 80% of executives in the industry say improving the customer experience is their No. 1 long-term business goal, according to BDO.

Tom Davenport’s take:

“Banks have always been leaders in digital transformation, but it’s not been very visible to consumers,” says Tom Davenport, a professor of information technology and management at Babson College. 

“They know so much about you and your spending, and that could yield all kinds of useful services. They need to start doing more with that data.”

One step in that direction is using conversational AI to automate different layers of customer service. While Bank of America and CapitalOne have launched popular front-end AI-enabled customer chatbots, banks still get 80% of their incoming queries from customers via their call centers, according to Forrester Research. Banks and other firms stand to save billions by applying machine learning and automation to these workflows.

CapitalOne, for example, offers features such as real-time explanations about why a customer’s card has been declined and what they can do about it. It can also alert customers when a free online subscription trial is about to expire, so they won’t forget to cancel before the first payment.

Banks are improving customer experience in other ways. Wells Fargo, Bank of America, and several other top banks jointly invested in Zelle, an industrywide instant-payment platform that is reclaiming market share in a digital-payments market long dominated by PayPal, Venmo, and other all-digital vendors.

But there’s still plenty of margin for improvement, says Susan Etlinger, an analyst with Altimeter. 

Chatbots, for example, don’t fully understand human communication. Customers don’t want automated expressions of empathy, such as “I’m so sorry you lost your credit card.” They want help they value, such as “Can I transfer your recurring payments to your new card number?”

Before banks can offer these seamless customer experiences, they must first gain control over vast amounts of consumer data and their sprawling infrastructures. Keith Pearson, who recently joined ServiceNow after serving as head of technology resilience at Lloyds Banking Group, faced this challenge when he arrived at Lloyds in the mid-2000s.

“If you looked at the way we managed resilience, capacity, cloud migration, the same problem manifested itself,” he says. “We didn’t have a clear, real-time view.”

The solution, says Pearson, is creating a reliable, scalable way of holding data, managing infrastructure and the thousands of applications that run across it, and finding a great analytics platform that brings these things together.

No economic sector faces a higher degree of difficulty with digital transformation than the $3.6 trillion healthcare industry. The stakes are life and death. The regulatory requirements are byzantine. Processes for managing patient care, electronic health records, and billing are often fragmented, complex, and costly. Even before the COVID-19 pandemic, doctors were so fatigued that many were exiting the profession.

Technology is making a big difference: Healthcare organizations are more likely to use AI than other industries and lap the field many times over when it comes to adoption of robotic process automation, according to the ESI/ServiceNow survey.

“In healthcare, mission-critical means life-critical,” says Deloitte’s Ramchandran. “Whatever industry you’re in, you can learn a lot by looking at what leaders in healthcare are doing.”

Stanford Hospital spent 10 years and $2 billion planning and building its new state-of-the-art facility, which opened in late 2019. A secure messaging system lets doctors and clinicians reach one another, and sophisticated digital workflows ensure patients’ calls to the hospital are routed to the most appropriate clinician—saving hours of frustration and wasted dollars.The system proved valuable in the COVID-19 crisis, as callers fearing infection were quickly advised whether to stay at home, come by for drive-through testing, or prepare for an emergency room visit.

Tom Davenport’s take:

“These investments help us respond as fast as possible,” says Alpa Vyas, Stanford Health Care’s vice president of patient experience.

This sweeping rethink was partially the result of casting a wide net for expertise. The planning team, which included hundreds of experts ranging from architects to AI specialists, looked at age-old problems like how to reduce the risk of patients infecting each other (answer: big waiting rooms with lots of original art and play structures to keep people circulating) and how to reduce the incidence of sepsis (install infrared video cameras at ICU entrances to make sure clinicians wash their hands).

Still, the new Stanford Hospital is the exception, not the rule, in the healthcare industry. For example, just 20% of healthcare executives say their organizations have made major customer experience improvements, and only 8% say they’ve made major improvements to their employees’ experience, according to the ESI ThoughtLab/ServiceNow survey.

