Digital Technology Agenda for Business in 2016

Technology innovation is accelerating faster than companies can keep up with. Many feel pressure to adopt new strategies that technology makes possible and find the resources required for necessary investments. In 2015 our research and analysis revealed many organizations upgrading key business applications to operate in the cloud and some enabling access to information for employees through mobile devices. Despite these steps, we find significant levels of digital disruption impacting every line of business. In our series of research agendas for 2016 we outline the areas of technology that organizations need to understand if they hope to optimize their business processes and empower their employees to handle tasks and make decisions effectively. Every industry, line of business and IT department will need to be aware of how new technology can provide opportunities to get ahead of, or at least keep up with, their competitors and focus on achieving the most effective outcomes.

Let’s review the digital disruptions that are impacting businesses of every size in any industry.

Analytics is at the top of the list. It has become indispensable not just for measuring performance and efficiency but also for guiding effective actions that make critical differences in an organization. Once just an ad hoc part of business intelligence efforts, analytics now can have a continuous role in streamlining business processes. Historical analysis – measuring the past to inform the present – is no longer sufficient; looking forward with predictive analytics can help organizations anticipate future behavior and outcomes. Our benchmark research on predictive analytics shows that nearly half (49%) of organizations expect to gain significant impact from utilizing it, and another one-third (32%) said it can have transformational impact.

However, to develop continuous analytics organizations first must prepare for use the data to be analyzed. Typically this requires significant amounts of time from analysts, data and operations professionals – time that could be used more productively. Today they can regain that time by using data preparation tools designed for this purpose. In 2016 we will perform in-depth market research on data preparation to assess the variety of ways in which it is used and where it can offer the greatest benefit to analytics and operations. Our research in 2015 found that preparing data for analysis is the most common impediment in the analytics process for more than half (55%) of organizations, as it has been for the past five years. We also will conduct and publish new research on the role of analytics in the sales, finance and human resources functions. In these and other lines of business we assert that organizations must develop competencies in analytics and begin using them continuously to improve their performance and competitiveness. Look at your own organization to determine if you have made analytics a priority and is being used effectively.

Another precursor to continuous analytics is collecting and processing what is commonly called big data, the huge volumes and broad variety of data that organizations encounter. Advances in computing technology including in-memory processing and storage of big data are now cost-effective and can be readily accessed and used through cloud computing. Because not all data is the same, ranging from structured data to unstructured content, documents and text, how businesses manage their information assets is just as important as the guidance they receive from analyzing them. To further investigate the impact of big data on business, we will perform new benchmark research to determine where investment can have the greatest impact in terms of value and time savings. Managing data effectively enables organizations to optimize their information, and there are other sources of data that can add to what they know. My colleague Robert Kugel has named this “cryptic data”; typically it is out of reach of business users, tucked away on the Internet and in external sources, but accessing it could enrich the value of existing information and analytics. Last year our data and analytics in the cloud benchmark research found that Internet information sources are important to 42 percent of organizations.

It is important to remember that big data is not just about data management but also about how it is interconnected and used for business purposes. Industry jargon that isolates it in “data lakes” and other ridiculous terms do a disservice to its full potential for analytics and any range of applications, extending even to advances in the Internet of Things (IoT), which connects whole networks and myriad devices to each other.   Beyond this data science has intersected with expert systems to produce cognitive computing systems that can learn from past and present decisions and interactions to answer questions in natural language and guide decisions to optimal results.

