FOR 2017 - AccentureThe current edition highlights the potential for major change in the direction of innovation—steered by human-centered technology. Accenture Technology Vision

BUSINESS JOURNAL FOR

ISSUE 3

INDIA

2017

Enterprises today anticipate the need to adapt quickly to market changes propelled by technology advances, and sometimes even by government policy. For example, the unexpected demonetization of large currency in November last year was the first big step in India’s movement toward becoming a digital economy.

Financial services was one of sectors most shaken by the change. As competition from mobile wallet and other fintech startups accelerated overnight, banks needed to immediately step up to the digital future they had been working toward for the past few years. Many of the large banks are now collaborating with startups to leverage open innovation for digital solutions based on blockchain—a technology that could arguably be the next big thing after the Internet. In fact, given India’s vibrant startup ecosystem and the government’s Digital India push, large enterprises across industries are actively exploring open innovation approaches.

Innovation enabled by digital technology and focused on the customer’s needs—the critical success factors we had explored in the 2016 edition of the journal—continue to resonate with Indian businesses. Last year, we had chronicled the need for companies to shift from incrementalism and focus on combining industry expertise with the power of digital and innovation to reshape markets.

The 2017 edition of the Accenture Business Journal for India notes that despite the enthusiasm of companies to adopt digital technology, there are hardly any truly game changing business or operating models. The time to act is now because new technology has made it possible to put the customer at the center of the business model—the mark of a truly innovative business.

The current edition highlights the potential for major change in the direction of innovation—steered by human-centered technology. Accenture Technology Vision 2017 says, it is no longer people who are adapting to technology—rather, technology is adapting to people and empowering them. Sophisticated technology—capable of learning—interacts with us in natural human ways and makes it possible to anticipate customer needs and wants, and personalize experiences.

Artificial intelligence (AI), for example, has evolved in such a way that it would be possible for robots and humans to work side by side. Intelligent automation—the next step in the automation continuum—combined with virtual workforces could drive a new, more productive relationship between people and machines. In the mining industry, for example, robots are increasingly taking over the more dangerous tasks, with humans controlling them.

Intelligent automation is helping companies simplify their systems and operations, accelerate their time to market and create the capacity for continuous innovation. For example, by finding meaningful patterns in vast data lakes, intelligent automation enables data scientists to quickly focus their efforts. It could also make same-day delivery a reality for e-commerce companies or revolutionize agriculture through digital farming.

The manufacturing sector—long used to digital—is now leveraging AI, the Internet of Things (IoT), 3D printing, sensors, cloud computing, wearables and nearables to create intelligent connected factories. So, whether it is smart production using predictive quality management and autonomous operations, advanced safety and security with video analytics and workforce tracking, maintenance excellence through predictive asset management, or intelligent warehousing, manufacturing is changing dramatically. So are all sectors, as advanced analytics tools make it possible to create “intelligent” enterprises.

With these forces of technology sweeping across sectors, every large established business will need to continually reinvent itself. We call this “innovating in the New.” It involves combining technology platforms, ecosystems and people. Design thinking—a structured approach using design principles to generate and develop ideas that are user-centric, collaborative and holistic—plays a critical role in innovation. In this edition, we talk about how design thinking along with “design doing” and “design culture” (Fjord’s Rule of 3) creates value for companies, amazing customer experience, and ultimately, competitive advantage.

We show how companies can find the trapped value in their current business models and know when to pivot to the New. We describe how companies can build robust analytics capabilities to become insight-driven enterprises.

Innovation based on digital technology is not about digitizing parts of business processes, or cautiously adopting technology in pilot phases. Along with a strategic approach, companies must also have the architecture to innovate. An innovation architecture makes it possible to take an idea through, from concept to prototype to industrialization, and then rapidly scale it. Speed is of the essence here. Taking the example of the Accenture Innovation Architecture, the cover story draws out a practical route to innovating for competitive advantage.

We believe that companies need to have a more comprehensive, transformational and end-to-end approach to innovation. This edition highlights the innovation approach, the strategy and the road map for industries especially from manufacturing, telecom, financial services and the consumer packaged goods segments.

We also take a close look at how new technologies are impacting Indian industry. How are companies adapting to the inevitability of technology-enabled and customer-driven change? How should they leverage the advances in AI, the opportunities for open innovation and design thinking to harness the immense potential for disrupting their own businesses?

As new technologies continue to accelerate the momentum of game-changing businesses, we believe there is sense in sharing best practices of how our clients are succeeding in the New. We hope you will find a rich vein of relevant insights in this journal. We also welcome your insights and perspectives as we continue to develop our thought leadership on leading in the New.

CHANGE IN DIRECTION OF INNOVATION

COMPREHENSIVE, END-TO-END APPROACH TO INNOVATION

WELCOME TO THE 2017 EDITION OFTHE ACCENTURE BUSINESS JOURNALFOR INDIA, OUR THIRD ANNUAL EXPLORATION OF GAME-CHANGINGTRENDS AND BEST PRACTICES IN THEDIGITAL AGE.

FOREWORD

Anindya Basu Country Managing Director Accenture in India

Manufacturing, transportation, logistics, financial services and energy companies are leading the effort to operate in new ways. Additionally, the government’s infrastructure drive, including the development of smart cities, is fueling deep interest in digital.

However, like many of their global counterparts, most Indian companies are still stuck with their current business models. Few, if any, can boast of digitally disruptive business and operating models. Critical aspects of what Accenture calls Innovating in the New—such as integrating an “as-a-service” platform in business strategy, offering amazing customer experience with strong and consistent data security across multiple integrated channels, collaborating with other industries in an ecosystem and a renewed organizational structure—are often missing.

The core operations and organizational structures remain unchanged as most companies implement stand-alone initiatives across select processes in silos, focused on cutting costs or improving efficiency. Averse to risking the profitability of their core business, they have little investment capacity for new businesses. Attempts at innovation peter out due to lack of funds or leadership interest, or the inability to rapidly scale the innovation.

Disruptive models involve radically changing both the customer interface as well as the enterprise operations for hyper-efficiency and reimagined customer experience. But the digital transformation efforts of Indian companies, especially in manufacturing, have largely focused on transforming enterprise processes, or parts of the supply chain, and much less on the customer journey.

For example, automotive companies are digitalizing manufacturing lines but continue with traditional approaches in sales and marketing, although a few of them are exploring digital dealerships. The “connected car” remains only a concept for the future. Similarly, in the retail business, e-commerce majors need to transform their supply chain efficiencies but prefer to invest only in sales and marketing.

The current situation of Indian companies seeking to innovate with new technologies resonates with companies in mature economies. Large established players in those markets too remain chained to their core business and have little leg room for new business based on advanced technology innovations. Unlike agile startups, they struggle to scale innovations in time to avoid being disrupted or to disrupt the market themselves.

Such companies fail to realize the opportunity to identify and unveil the tremendous amount of value trapped within their current business models, supply chains and wider markets. Unlocking the trapped value involves three simultaneous steps. Starting with transforming the core business, companies will need to build competitive agility and cost structures to stay profitable in the core business and expand investment capacity. They must use the new investment capacity to drive top-line growth in the core business, identify and scale an innovation, and most importantly, know when to pivot to the New by balancing investment between old and new business. Pivoting too slowly could mean being decimated by a disruptor. Pivoting too fast to the New could mean triggering financial risks.

As a US$35-billion multinational company, Accenture has also had to keep pace with market changes and transform itself to lead in the New. We continuously transform our core business with a “fit for purpose” mindset across our five businesses through process automation, analytics, artificial intelligence, crowdsourcing and other new technologies. We grow our core business through targeted deals in core areas and we drive investments in markets where we can scale more aggressively. We scale the new through ventures and acquisitions, ecosystem relationships and our innovation architecture.

A handful of Indian companies (a leading steel maker, a telecom company and a construction major, for example) have identified and realized trapped value by leveraging advanced technologies. But most find it difficult to carve practical paths to innovating and leading in the New. These companies remain extremely vulnerable to disruption.