Some customer experiences today can be important eye-openers—for the wrong reasons. In the months before his death from pancreatic cancer in late 2018, Bart Wise got into the habit of taking photos of his test results when numbers flashed on lab-equipment displays. Although he was treated at a world-class Boston hospital, there was no real-time collaboration system, forcing doctors to try to stay in sync by communicating via countless email chains. Many caregivers came to rely on Wise’s snapshots for the latest information.

“More than one doctor told Bart, ‘what a great idea, I’m going to ask all my patients to do this,’” says his widow Nancy Wise, who runs Spring Street Exchange, a consultancy that helps healthcare systems implement digital technology.

This was just one of many missed chances to use technology to improve care and ease suffering for Bart. His experience was just one example of a problem in patient care that could have—but wasn’t—solved with technology. “Every person involved with Bart’s care was trying to do the right thing,” says Nancy Wise. “But it’s hard for anyone to find the time to step back and rethink how care is delivered. Everybody’s back is always against the wall.”

Electronic health records (EHRs) are another nexus of frustration. Healthcare companies have spent hundreds of billions of dollars on systems to standardize collection and sharing of medical data in EHRs. All too often, they are mainly used to gather administrative data related to billing and payment.

While many doctors spend their evenings updating EHRs after long days, the information is rarely viewed again. That does little to improve care, says Atul Butte, chief data scientist for UC Health, a provider that oversees five academic medical centers in the University of California system.

To help put some of that information to better use, Butte led a project to gather data from nearly 500,000 UC students, employees, and other members of its health plans. 

Butte’s team organized the data to be easily accessible to analytics tools, which could help spot meaningful trends. For example, the team decided to look at which forms of the generic diabetes drug metformin doctors at various campuses were prescribing. UC Health mined data on the efficacy and cost of different brands, and then saved more than $1 million per year by standardizing on one.

“That was for just one drug,” Butte remarked at a recent industry panel. “We’re working on 15 others, from inhaled steroids to Allerest. This fruit is hanging so low, it’s almost spoiled.”

When the COVID-19 crisis sent millions of workers home in March, their digital requirements went with them. Major telecom providers didn’t let them down. Comcast, the largest provider of broadband in the U.S., handled a 32% spike in internet usage, including a 212% increase in bandwidth-hogging videoconferencing. Despite historic, overnight spikes in demand as the world shelters in place, most of the world’s telecoms have adjusted without missing a beat.

How did they pull it off? Most major telecoms have spent years—and billions of dollars—overhauling their underlying networks to meet the needs of an increasingly digital world. They have ripped out their old routers and switches and replaced them with new, software-based infrastructure that allows them to add features or shift capacity with clicks of a mouse.

Tom Davenport’s take:

While the infrastructure may be starkly different than it was a decade ago, the consumer-facing services that telecoms provide are all too familiar.

“Recent events have proven how critical and reliant the world has become on connectivity,” says Chris Bauschka, general manager and area VP of telecommunications at ServiceNow. “It is now more important than ever for communication service providers to utilize the right technology to elevate the customer experience and become more responsive to their customers’ needs.”

Judging from the industry’s reputation—it was second to last in customer satisfaction in 2019, according to the American Customer Satisfaction Index—it has much to learn from leaders in other industries about how to use technology to win over customers.

“Most communications markets are getting awfully saturated, so telecoms are realizing they can’t just focus on getting new customers,” says Gregg Johnson, CEO of Invoca, which sells call-tracking software used by marketers and call center reps. “They need to make their existing customers happier.”

Many telecoms could start by offering different tiers of service, says Davenport, the Babson professor. Very few, for example, offer premium experiences to their best customers, or higher-value offerings for the most price-conscious. “You can spend as much as you want with a telecom, and you’ll get the same lousy service,” he say.

AI will be a crucial part of meeting this challenge. Invoca’s software, for example, listens in to service reps’ calls with customers to suss out impending congestion in a neighborhood so it can be fixed proactively. Comcast uses data it collects from devices in the homes of its customers to troubleshoot and identify opportunities to upsell new products.