In the excitement over big data and analytics it’s easy to forget that they are useful only when people work with them, and businesses rely on their people to interact and collaborate to reach agreement or better understand opportunities and situations to be resolved. Through a new generation of digital technologies, workers and managers alike can engage in discussions interactively online, through videoconferences that can share applications and presentations and with mobile technologies that make it simpler to collaborate at any time from any place. Our next-generation learning management benchmark research found that social collaboration is critical for more than half of organizations to share learning socially through activity streams. Technology enables even digital “town hall” meetings in which workers anywhere on the planet join in interactive discussions. But collaborative technologies must be used in context of business processes that rely on business applications in which information must be shared, assessed and acted upon to achieve specific goals. Thus the idea of embedding collaboration in business application is taking hold among large application providers, although some just make it available separately. Our research in the past several years has identified collaboration as one of the most widely recognized digital technologies to advance business processes; for example, more than one-third (38%) of participants in our data and analytics in the cloud research are using it, although fewer than that (30%) are satisfied with how they collaborate, which is not surprising when many are still using email as the primary mode of collaboration. The good news is that new methods are gaining traction: Almost half (47%) are planning to use or are evaluating discussion forums, and nearly as many (48%) are interested in wall posting. New research we’ll produce in 2016 will identify the further adoption of collaboration and best practices in contact centers, sales, human resources and finance groups. Furthermore, to better engage workers in the organization, a new generation of digital feedback techniques used in consumer applications for easy-to-rate feedback is migrating into business. In general collaboration using digital techniques is still one of the most underutilized methods in organizations, but it can have large returns on investment since it engages and should motivate workforces to interact with others and management.

Another major new digital technology that has reshaped the way organizations use information is cloud computing, which enables applications or services to operate beyond an enterprise’s own premises. It can help organizations simplify access to and use of software by removing barriers of resources and skills, allowing any size of organization to exceed its previous computing capabilities. Simplifying the ability to onboard a range of software whether business applications or other tools and to manage them easily in any area of business in conjunction with IT policies provides a radically faster time to value. We have also seen this in the use of analytics, as almost half of organizations in our data and analytics in the cloud research already use cloud-based analytics in some manner and another one-fifth (19%) will use it in the next year. Now organizations are shifting to integrating business applications in the cloud and in the enterprise, a process that requires integration software designed to help streamline interoperability. Underlying this transition of business computing is a movement toward the platform as a service (PaaS) and messaging that interconnects business and consumers in a range of cloud environments – public, private and hybrid. The enterprise architecture of the future is centered in the cloud; much of the software industry has shifted to this approach, and business organizations will be required to adapt or be left using and managing their own software. It is only a matter of time until they will not have a choice as new applications are rapidly becoming available only in the cloud.

Until recently many businesses have worried about the security of systems they don’t deploy and control themselves. Our data and analytics in the cloud benchmark research shows that lack of confidence in security is still the most frequent impediment to deployment cloud-based analytics, in more than half (56%) of organizations. Arising from these worries is new digital technology designed to ensure cybersecurity and protect intellectual assets (systems, internal data and customer information) from being hacked and compromised. More than a few large-scale incidents have shown that such attacks can significantly impact not only financial profitability but an organization’s credibility. Alert organizations now realize that just protecting the network that connects their computers and systems is insufficient to ensure that the full range of threats is mitigated. For example, most organizations have not effectively inventoried and assessed their IT assets to identify outdated software that might have known cyber exposures that can create wormholes that work from inside the organization to the outside. Building on IT asset management is the ability to identify legacy systems that increase threats and put data at risk in databases or from systems and tools that access them from more than one location. Such vigilance requires a sophisticated set of technology that not only detects and responds to threats but can recommend and even act on cyber exposures before situations reach crisis levels. The data within databases and analytics also needs to be secured. This challenge will require a new generation of cyberintelligence that is managed directly by the CIO’s office and understood by business management.

As if all this was not complicated enough, now we have the Internet of Things (IoT) emerging. Devices, machines and networks that are interconnected to the Internet through sensors and messaging are no longer just for monitoring but also for interactive dialogues that notify and take action on threats or malfunctions. As we evolve to this technologically sophisticated world, even things we wear, from watches to certain types of clothing, also can provide information on business and personal activities that range from responding to requests to the wellness of individuals. The underlying connectivity comes from the use of Bluetooth and RFID for cellular or WiFi connections directly onto the Internet. As we find ways to miniaturize and embed sensors and related technology that can provide data, we also find that the processing is operating at the edge of the network and within machines, even automobiles. These Internet-level bots do not just operate at the edge of the network but can also transport themselves to where processing needs to happen. IoT will require applications that can monitor systems and also be used to manage monetization as in subscription to services and interact across any range of services. Such a change will require advanced skills in IoT analytics and capabilities for real-time processing; we call this the next generation of operational intelligence and are conducting new market research to determine the rate of innovation and emerging best practices in adoption of the technologies.