Our experience with digital leaders across the globe has shown that to make digital deliver value end to end, companies need to know:

Based on our own transformation journey and our work with clients, we have designed the Accenture Innovation Architecture to help companies innovate using the structural elements of disruption from idea generation to industrialization, combining technology platforms, ecosystems and people.

The Accenture Innovation Architecture brings together our various capabilities such as Accenture Research to identify game-changing trends and ideas, Accenture Ventures for partnering and investing in companies creating enterprise technologies using an open innovation approach, Accenture Labs for prototyping, Accenture Studios for solutions, Accenture Innovation Centers to scale solutions and demonstrate their impact, and Accenture global delivery centers to help scale up and industrialize solutions (see Figure 1).

Companies in India need to start building or leveraging innovation architectures if they want to effectively harness technology advances for their innovation priorities at speed and scale.

While many companies in India are well on their way to a digital future, most need to shift focus from optimizing costs and efficiency to building new business and operating models with customer needs at their center. They need to not only leverage technology advances in artificial intelligence, IoT, robotics and 3D printing, but integrate these into the value chain—from manufacturing, supply chain, sales and marketing—to create new models for development, delivery and service that can propel game-changing innovation in the industry.

The New is now; not in some dystopian future where profitability concerns will no longer hinder accepting innovation risks. Globally, leading businesses across all sectors have shown how they are innovating in the New and driving growth. An Accenture survey reveals that these companies have achieved between 3.5 percent and 7 percent higher revenues through these new and better approaches to innovation, product development and solution development. This translates to an increase of up to US$1 billion in annual revenue depending on the industry.

The answers to these questions lie in understanding that innovating in the New is a journey, and not an isolated event. It requires a disciplined approach and an architecture that will help the company move its innovative idea from concept stage and pilot to execution at scale and speed.

Companies will need to collaborate across functions and with partners (possibly from a different industry). They will need the capacity to generate game-changing ideas through co-creation with different communities, use open innovation to shape emerging technologies, build prototypes, rapidly scale up solutions and industrialize the solutions for sales and delivery.

All these elements—both existing and new capabilities—should be brought together into the operating model through an innovation architecture to create a step-change approach in outcomes for end customers.

Spurred by a greater awareness of the need for new business and operating models to survive disruption, large companies in India are increasingly focusing on digital transformations.

GETTING “UNSTUCK” AND UNLOCKING “TRAPPED VALUE”

OUR JOURNEY IN THE NEW

THE PRACTICAL PATH TO INNOVATING AND LEADING IN THE NEW

THE ACCENTURE INNOVATION ARCHITECTURE

CONCLUSION

How to build an innovation architecture

inside the business

How to scale innovation

How and when to pivot to the New

LEADING

NEWIN THE

I

E

FIGURE 1: THE ACCENTURE INNOVATION ARCHITECTURE

ACCENTURE RESEARCH

Ideate through thought leadership

ACCENTURE VENTURES

Shape emerging technologies

ACCENTURE LABS

Prototype through applied R&D projects

ACCENTURE STUDIOS

Build with speed and agility

ACCENTURE INNOVATION

CENTERS

Scale, re-use with clients

ACCENTURE DELIVERY CENTERS

Industrialize sales and delivery

Trends Investment and Open Innovation

Research and Developement

Solution Innovation

Use Cases and Assets Industrialization

EXCITED BY ADVANCES IN DIGITAL TECHNOLOGY, INDIAN COMPANIES ARE EXPLORING WAYS TO REINVENT THEMSELVES. BUT TO CREATE DISRUPTIVE BUSINESS AND OPERATING MODELS, COMPANIES NEED TO KNOW HOW TO ARCHITECT FOR INNOVATING IN THE NEW.

The adoption of the Internet of Things (IoT), automation, robotics and artificial intelligence (AI) in India, combined with design thinking, extends beyond “digitally intense” industries such as retail, media and telecom.

AUTHOR

Anindya Basu

Country Managing DirectorAccenture in [email protected]

DIGITAL CAN UNLOCK A US$100-TRILLION OPPORTUNITY. BUT COMPANIES NEEDTO REIMAGINE THEIR BUSINESSES FOR THE FOURTH INDUSTRIAL REVOLUTION.

Digital technologies have unleashed what is being called the Fourth Industrial Revolution. A combination of technological advancements is transforming consumer lives, creating value for business and unlocking broader societal benefits at an unprecedented scale.

The potential value at stake is estimated at a massive US$100 trillion over the next 10 years (see Figure 1). In India alone, digitization can lead to benefits valued at more than US$5 trillion.

THE FOURTH INDUSTRIAL REVOLUTION

TAPPING INTO THE DIGITAL OPPORTUNITY

• CHANGES IN CUSTOMER PREFERENCE If the Internet is being used to compare hotels, then it will also be used for doctor feedback on peer platforms.

• CHANGES IN TECHNOLOGY AI can automate previously human tasks and Accenture is using it to transform the project management of outsourced services.

• CHANGES IN BUSINESS IMPERATIVES Marriott India is facing competition both from global disruptors such as Airbnb as well as local avatars such as SaffronStays that currently has more than 800 verified homestays across India listed on its platform.2

Traditional business strategies of cost leadership, differentiation and focus now require digital parallels.

• DIGITAL CUSTOMER Use of digital means to change the customer experience like Proctor & Gamble does to increase sampling through its Rewardme website.3

• DIGITAL ENTERPRISE Use of Industry 4.0 and other IT enablers to transform the organization like Caterpillar does through connected equipment in its Minestar endeavor.4

• DIGITAL BUSINESS MODEL Leveraging disruptions that change the nature of business. While Uber’s growth and Xerox’s demise are now well documented, equally revolutionary is Michelin’s attempt to sell tires as a “per mile service.”5

There is a cost of inaction that businesses need to consider. And the cost can be quantified. Accenture’s research estimates that for a leading Indian life sciences player the cost of inaction can range from -10 percent to +30 percent of revenues, while for a leading Indian auto organization it could be from -30 percent to +50 percent.6

SOURCE OF CHANGE

RESPONSE TO CHANGE

COST OF CHANGE

1 https://charlesandhudson.com/smart-home-big-3-google-nest-apple-homekit-samsung/2 https://www.saffronstays.com/about-us3 https://www.rewardme.in/page/about-us4 https://www.linkedin.com/pulse/inside-look-caterpillars-minestar-technology-robert-spence5 https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/WEF/PDF/Accenture-Digital-Enterprise.pdf6 Accenture point of view on impact of digital on industries like such as life sciences and automotive7 https://newsroom.accenture.com/news/accenture-technology-vision-2017-forecasts-a-future-of-technology- for-people bypeople.htm8 https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/WEF/PDF/Accenture-Digital- Enterprise.pdf9 www.forbesindia.com/article/special/reliance-jio-announces-strategic-tieup-with-uber/46045/1

Accenture, as part of the World Economic Forum’s Digital Transformation Initiative (DTI), used a unique value-at-stake framework across 10 industries, and then scaled the results to estimate the net benefits through to 2025.

THE COMBINATORIAL IMPACT

The sheer scale of this disruption is unprecedented. The current phase of technological evolution is particularly exciting as concurrent waves of innovation are peaking simultaneously, adding up to the biggest change since the dawn of the information age. Technology waves—from the mainframe computers of the 1950s to the digital technologies of the 2010s—all undergo a maturity curve. In the current phase, the maturity peaks of Big Data analytics, artificial intelligence and the Internet of Things are coming together to bring about a “combinatorial” effect—the capability of technologies working in tandem far exceed their capabilities when deployed separately (see Figure 2).

THE DISRUPTION IN THE MARKETPLACE

Digital disruption has changed the definition of competition—it is no longer limited to players of a particular industry. In the consumer electronics space of connected homes, electronics major Samsung (SmartThings) is competing with technology giants Google (Nest) and Apple (Home Kit),1 while in auto ancillary connected fleet, engine players (Cummins) and tire players (Michelin) have to compete with third-party players such as Tire Vigil and Alcoa Wheels.