Recent history suggests telecoms can make the leap. It’s an industry that has sidestepped major obstacles over the years. Wi-Fi, once seen as a threat, became a way to offload soaring cellular traffic. Streaming services like Netflix went from a scourge that was going to bring the internet to its knees to a partner for many carriers. And while the cloud remains a threat to carriers’ once-lucrative sales of corporate IT services, many telecoms have exited the data center business and found other ways to add value.

“In the future, carriers should be reaching out to make sure people are happy,” says Johnson. That means creating a more seamless omni-channel approach that balances effective self-service options with the occasional proactive outreach when the customer has a problem or need that’s not being addressed. “It preempts problems and creates sales opportunities.”

Digital transformation is never easy, but it’s especially tough for governments, large universities, and other public organizations. They serve millions of people and face a gauntlet of bureaucratic, regulatory, and cultural obstacles. Not only do they need to envision how the world will be in a decade or more, they must also prove they’re on track every year to keep their programs funded.

Lately, more public sector organizations in the U.S. and abroad are rising to the challenge. And they’re more likely than their peers in other industries to have successfully used cloud technologies and data analytics to meet their innovation goals, according to the ESI/ServiceNow survey.

“We see a lot of public sector leaders painting a vision for the future, along with tactical plans to get the money they need,” says Deloitte’s Ramchandran. While many private-sector clients tend to focus on a particular service or set of workflows, government teams, he says, “are a lot more thoughtful about how to invest in platforms for a wide variety of services.”

One striking example is Arizona State University, the largest university in the U.S. During the COVID-19 outbreak, ASU was able to shift its 60,000 students to remote learning setups in a matter of days, thanks to a forced march to the cloud over the past two years.

Tom Davenport’s take:

ASU made 5,000 courses, from public speaking to nuclear engineering, available online.

Between March 14 and 21, the number of daily classes and other meetings held on Zoom jumped from 603 to more than 10,000.

Pulling that off without a major hiccup was the result of a digital-technology transition that started a decade ago, says ASU Chief Information Officer Lev Gonick. For years, the campus IT team had experimented with a variety of cloud strategies. When Gonick arrived in 2017, one of his first moves was to implement a single strategy to address all of the university’s IT needs.

Since then, the team has moved hundreds of other applications to the cloud, including the learning management system for delivering classes electronically, and the student information system for tracking student’s grades, scholarship, and other data.

“Not a single major piece of that digital, remote-delivery system sits inside the campus. That gave us a pretty amazing ability to flip the switch to the cloud,” says Gonick, who notes that traffic on the old enterprise network fell to 25% of the norm as cloud-traffic spiked.

A wide variety of government agencies are making similar progress in digitizing citizen services. Estonians do their taxes from a prepopulated form, rather than a blank one, and can vote and see their health records online. The governments of India, the EU, and the state of Utah are working on digital identity systems that make it easier for citizens to access public services with far fewer authentication headaches.

AI-powered chatbots help citizens get help with non-life-threatening health issues, while a virtual assistant named Roxy answers roughly 85% of the questions typically asked by callers to Australia’s Department of Human Services.

The United States Digital Service, created after the disastrous launch of the healthcare.gov website in 2014, has helped several agencies rethink essential services and adopt modern software-development methodologies such as Agile and DevOps.

Still, the public sector has a long way to go. Even as many government agencies spend more than half of their budgets on obsolete legacy systems, the COVID-19 pandemic has exposed glaring weaknesses. For example, limitations on the number of checks that IRS systems can issue could delay emergency stimulus payments to Americans by as much as five months.

Gonick remains an optimist about the digital transformation of government, if only because governments are rapidly running out of other options. Once agencies realize the benefits of cloud-based platforms and more automated, integrated workflows, he says, they won’t go back. “We’ve burned the bridge on 99% of what we do,” he says. “Anything that’s in the cloud as a result of COVID is going to stay there.”


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Peter Burrows is a long-time technology journalist and author who has written for Business Week, Bloomberg News, MIT Tech Review and other publications.

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