As we all can see, smartphones and tablets are everywhere, connecting people and the Internet. The potential for businesses is enormous, and it will be a necessity for them to equip and support their workers and managers with applications that can easily operate on these devices. Unfortunately so far many business software applications and tools provide only lip service to using their capabilities; few of these vendors have a “mobile first” approach to supporting workforce effectiveness. Working across devices from Apple or Android has plenty of nuances, and many applications require a lot of “pinching” to interact with them rather dynamically sizing in response to the device on which it operates. Additionally, a new generation of notebooks that operate through touch screens and tablets that use Microsoft Windows is emerging. Giving ineffective software to mobile-enabled workers can lead to employee dissatisfaction and become a factor in why they leave an organization. Ensuring that mobile apps provide a contemporary user experience and easy usability is more important than just the app’s capabilities; don’t listen to analyst firms that rate them on the number of customers or amount of revenue they have generated. Such recommendations have led many organizations to select the wrong software and weaken themselves for years to come. With new research in 2016 we will continue our decade-long analysis of the mobile revolution and its impact on business; we advise that embracing mobile-ready applications is essential to maximize the value of the workforce.

Mobile technology advances have paved the way for a new generation of wearable devices, most evidently the new kind of watch, which is now ready for businesses to use to consume and act on information and make decisions. Wearables can support business productivity by increasing the responsiveness of individuals in any role. A new generation of smart watches that are easier for technology providers to integrate with business applications is available and will begin to establish new workflow and interactivity capabilities. Our upcoming research into the new generation of human resources management systems (HRMSs) and into workforce management will assess the demand for these applications. This generation of wearables will come with location information that can be used to promote situational awareness and be optimized for a variety of uses. For many organizations and workers, using wearables provides immediate visibility on the wellness of individuals that not just helps the individual maintain personal health but helps organizations ensure that workers are able to conduct their job responsibilities in ways that minimize risk and ensure safety.

As you see, this will be a big year for technology and potentially just as big a one for business in learning to take advantage of these advances. We have put together a formalized set of research agendas covering all of these areas for more depth on our direction in 2016. Please rely on Ventana Research to help guide you in understanding the challenges and making the decisions that will serve your organization best.

Regards,

Mark Smith

CEO and Chief Research Officer

Integrated Business Planning Is More Effective

Ventana Research recently released the results of our Next-Generation Business Planning benchmark research. Business planning encompasses all of the forward-looking activities in which companies routinely engage. The research examined 11 of the most common types of enterprise planning: capital, demand, marketing, project, sales and operations, strategic, supply chain and workforce planning, as well as sales forecasting and corporate and IT budgeting. We also aggregated the results to draw general conclusions.

Planning is the process of creating a detailed formulation of a program of action designed to achieve objectives. People and businesses plan to determine how to succeed in achieving those objectives. Planning also serves to structure the discussion about those objectives and the resources and tactics needed to achieve them. A well-managed planning process should be structured in that it sets measurable objectives and quantifies resources required to achieve them. Budgeting is a type of planning but somewhat different in that is financially focused and is done to impose controls that prevent a company from overspending and therefore failing financially. So while planning and budgeting are similar (and budgeting involves planning), they have different aims. Unlike budgeting, planning emphasizes the things that the various parts of the business focus on, such as units sold, sales calls made, the number and types of employees required or customers served.

Integrating the various business planning activities across a company benefits the senior leadership team, as I have written by enabling them to understand both the operational and the financial consequences of their actions. There are multiple planning efforts under way at any time in a company. These plans typically are stand-alone efforts only indirectly linked to others. To be most effective, however, an individual business unit plan requires direct inputs from other planning efforts. A decade ago I coined the term “integrated business planning” to emphasize the need to use technology to better coordinate the multiple planning efforts of the individual parts of the company. There are good reasons to do this, one of which is accuracy. Our new research reveals that to be accurate, most (77%) planning processes depend to some degree on having access to accurate and timely data from other parts of the organization. For this reason, integrating the various planning processes produces business benefits: In our research two-thirds of companies in which plans are directly linked said that their planning process works well or very well. This compares favorably to 40 percent in those that copy planning data from individual plans to an integrated plan (such as the company budget) and just 25 percent of those that have little or no connection between plans.