In the Indian context, the opportunity created by the smart cities initiative has players from multiple industries vying for a share of the pie. These include government agencies, auto manufacturers, retail and insurance players, among others. Digital has redrawn the boundaries of the competition landscape, and businesses need to take a relook at their strategies and operations to stay ahead.

RESPONDING TO DIGITAL

To start the digital transformation journey, organizations need to move from thinking “do something digital” to “what do I do in digital in my industry to unlock value.” They need to focus on three aspects—identifying the source of change, strategizing to respond to the digital opportunity and understanding the cost of inaction.

DIGITIZING THE VALUE CHAIN

Accenture Technology Vision 2017 says digital disruption has a new direction—companies are now using technology to disrupt themselves.7 The benefits of digital transformation span beyond the value chain to all enterprise areas and Accenture research has estimated the impact.8 • HR: Virtual collaboration and talent portals can reduce hiring costs

by approximately 10 percent.

• FINANCE: Cloud-based accounting systems and AI-driven automation can reduce costs by approximately 40 percent.

• IT: Cloud computing can reduce IT system costs by 25–50 percent.

• SUPPLY CHAIN: Autonomous transport and sensors for monitoring supply chains can cut costs by 50 percent.

• R&D: Crowdsourcing and AI can improve productivity by 20–40 percent.

These numbers may vary across local and organizational contexts, but the salient point is that the impact is now measurable and can be budgeted for.

DIGITAL CUSTOMERS

Companies need to constantly reinvent their offerings to keep up with the rapidly evolving expectations of digital customers.

• PRODUCTS AND SERVICES TO EXPERIENCES: Companies need to go beyond offering products and services to focus on delivering the most compelling experiences. Shopsense in India offers product-as-an-experience by installing large touchscreens connected with the store’s inventory to transform its customers’ buying experience.

• HYPER-PERSONALIZATION: Customers expect and value personalized interactions at all points of their journey, and digital technology is enabling companies to deliver personalization economically and at scale. L’Oreal’s new Makeup Genius mobile application allows users to virtually try on a wide range of cosmetics on their own photographs.

• OWNERSHIP TO ACCESS: Enabled by digital platforms, customers are substituting ownership of goods with access-based models. This trend has accelerated from taxi services of Uber and Ola to truck rentals through new platforms such as Rivigo.

DIGITAL BUSINESS

Organizations need to take into account two new business realities.

• DIGITAL PARTNERSHIP MODELS: Organizations do not need to build every capability within themselves but can partner with others. The recent strategic tie-up between Reliance Jio Infocomm and cab-hailing platform Uber enables each to ride the other’s user base by merging the needs of connectivity and mobility to offer a seamless customer experience.9 GE’s Digital Wind Farm is an adaptable wind energy ecosystem that pairs turbines with the digital infrastructure for the wind energy industry as a platform for all stakeholders to participate in.

• PEER EVALUATION: Organizations are being evaluated by users and employees more than ever before. If TripAdvisor ratings determine the success of a hospitality player, Jobbuzz (Timesjobs) has provided a platform for employer feedback and already has 80,000 reviews covering more than 2,000 companies in its beta launch stage.

SOCIETAL IMPACT

Digital transformation is generating a debate among policy makers, economists and industry leaders about its societal impact on three key areas

• EMPLOYMENT: Digitization can be a net job creator in some industries and a destructor in others. So, there is a need to evaluate and upskill employees to manage employment rates.

• SUSTAINABILITY: Digital and its power to drive value creation can decouple economic growth from an increase in emissions and optimize use of scarce resources.

• TRUST: Studies suggest that trust in technology-based sectors has declined—there were more than 10,000 cases of cybercrime in India in 2016. India is ranked third after the United States and Japan among the countries most affected by online banking malware.

In summary, digital transformation has the potential to unlock value at an unprecedented scale and the journey has already started with a fortuitous mix of concurrent technology innovations coming together and reduction in cost to serve. Adaptive organizations that understand, embrace and prepare for this change can gain significant business value as part of this transformation. However, for transformations of this scale, all stakeholders—customer, business and society—need to work together.

This transformation requires a dialogue between policy makers and companies on issues and practices that are “good for business, and good for society.” It is through this lens that companies should think about their innovation agenda, portfolio management and capital investment to tap the opportunities presented by the Fourth Industrial revolution.

Digital is not just reshaping industries by disrupting existing business and operating models, but also having a profound impact on the wider society, presenting a series of opportunities and challenges for businesses. Businesses need to take an integrated approach that takes into consideration the three impact areas.

FALLING COSTS OF ADVANCED TECHNOLOGIES

Many technological solutions today are nearing mass affordability. Costs have fallen sharply for devices such as drones (from US$100,000 in 2007 to US$700 in 2013) and solar power generation (from US$30 per KWH in 1984 to US$0.16 in 2014). This plays a major role in accelerating innovation, making technology accessible and forging a more connected world. The fact that there are now eight billion devices connected to the Internet enables economies of scale to further reduce costs. For instance, the affordability of drones is allowing a range of applications—from monitoring at digital manufacturing plants to dispensing fertilizers in fields.

FIGURE 1: THE US$100 TRILLION OPPORTUNITY

FIGURE 2: MULTIPLE TECHNOLOGY WAVES ARE PEAKING SIMULTANEOUSLY

REALIZING THE DIGITAL VALUE THROUGH AN INTEGRATED APPROACH

Societal Industry

Cumulativevalueto societyand industryduring 2016-25($ billion)

Con

sum

er

Auto

mot

ive

Logi

stic

s

Elec

tric

ity

Tele

com

Avia

tion

Oil

and

Gas

Med

ia

Min

ing

Che

mis

try

Reduction in CO2

emissions(million tonnes)

Jobs(000s)

4,877

5,439

667

3,141

1,546

2,393

1,360

1,741

1,280

873

405

705

945

637

1,037

274

321

106

308

2

223 540 9,878 15,849 289 250 1,284 -151 608 60

-3,249 NA 2,217 3,158 1,100 -780 -57 NA -330 -670

Cum

ulat

ive

capa

bilit

y

Mainframe

Concurrent waves of new technology

Client server and PCs

Web 1.0 e-commerce

Web 2.0, cloud, mobile

Big Data analytics visualization

IoT and smart machine

Artificial intelligence

Source: World Economic Forum/Accenture Analytics

1950 1960 1970 1980 1990 2000 2010 2020 Time

AUTHORS

Sanjay Dawar

Managing Director and LeadAccenture StrategyAccenture in [email protected]

Peter Lacy

Managing DirectorAccenture Strategy - Growth, Strategy & [email protected]

THE VALUE AT STAKE

Digital technologies, new consumer expectations and increased scrutiny have rewritten the rules of competitiveness. The impact of this changing dynamics has been brutal—since 2000, 52 percent of Fortune 500 companies have gone bankrupt, have been acquired or have ceased to exist.

Companies are acutely aware of the need to change. A recent Accenture survey in India showed that 93 percent of chief strategy officers believed their industry will be disrupted by new technologies in the next five years, while 82 percent of executives agreed that organizations are feeling the pressure to reinvent themselves before they are disrupted from the outside or by their competitors.1

Faced with increasing competition and pressure to change, companies are undertaking several initiatives focused on cost reduction and growth. However, most of these initiatives are stand-alone and disjointed, and hence not able to provide sustainable results. Though companies are undertaking cost reduction to enhance competitiveness, only 36 percent executives are confident of sustaining these cost benefits. Eighty-two percent of businesses are reinvesting savings but only one-third of executives believe reinvestment priorities are in line with business strategy. Similarly, only 33 percent feel their companies are doing enough on sustainability.

For sustained competitive advantage, companies need to drive a strategy focused on three interdependent fronts: Growth and Customers; Profitability; Sustainability and Trust (GPS). The journey to sustainable growth starts with creating a growth agenda aligned with business goals, establishing robust and sustainable cost management for generating the fuel for growth, and building trust with the customer and society (see Figure 1).

Digital technologies are creating bold targets for “Should Be” costs. Insights into “Should Be” performance are creating a new quartile Q0, which is way ahead of the traditional definition of leading performance (quartile Q1).

While 64 percent companies realize the importance of such an interdependent strategy, only one-third show signs of following it. To survive digital disruption, companies need to start this journey now.

Once the “working money” available with the organization is optimized through the ZBx approach, it could be reinvested in areas aligned to the organization’s business strategy and used for creating customer or employee value proposition. The growth agenda in the digital age requires combining the basics with new pathways of growth. Digital technologies should be used to interpret signals of disruption, build visibility into what creates value, accelerate innovation and organize for speed. In a recent survey, 54 percent of leaders identified reinvesting savings in digital as a priority area. They agree that a digital business is an enabler of strategic growth (85 percent).2

For Philips, exploring the answers to “what to disrupt” and “what do the customers want” was critical in helping it move from selling light bulbs to selling light while enabling energy saving.

It is not possible to grow or generate profits without factoring in sustainability and establishing trust with all stakeholders involved. Thanks to digital, accountability of a company extends beyond customers and shareholders—it is to the society. It is important for companies in the digital age to assess how to increase profitability and grow by doing more with few resources, leveraging new business models of the circular economy to drive growth, establish trust and ensure positive impact on society. Only this will help companies scale at speed and “secure a license to grow.”

A global beverages manufacturer has committed to secure all its purchased electricity from renewable sources by 2025. This will shift 6 terawatt-hours of electricity annually to renewable sources, helping the company reduce its carbon footprint by 30 percent. This initiative decouples growth from environmental impact while increasing societal impact, thus fostering trust and “securing a license to grow.”

To improve the bottom line and grow in the digital age, companies need to formulate an interdependent GPS strategy, and start the journey now by:

Digital disruption is redefining competitiveness across industries the world over. New entrants are challenging established players through technology-led innovations.

GPS STRATEGY FOR A COMPETITIVE EDGE

CREATING FUEL FOR GROWTH

GROWING IN THE DIGITAL AGE

ACHIEVING SUSTAINABLE GROWTH

CONCLUSION

Digital technologies are helping these new entrants reduce the complexity of systems and operations, and experiment continually with new products and services. It is enabling them to improve efficiencies, increase agility in operations and lower costs.

FIGURE 1. THE GPS STRATEGY AND ITS COMPONENTS

STAYING AHEAD

DIGITAL AGEIN THE

I

EI DA

A

Case study: A consumer goods company used industry-specific analytics to redefine the benchmarks. This resulted in huge savings as illustrated below:

Brilliant BasicsBreaking New Grounds

Circular EconomyTrust and TraceabilitySustainable Value

ZBS (Zero-Based Spend covering G&A,or general and administrative expense)ZBO (Zero-Based Organization)ZBSC (Zero-Based Supply Chain covering COGS or cost of goods sold)ZBFO (Zero-Based Front Office covering price and revenue; sales,marketing and service spend)

COMPETITIVE AGILITY

GROWTH & CUSTOMERS Fuel for

growthLicense to grow

Trusted company

SUSTAINABILITY

& TRUST

PRO

FITA

BILI

TY

SG&A Spend (ZBS) Headcount—Internal Cost (ZBO)

Q0 Q1 Q23.462.29

0.501

742

Media Buying Cost as % of net revenue (NR)

Digital content management

8.15Q3 Q4

Q0 Q1 Q21,441

Facillity Benefits Cost $ per FTE

Flexible vending machine (”The canteen of the future”)

1,798Q3 Q4

Q0 Q1 Q22.953

Logistics Tier 2 Distribution as % of NR

Real-time tracking solution and last-mile delivery optimization

4.738Q3 Q4

Q0 Q1 Q20.25 0.390.07

Procurement Operation Cost as % of NR

0.48Q3 Q4

Supply Chain (ZBSC)

Q0 Q1 Q211% 21%8%

Direct Labour Cost as % of COGS

26%Q3 Q4

To be competitive in a digital world, companies must operate at a significantly lower cost. To optimize costs and fund growth opportunities, companies need to undertake a sustainable profitability improvement program which focuses on enterprise-wide cost reduction—from operating models and manufacturing to supply chains, and everything in between.

Implementing ZBx, a robust and sustainable enterprise-wide, closed-loop cost improvement program, will help achieve this. ZBx helps answer the question “what should my costs be” rather than “how do I reduce them by some percent.” This approach could prove to be a real differentiator, creating sustainable savings through forensic visibility; incorporating savings in the budget; establishing accountability and ownership; and inculcating a cost-conscious culture. The key components of ZBx, which help optimize costs, are detailed below.

A combination of these approaches will create a synergetic effect and will help companies achieve profitable growth. An example of this synergy can be seen in the interplay between ZBS and ZBO—optimizing resources and establishing an agile operating model through the ZBO approach will naturally ensure lesser spend on indirect costs. A global beverages company could save more than US$3 billion by applying these approaches simultaneously to become one of the most profitable consumer goods companies globally. Similarly, Mondelez International could save US$1 billion through a combination of ZBS and ZBO approaches.

FIGURE 2. THE KEY COMPONENTS OF ZBX

Have I reduced complexity in my product and part portfolio?

Have I optimized my COGS?

How much of my overhead spend is aligned to my growth objectives?

How much of my spend is non-working?

How do I design my organization for what it needs tomorrow rather than modify

what it is today?

Have I fully optimized my prices to maximize revenue?

Are my service levels optimized to serve higher-value customers?

How to optimize my marketing, sales and service spend (FTE and non-FTE) while delivering the desired customer experience?

ZERO-BASED ORGANIZATION

(ZBO)

ZERO-BASED SPEND (ZBS)

ZERO-BASED FRONT OFFICE

(ZBFO)

ZERO-BASED SUPPLY CHAIN

(ZBSC)

ZERO-BASED SPEND (ZBS)

It focuses on reducing overhead costs and on achieving general and administrative spend excellence through price and consumption optimization. The closed-loop approach provides deep visibility into all expenses and helps identify, prevent and eliminate unproductive expenses.

ZBS has helped a leading integrated travel and travel-related financial services company in India reset its future overhead costs to 84 percent of its current level. It has helped a leading engineering company achieve “should be cost” for key indirect categories, which is 10 percent less than current costs. Another leading engineering, procurement and construction player eliminated “non-working” overhead spend and optimized indirect costs by 24 percent. All these companies put the savings in targeted reinvestments aligned to their business goals.

ZERO-BASED ORGANIZATION (ZBO)

ZBO focuses on aligning the operating model and organization with the business strategy. It helps in enhancing manpower productivity through benchmarking, span of control optimization, pyramid refresh, and role, process and technology optimization. It is all about shifting talent to value-creating roles and differentiating capabilities required to win.

By adopting the ZBO approach, a leading player in the electrical and automation business could create a future-ready organization, and enhance manpower productivity by 40 percent in its project business. A ZBO exercise undertaken during the merger of two major food companies helped identify a 30 percent reduction in headcount with expected savings of US$15 million. ZBO helped these companies optimize “working money” in hand.

ZERO-BASED SUPPLY CHAIN (ZBSC)

It creates forensic visibility by mapping all direct costs across the supply chain to standard categories. It optimizes costs by identifying improvement initiatives for both fixed and variable supply chain costs, as well as by identifying initiatives that improve operation through price, performance and value engineering.

By implementing the ZBSC approach, a leading player in the electrical and automation business in India could reset its future COGS spend to 92 percent of its current level. Similarly, a global beverages manufacturer could identify a US$207 million (4 percent of cost of goods manufactured) cost optimization opportunity through ZBSC.