Technology has been a major barrier preventing companies from integrating their planning efforts. Until relatively recently, joining the individual detailed plans of various departments and functions into an overall view was difficult because the available software, data and network capabilities were not sufficient to make it feasible and attractive to take this approach. To be sure, over the past decades there has been steady progress in making enterprise systems more accessible to ordinary users. But while dedicated planning software has become easier to use, evidently it’s still not easy enough. The research reveals that across the spectrum of corporate planning activities, three-fourths of organizations use spreadsheets to manage the process. We expect this to change over the next several years as the evolution in information technologies makes dedicated planning software a more compelling choice. One factor will be enhanced ease of use, which will be evident in at least two respects. Software vendors are recognizing that a better user experience can differentiate their product in a market where features and functions are a commodity. Ease of use also will extend to analytics and reporting, making it easier for business users to harness the power of advanced analytics and providing self-service reporting, including support for mobile devices. The other factor will be the ability to make the planning process far more interactive by utilizing in-memory processing to speed calculations. When even complex planning models with large data sets can be run in seconds or less, senior executives and managers will be able to quickly assess the impact of alternative courses of action in terms of their impact on key operating metrics, not just revenue and income. Having the means to engage in a structured conversation with direct reports will help executives be more effective in implementing strategy and managing their organization.

Technology is not the only barrier to better planning. The research demonstrates the importance of management in the process, correlating how well a planning process is managed with its accuracy. The large majority (80%) of companies that manage a planning process well or very well wind up with a plan that is accurate or very accurate. By contrast, just one-fourth of companies that do an adequate job achieve that degree of accuracy and almost none (5%) of those that do it poorly have accurate or very accurate results. Additionally, managing a planning process well requires clear communications. More than three-fourths (76%) of companies in which strategy and objectives related to plans are communicated very well have a process that works very well, while more than half (53%) with poor executive communication wind up with a planning process that performs poorly. And collaboration is essential to a well-functioning planning process. Most (85%) companies that collaborate effectively or very effectively said that their planning process is managed well, while just 11 percent of companies that collaborate only somewhat effectively expressed that opinion.

Collaboration is essential because the process of planning in corporations ought to get everyone onto the same page to ensure that activities are coordinated. Companies have multiple objectives for their planning processes. Chief among these is accuracy. But since things don’t always go to plan, companies need to have agility in responding to changes in a timely and coordinated fashion. In a small business, planning can be informal because of the ease of communications between all members and the ease with which plans can be modified in response to changing conditions In larger organizations the planning process becomes increasingly difficult because communications become compartmentalized locally and diffused across the entire enterprise. Setting and to a greater degree changing the company’s course requires coordination to ensure that the actions of one part of the organization complement (or at least don’t impede) the actions of others. Coordination enables understanding of the impact of policies and actions in one part of the company on the rest. Yet only 14 percent of companies are able to accurately measure that impact, and fewer than half (47%) have even a general idea. Integrated business planning address that issue.

In most organizations budgeting and operational planning efforts are only loosely connected. In contrast, next-generation business planning closely integrates unit-level operational plans with financial planning. At the corporate level, it shifts the emphasis from financial budgeting to planning and to performance reviews that integrate operational and financial measures. It uses available information technology to help companies plan faster with less effort while achieving greater accuracy and agility.

For companies to improve competitiveness, their business planning must acquire four characteristics. First, planning must focus on performance, measuring results against both business and financial objectives. Second, it must help executives and managers quickly and intelligently assess all relevant contingencies and trade-offs to support their decisions. Third, it must enable each individual business planning group to work in one central system; this simplifies the integration of their plans into a single view of the company and makes it easy for planners in one part of the business to see what others are projecting. Fourth, it must be efficient in its use of people’s time. Success in business stems more from doing than planning. Efficient use of time enables agility, especially in larger organizations.

Today’s business planning doesn’t completely lack these features, but in practice it falls short – often considerably. Senior executives ought to demand more from the considerable amount of time their organization devotes to creating, reviewing and revising plans. They should have easy access to the full range of plans in their company. They must be able to engage in a structured dialog with direct reports about business plans, contingency plans and business unit performance. Information technology alone will not improve the effectiveness of business planning, but it can facilitate their efforts to realize more value from their planning.

Regards,

Robert Kugel – SVP Research