ZERO-BASED FRONT OFFICE (ZBFO)

It focuses on revenue optimization and marketing spend excellence. ZBFO is all about maximizing customer economics. ZBFO helps optimize revenue through pricing, sales and channel strategy. It provides deep visibility to all front-office components to identify, eliminate and prevent unproductive activities on an ongoing basis.

By adopting the ZBFO approach, a manufacturing major reduced the sales spend by 10 percent while growing revenues by 58 percent over three years. By focusing on basics and investing in the right technologies, an Indian automotive major enhanced its market share by 15 percent in the small commercial vehicle segment and by 4 percent in the medium and heavy vehicle segments in target geographies.

CREATING A GROWTH AGENDA

Companies need a growth strategy that focuses on the future. This might mean enhancing existing businesses, improving value proposition or investing in new businesses and digital technologies to gain the required agility. Companies must not only keep the traditional businesses on track, but also pave the way for innovative strategies enabled by digital. They need to generate funds for investment to capitalize on available opportunities quickly.

CREATING FUEL FOR GROWTH

To improve profitability and release funds for the growth agenda, companies must proactively identify activities that drive value and take out costs that are not contributing to business goals. To facilitate the same, they should adopt a robust and sustainable closed loop, enterprise-wide cost improvement program such as ZBx.

ACHIEVING SUSTAINABLE GROWTH

Establishing a level of trust with customers, adopting business practices that are sustainable and transparent by leveraging digital technologies and balancing social acceptability are key to creating a solid foundation that allows organizations to scale at speed.

2 Increasing Agility to Fuel Growth and Competitiveness, Accenture, January 2016

AS DIGITAL REDRAWS THE RULES OF COMPETITIVENESS, COMPANIES NEED TO REWORK THEIR STRATEGIES.

AUTHORS

Manish Chandra

Managing DirectorAccenture Strategy - OperationsAccenture in [email protected]

Kris Timmermans

Senior Managing DirectorAccenture Strategy - [email protected]

Enterprises and business leaders must have a vision to rotate to this new world of technology to get ahead in their business and industry. CIOs can adopt a three-pronged approach to deal with the increasing complexities and demands of the IT function in the enterprise.

• First, they must automate repeated tasks, activities and manual effort to optimize the quality, speed to market, and productivity. We will discuss the aspects of intelligent automation in more detail in this article.

• Second, enterprises must rotate from legacy to New IT. New IT represents a fundamental shift from traditional technology strategy, development and delivery models. It uses new architectures, methods and tools to drive a shift from “project” orientation to continuous development and liquid delivery of application services. Fueled by innovation, New IT is bringing to life agile and collaborative delivery models to deliver disruptive business outcomes.

• Third the IT organization must consolidate to centralize and standardize its operations, and simplify the IT environment. Consolidation in order to simplify is key to tackle the complexity of the technology landscape, especially as more tools and platforms get defined in the era of automation, artificial intelligence, Internet of Things, and so on.

Accenture refers to this three-pronged approach as the ARC Strategy to lead in New IT (see Figure 1).

Intelligent automation is clearly a game changer when it comes to improving complex problem solving, risk analysis and business decision making. However, enterprises are not fully aware of where they can apply automation, how to automate to achieve the best results, and how to deal with a multidimensional technology world having a plethora of tools and offerings (see Figure 2). This “choice overload” leaves them uncertain about the best approach to deal with the complexity.

Successful implementation of intelligent automation requires an approach that is people-first, business-oriented and technology-rich. Accenture has identified six aspects that are key to achieving a successful implementation of intelligent automation in an enterprise.

A global beverage company leveraged automation to achieve cost reductions and business service improvements. It used Accenture myWizard®, an intelligent automation platform, to embed advanced analytics, insight and automation capabilities. The global major experienced 65–70 percent reduction in overall ticket volume, 60–65 percent reduction in critical incidents and 10–15 percent improvement in system availability—leading to a reduction of total cost of ownership of several million dollars.

THE ARC (AUTOMATE, ROTATE, CONSOLIDATE)

STRATEGY

THE APPROACH TO AN INTELLIGENT AUTOMATION TRANSFORMATION

Technology today is increasingly driving business growth, dramatic levels of productivity and cost efficiencies. This is a remarkable shift compared to the role that technology was playing earlier—that of supporting the business. Technology today is disrupting industries by reinventing business models, processes and customer engagement. Correspondingly, the CIO’s mandate has grown to being an agent of speed and change, driving value in the business, and even disrupting the status quo through transformative technologies.

FIGURE 1. THE ARC STRATEGY

FIGURE 2. CONCERNS OVER ADOPTION OF INTELLIGENT AUTOMATION

INTELLIGENT AUTOMATION IS MATURE ENOUGH TO BE PART OF THE TECHNOLOGY FOUNDATION OF ALMOST EVERY BUSINESS. YET, THIS CRITICAL COMPONENT OF “NEW IT” SEEMS SOME DISTANCE AWAY FROM BROAD, MAINSTREAM ADOPTION. THERE ARE A FEW WAYS TO GET WHERE COMPANIES NEED TO BE.

FIGURE 3. FOUR PILLARS OF DIGITAL CORPORATE CULTURE

Enterprises that can totally transform themselves through the opportunity that intelligent automation presents will be best positioned to achieve significant productivity gains, support humans in complex problem solving, make humans and machines more powerful than they are on their own, and enable greater insights to drive the business forward. The era of intelligent automation is here and now, and it is time to accelerate.

CONCLUSION

INTELLIGENT

AUTOMATE

Drive productivity using intelligent automation

including analytics, robotics and artificial

intelligence (AI).

ROTATE

Ensure a smooth transition to New IT by replacing legacy systems with cloud-

based, agile and liquid IT systems using

DevOps processes.

CONSOLIDATE

Consolidate multiple vendors providing a range of technology

support to find the best fit-for-purpose solutions, institute accountability

and scale services.

• Reach the next level of productivity through automation?• Derive better and new insights from data?• Orchestrate and securely manage automation

investments across the enterprise?• Reassure my workforce about the increasingly complex

blend of humans and machines?• Deliver more predictable services?

HOW DO I...

StrategyIt is critical to focus not just on the selection of the right tool for automation, but on the right goals or business outcomes such as better customer experience, faster cycle time or lower cost. The strategy should include a holistic plan for executing automation solutions across multiple business functions, plus a systematic way to identify and track benefits.

Scope The holistic strategy has a direct impact on the scope of technology intervention. Technology and business leaders should decide whether the scope of applying automation and AI is to make internal operations more efficient or to create greater impact on the business. Within this larger framework of business outcomes, CIOs need to map out the level of automation required for each function and process. For instance, if the goal is to improve sales by targeting customer segments, CIOs can opt for a sophisticated analytics solution to map customer behavior. If the objective is customer retention through better service, chat bots can be brought into play.

Change ManagementThe scale of disruption brought about by AI implementation requires active change management, particularly in culture and capability. As robotics takes over repetitive tasks and analytics redefine decision making, the work culture in an enterprise needs to change to capitalize on the efficiencies and opportunities provided by the insights and productivity gains from AI. Building the right capabilities among the talent pool and across the enterprise is key to achieve an intelligent automation transformation.

Workforce TransformationAutomation requires that companies transform the relationship between humans and machines. New roles and skills should be developed, along with the right mix of technical knowledge and business acumen. While the C-suite leaders will need to devise AI-driven strategies, executives should be ready to explore cross-functional automation programs. At the implementation level, people need to learn to work with machines and develop new oversight capabilities. Overall, an enterprise-wide workforce transformation, including upskilling, is needed to make the most of automation tools, artificial intelligence and machine learning.

DataWhile enterprises have been generating large volumes of data all along, data itself has not always organized and harnessed to its full potential. For artificial intelligence to work best, it needs to be given the right data in the first place. So, having a data strategy that focuses on accuracy and quality is important for intelligent automation to add value to the business. Artificial intelligence also gives data a new voice as it allows access to a wealth of inputs. Thus, data becomes a key link in automation transformation—and a core competency in need of C-level investment and strategy.

Ecosystem InnovationThe automation and AI landscape thrives on collaboration and innovation. There is no one single automation or AI solution that can address all problems. The best automation solutions are technology-rich, integrating multiple technologies—from software vendors and open source ecosystem—that together create a highly adaptable, nimble business capability. An open, technology-agnostic architecture enables businesses to change the underlying components to suit their purpose, taking advantage of the best of the entire ecosystem. Therefore, it is important to have the right technology partner with the knowledge of and access to solutions offered by a range of vendors. In the fast-evolving intelligent automation landscape, it is critical to keep pace with the latest innovation to stay ahead in the market.

Adopting intelligent automation, from the perspective of these six aspects, can optimize the gains of technology transformation for enterprises. A successful intelligent automation implementation will also help enterprises master the four pillars of digital corporate culture and become future-ready (see Figure 3).

BECOME BUILT FOR CHANGEBe built for change, which may mean changing the way your enterprise operates. Automation plays a very big role in achieving this.

BE DIGITALLY RISK-AWAREFace and factor in newer risks that traditional businesses were never exposed to: security, consumer privacy, data transparency and responsible use of technology.

ECOSYSTEM INNOVATIONEmbed intelligent automation into the fabric of the business and make data-based decision making pervasive.

EMBRACE DISRUPTIONIntelligent automation changes the rules by innovating with new products and services on an unprecedented scale. View disruption as an opportunity to rethink what you do and how you do it across the enterprise.

AUTHOR

Bhaskar Ghosh

Group Chief ExecutiveAccenture Technology [email protected]

ANALYTICS HAS EMERGED AS A KEY DIFFERENTIATOR IN BUSINESS GROWTH. DESCRIPTIVE, PREDICTIVE AND PRESCRIPTIVE ANALYTICS IMPLEMENTED AT SCALE PLAYS A CRITICAL ROLE IN GAINING COMPETITIVE ADVANTAGE.

Companies in India are increasingly realizing that analytics plays a critical role in staying competitive in the digital age (see box). Analytics is no longer limited to retail companies and startups focused on customer experience; it is powering transformation in manufacturing, life sciences, automotive and even oil and gas, among other sectors.

Indeed, some Indian companies have already started on their analytics transformation journey.

• A leading Indian car maker uses an analytics-based pricing model that allows decision making at the micromarket levels, and helps optimize variable marketing spends and improve profitability.

• A large metals company in India detects violations of safety norms and creates a safer shop floor work environment with the help of video analytics.

• A leading Indian engineering and construction company relies on drones for remote monitoring of its project sites, uses predictive analytics to optimize inventory and enables its workers through wearable connected devices.

• A leading Indian consumer goods firm uses analytics-driven insights to guide its marketing investments and media buying, to achieve higher return on investment.

Descriptive, predictive and prescriptive analytics implemented at scale is helping companies move from data to decisions faster, and address a range of issues—from market share and pricing to employee engagement—to deliver measurable outcomes (see Figure 1).

FIGURE 1: THE ANALYTICS JOURNEY TO ROI

However, many established companies, including those using analytics solutions, are still to realize the full potential of analytics. For instance, in these companies, business intelligence is often unaligned to business strategy as data tends to stay siloed in different parts of the enterprise and is used for different goals. Or, in other instances, the investment in analytics solutions is not accompanied by the necessary organizational changes and the enterprise fails to achieve the intended business outcome.

Digital natives, on the other hand, are unencumbered by legacy infrastructure, and are better equipped to realize the value of analytics.

To compete, established enterprises need to embed analytics across the entire value chain and become “intelligent” businesses or enterprises. The march of technology is already pushing the manufacturing sector in this direction. As manufacturing is radically changing with the use of analytics, sensors and intelligent automation, connected intelligent factories are looking at achieving unprecedented levels of operating efficiencies and discovering new sources of revenue through smart products and services.

DISRUPTING TRADITIONAL PROCESSES WITH ANALYTICS INSIGHTS

Industry 4.0—where connected machines share data and automatically take decisions to execute tasks—is already a reality in advanced economies. Lufthansa Technik,1 the Lufthansa Group subsidiary that provides maintenance, repair and overhaul services for aircraft, engines and components, can predict precisely when components for aircraft should be replaced through a platform called Condition Analytics. Remote control monitoring and data analytics are also helping companies such as Claas,2 an agriculture equipment maker, to automatically transmit information from its harvesters to farmers or grain experts so that these can be operated through a smartphone app. Digital disruption—in which analytics plays a key role—is redefining not just business models, but also resulting in innovative new products and services.

Against this backdrop of the inevitability of disruptive change, how should enterprises build analytics capabilities that are sustainable and scalable to achieve tangible value?

BUILDING ROBUST ANALYTICS CAPABILITIES

Before addressing this challenge, it is important for companies to understand two things about data. First, it is not a static entity and flows like a river throughout the organization. And second, analytics is not about randomly looking for useful patterns. Companies must begin with identifying an urgent business challenge to solve—such as optimizing costs, improving the bottom line or increasing productivity—and then work backwards. The Indian automobile major, for example, identified increasing profit margins as the business outcome before it implemented an analytics-based pricing model. Data needs to be used as a strategic asset (see Figure 2).

FIGURE 2: ANALYTICS JOURNEY TO HIGH PERFORMANCE

After identifying the targeted business outcome, companies should assess their talent, tools and investments in analytics before it undertakes the analytics transformation journey. The DELTA model—a framework that measures maturity4—could prove useful to assess the current capabilities and the route map to move along the five stages of the model. The journey from Stage 1 (where there is little management commitment to analytics) to the Stage 5, the highest level in which analytics is a strategic competitive advantage with C-level accountability, can take time. The leading Indian car maker mentioned earlier, for example, went through a self-assessment to arrive at an objective to move from Localized Analytics (Stage 1.5) to Analytics Competitors (Stage 5) over a period of six years.

ANALYTICS OPERATING MODELS IN THE NEW

To create a new operating model that supports an analytics-led transformation, many elements need to come together—from identifying enterprise-wide priorities (as opposed to “value islands”), to defining the analytics value proposition across functions, to the relevant metrics for measuring the outcomes. A strong leadership will be needed to drive this strategic change as well as to acquire and retain scarce talent. Appointing a chief data and analytics officer to steer the organization’s analytics journey could set the right tone.

The leadership must also mould a cultural shift that will enable everyone in the enterprise to work toward the same business goals with analytics (see Figure 3). This could also involve collaboration with vendors, research organizations, startups and other players in the digital ecosystem.

To retain the right analytics skills, companies could deploy “pod” teams of data scientists, analytics modellers, visualization experts, data engineers, business analysts and business domain experts.

As speed and scalability are of the essence, leaders should ensure that their governance structures quickly empower and drive programs, and use the key metrics that can improve business performance.

Last but not the least, to optimize investment in analytics, companies first need to identify the priority capabilities, prove the value achieved in days and weeks (not months), and then identify a path to scale.

CONCLUSIONThese best practices could help companies in India derive enormous value from analytics and go beyond improving core processes. With new tools leveraging powerful algorithms and deep learning capabilities, companies can aim to build new products and services, design efficient new operating models, create new markets and offer amazing customer experiences as intelligent, insight-driven enterprises.

ISSUES

Shrinking market share

Pricing pressures

Customer defection

Fragmentation and complexity

Ine�icient operations

Aged platforms and systems

Employee engagement

Fraud and non-compliance

Expanding market share

Enhancing cost and cash advantage

Customer loyalty

Speed to insights

Operational excellence

Leading edge platforms and systems

Winning the war for talent

Reduced risk and fraud

Data Analytics Insights Actions OUTCOMES

Descriptive Analytics(the ‘what‘)

Prescriptive Analytics(the “so what”...

and the “we should”)

Com

petit

ive

Adv

anta

ge

Degree of Intelligence

What’s

the best

that c

an happen?

What w

ill

happen next?

What if

these

trends c

ontinue?

Why i

s this

happening?

What a

ctions

are needed?

Where exa

ctly

is th

e problem?

How many,

how

often, w

here?

Optimization

Predictive Modeling

Forecasting

Alerts

Query Drilldown

Ad hoc Reports

Standard Reports

Statistical Analysis

What

happened?

Predictive Analytics(the “what if‘...

and the ‘now what‘)

BUSINESS LEADERS

1 - Strategic Business Direction2 - Line-function Managers3,4,5,6 - Analytics Operating Model Skills

REGIONAL/PRODUCT/FUNCTION MANAGER

DATAMANAGEMENT

AND MIS

ANALYTICSMODELLING

BUSINESSSTEWARDS

IT SYSTEM DEVELOPMENT AND MAINTENANCE

1

6

4

2

5

3

Accenture’s Analytics Operating Model Benchmarking study reveals that analytics leaders tend to work with a center of excellence (CoE) for analytics, instead of working with a centralized or a distributed model with islands of excellence in different business functions. An “analytics academy” also helps raise business acumen of analytics resources and analytics acumen of business resources.

FIGURE 3. THE ANALYTICS ORGANIZATIONAL STRUCTURE

AUTHORS

Narendra [email protected]

Chief Analytics Officer Accenture AnalyticsAccenture

Saurabh Kumar [email protected]

Managing Director and LeadAccenture AnalyticsAccenture in India

1 Industrie 4.0: Analytics everywhere: What Germany’s new initiative is teaching us about the power of analytics by Arnab Chakraborty and Thomas D. Meyer; http://analytics-magazine.org/industrie-4-0-analytics-everywhere

2 Industrie 4.0: Analytics everywhere: What Germany’s new initiative is teaching us about the power of analytics by Arnab Chakraborty and Thomas D. Meyer; http://analytics-magazine.org/industrie-4-0-analytics-everywhere

3 Sales gets a machine-learning makeover; H. James Wilson, Narendra Mulani, Allan Alter; MIT Sloan Management Review; May 17, 2016

4 Competing on Analytics: The New Science of Winning – Jeanne G. Harris and Thomas H. Davenport, Harvard Business School Press. DELTA: Data, Enterprise, Leadership, Talent, Analysts

To tap these opportunities, businesses need to go beyond adopting new technologies—such as cloud and Big Data—through stand-alone initiatives. An integrated approach across adoption and implementation of technology is required. Accenture has been helping clients do just that—by innovating in the New through New IT. It is not just about improving the core IT setup, but also about deriving actionable insights through available data and making organizations innovation-ready by tapping into a multi-talented and liquid workforce. By moving to New IT, businesses can enhance their capabilities significantly to deliver new customer experiences, at much greater speed with higher quality products.

While most companies—particularly their CIOs—are acutely aware of the need to keep up with the fast-evolving IT landscape, few have a road map to implement changes and translate the technology advantage into business outcomes. Leading in the New is not a single event; it is a deliberate and continuous journey.

Leading in the New with strong business and IT alignment involves a three-pronged approach—transforming the core business, growing the core business and pivoting to the new. Each of these approaches need to be supported with key changes in the IT setup to power business agility and build digital trust (see Figure 1).

IT has come a long way—it is no longer a back-end function. It has become a key driver for business growth and differentiation. Digital disruption has redefined the role of information technology in organizations.

LEADING IN THE NEW

This transformation, coupled with changes in customer behavior, offers a range of new opportunities to drive business.

FIGURE 1. LEADING IN THE NEW IN INFORMATION TECHNOLOGY SYSTEMS

1 Source: Accenture Technology Vision 2017 https://www.accenture.com/us-en/insight-disruptive-technology-trends-2017

TECHNOLOGY INNOVATIONS ARE TRANSFORMING THE WAY BUSINESSES ARE RUN, AND INFORMATION TECHNOLOGY CAPABILITIES ARE PLAYING AN EVEN MORE CRITICAL ROLE IN DRIVING BUSINESS OUTCOMES.

TRANSFORMING THE CORE

The world is increasingly becoming unpredictable and business disruption is the norm rather than the exception. A key imperative for the business is to variablize the cost base to be able to react to the market challenges and opportunities. New IT presents an opportunity to transform the core IT systems and infrastructure, enabling companies to move away from monolithic legacy systems to platform-based liquid applications. Effective deployment of cutting-edge technologies to digitize core operations can result in considerable speed, consistency and quality in delivery capabilities.

An important aspect of New IT is cloud computing. Cloud-based applications offer a new operating model, allowing companies to scale up or down easily and upgrade to the latest technologies. Companies can slash fixed costs of large IT infrastructure investments and opt for cloud-based flexible solutions from third-party providers that involve variable costs. The implications of this structural change goes beyond financial benefits to key business and competitive advantages. It provides agility, scalability and speed in business operations that are key to succeed in the digital era.

Another business advantage of transforming the core IT systems is freeing up investments on mature platforms and enterprise resource planning (ERP) processes through effective use of cloud, outsourcing and intelligent automation. By rationalizing legacy apps and moving toward a fully platform-driven and cloud-first approach, companies can target not just improved ROI, but also reinvestment into growing the business through innovation and collaboration.

Many leading companies have already tapped this opportunity. The CIO Strategic Partner Index run by IDC reports that 29 percent of IT leaders are spending more than half their IT budget on external providers—an evidence of the growing use of cloud-based solutions and platform-driven infrastructure.

GROWING THE CORE

Companies can leverage New IT to grow the core by doing things differently. One key driver of competitive advantage is the use of analytics for actionable insights. The power of Big Data and analytics can be harnessed to respond to changing market conditions and customer behavior.

As technology is integrated into every action people take, 2.5 quintillion bytes of data are produced every day. It provides an unprecedented opportunity for companies to use more sophisticated analytics to understand how people behave. Data becomes the new currency and companies need to have a well-defined data strategy, a strong data governance framework and robust data management. By becoming a data-driven enterprise, companies can leverage New IT to draw actionable insights to make smarter decisions.

New IT enables another differentiator for businesses—digital trust. Ensuring security, privacy and digital ethics— the building blocks of digital trust—are core to a company’s digital industry strategy. This trust drives adoption not only by consumers, but also other industry members and government regulators. New digital technologies such as blockchain, smart contracts, differential privacy and homomorphic are defining new levels of digital trust. For instance, Google’s Better Cities initiative uses differential privacy with data gathered from Google Maps on mobile without revealing any individual’s trip. This helps the company build digital trust.

Another key element of New IT that can help companies grow the core is automation. Robotics and artificial intelligence can enable companies to do things differently. A leading steel manufacturer in India, for example, is improving the safety features of its steel plants by capturing videos of its workers working amid heavy machinery. Analytics derived from these videos with the help of algorithms sets off safety alarms if any worker works too closely to a machine.

General Electric (GE), on the other hand, leveraged data analytics on customer behavior to move toward an as-a-service business model. It is bundling a digital predictive maintenance program as a service along with the purchase of its turbines. GE has also launched Predix, a cloud-based Industrial Internet of Things platform-as-a-service, which enables machine-to-machine communications and industrial-scale analytics.

PIVOTING TO THE NEW

New IT plays a key role in helping businesses innovate and lead in the New. Companies need to identify new areas of growth and innovation apart from their focus on existing core business—and balance investments between the core and the New.

To achieve innovation at scale, companies need to foster a culture of innovation—not just in its strategy but at the organizational level, in the way they operate and in building an ecosystem of partners. Take the instance of liquid workforce. Labor platforms are supporting distributed teams that are quickly assembled to complete projects and then dispersed. With this flexibility, companies are moving toward models where they run their organization less like a hierarchy of static business processes, and more like an open talent marketplace. These talent marketplaces are not only more efficient, but also enable companies to change rapidly and innovate in ways that were not possible before.

WordPress parent company Automattic has become the ubiquitous leader in content management on the Internet with 25 percent of websites using the Automattic platform. And driving this is a staff of only 450 people across 45 different countries who work in project teams of two to 12—enabled through collaboration tools.

In the fast-evolving and disruptive digital era, companies need to be agile, dynamic and innovative to lead in the marketplace. New IT with its cloud-enabled, analytics and digital solutions provides the technology framework that can drive growth, profitability, differentiation and innovation. It enables companies to build better IT infrastructure, achieve significant cost reductions, deliver high-quality products and services, and deliver value to their customers.

CONCLUSION

Release investment capacityfrom mature platforms, ERP,cloud, BPO and intelligent

automation.

Redirect funding to get to "brilliant basics"

for app development, mobile,digital, supply chain and

marketing.

Identify new areas and scale them using an innovation

framework. Balance investment between the core and the NEW.

TRANSFORM THE CORE

IMPLICATIONS FOR IT

GROW THE CORE PIVOT TO THE NEW

Rationalize Legacy Apps

and Estate

An Innovation

Culture

Right-source Skills and Services

Intelligent Automation

Extended Ecosystem

Innovation at Scale

Flexible Delivery

Actionable Insight

Teams that are Inspired

POWERING BUSINESS AGILITY, SPEED AND DIGITAL TRUST

PlatformDrive.

Cloud First

Flexible Cost Base

Modernize Digital Core

Cutting-edge Technologies

Deployed Smoothly into

Landscape

Digital Identity and

Security

AUTHOR

Nachiket Sukhtankar

Senior Managing Director and LeadAccenture TechnologyAccenture in [email protected]

ARTIFICIAL INTELLIGENCE (AI) HAS THE POWER TO FUNDAMENTALLY CHANGE THE TRADITIONAL WAYS IN WHICH BUSINESSES OPERATE, AND TRANSFORM WHAT PEOPLE CAN ACHIEVE BY WEAVING TOGETHER SYSTEMS, DATA AND PEOPLE.

Discussions and projections about the possibilities of automation and AI have been around for decades. But recent years have seen AI take off at scale, with the increased footprint of digital technology and advances in the application of AI technologies.

Today, leading organizations are increasingly using smarter machines for their processes.

AI MORE THAN A TECHNOLOGY TREND

PUTTING AI TO WORK

The goal is not just performing the same tasks faster and more efficiently, but to empower creation of new products and services on a scale that was not feasible previously. Accenture research reveals that by 2035, AI can double economic growth rates in 12 developed countries, and boost labor productivity by up to 40 percent.1

At the simplest level, it curates content for people.

Virtual assistants are helping schedule meetings—taking away the “pain” of accessing scheduling software to find a time, create an event and type the details.

In a more significant role, AI applies machine learning to guide actions toward the best outcome.

Online automated investment advisor Wealthfront tracks account activity and automatically applies that behavior to advise clients individually. It uses AI to analyze individual transactions, and provide recommendations on diversification, taxes and fees specific to a client’s financial profile and risk tolerance.

At the height of sophistication, AI learns from past actions and collaborates tasks across multiple channels to achieve the desired outcomes. Amelia—an AI platform from IPsoft with natural language processing capabilities—supports maintenance engineers in remote locations. Having read all the manuals, Amelia can diagnose a problem and suggest a solution. She also recognizes the gaps in her own knowledge and takes steps to close them. When presented with a question she cannot answer, she escalates it to a human colleague, and then observes how the person solves the problem.

1 Why Artificial Intelligence is the Future of Growth https://www.accenture.com/t20170206T005353__w__/us-en/_acnmedia/PDF-33/Accenture-Why-AI-is-the- Future-of-Growth.PDF#zoom=502 Accenture Technology Vision 2017 https://www.accenture.com/us-en/insight-disruptive-technology-trends-20173 Accenture Technology Vision 2017 https://www.accenture.com/us-en/insight-disruptive-technology-trends-20174 Getting Robots Right https://www.accenture.com/t00010101T000000__w__/au-en/_acnmedia/PDF-36/Accenture-16-4014-Robotic- Process-Auto-POV-FINAL.pdf

A global banking and financial services company recently mandated its procurement team to focus on more rewarding, higher value work. This required using robotic process automation (RPA) to automate invoice processing, noncompliance validation, vendor master data, catalogue creation/amendments, contract uploads, vendor on-boarding and global sourcing.

Benefits: A more motivated team now delivers new value and achieves more for the business even as the organization achieves productivity savings of approximately 20 percent.across the function.

An international retailer used RPA to drive greater accuracy, improve efficiency, and enhance the speed of invoice processing, validation and query resolution. The implementation was woven into several different applications to automate a previously time-consuming, error-prone matching process.

Benefits: A 46 percent improvement in efficiency and a 40 percent reduction in transaction handling time.

Workflow and analytics automation arebringing significant improvements to finance processes. One global technology company successfully replaced cash allocation processes with an automation solution that is now being systematically scaled to multiple regions.

Benefits: More than US$383,000 annual savings generated and process quality score up at 98.8 percent.

*1 US$=1.32 AU$

HIGHER VALUE WORK

INCREASED EFFICIENCY

ENHANCED SCALE ACROSS REGIONS

MOVING BEYOND A BACK-END TOOL FOR ORGANIZATIONS...

Accenture views AI as a constellation of technologies that allow smart machines to extend human capabilities by sensing, comprehending, acting and learning—thereby allowing people to achieve much more. These technologies include natural language processing, intelligent agents, computer vision, machine learning, expert systems, autonomous cars, chatbots and voice recognition (see Figure 1).

But how are organizations applying AI to redefine business process services? They are using AI to automate routine or repetitive tasks that involve analysis or crunching of data at speed and with few or no errors.

Rhizabot, for example, uses natural language interfaces to translate complex business analysis questions. Instead of humans struggling to create queries that the technology can read, it listens as a human asks a question in natural language, then generates queries that can be run instantaneously across multiple massive datasets. It completes the interaction by orchestrating back-end connections to provide the relevant results.2

The benefits can be impressive. Increased productivity, improved operational efficiency and quality, reduced cost of operations and enhanced customer satisfaction to start with.

AI IS TAKING ON MORE SOPHISTICATED ROLES WITHIN TECHNOLOGY INTERFACES

As AI gains momentum across industries, and organizations move up the automation continuum, it will herald an era of “intelligent business solutions”. Take the example of Siemens’ “lights out” manufacturing plant. Siemens has automated some of its production lines to the point where they can run unsupervised for several weeks. This is a step toward a larger goal of creating a fully self-organizing factory. Here, machines will largely organize themselves, supply chains will automatically link themselves together, and orders will be directly converted into manufacturing information that is incorporated into the production process.3

Such examples of intelligent business solutions are prevalent all around us. From law enforcement agencies that use computer vision on facial recognition systems to identify a person from a digital image, to autonomous driving vehicles that use computer vision—AI is making every interface both simple and smart. In fact, AI is already playing a variety of roles throughout the user experience (UX).

FIGURE 1. THE ROBOTIC SPECTRUM

AI CAN ACT AS A CATALYST OF GROWTH AND A KEY DIFFERENTIATOR, AND BECOME A CORE COMPETENCY REQUIRING C-LEVEL INVESTMENT AND STRATEGY.

AI can drive growth in at least three important ways. First, it can create a new virtual workforce—what is commonly known as “intelligent automation.” Second, AI can complement and enhance the skills and ability of existing workforces. Third, it can drive innovations in the economy. Leading organizations are already successfully putting AI to work, using a combination of technologies from the automation continuum to achieve a range of business outcomes:

STEPS TO SUCCESS

MOST COMMON MYTH: AI WILL REPLACE PEOPLE

While the benefits of AI are widely understood, the journey to overhauling business processes should be charted carefully. Many organizations are applying technology solutions that are disparate and still need extensive human intervention to input commands. That is why following a holistic and integrated approach to AI implementation is essential to harness its full potential.

Here are five key ingredients for an effective automation program:

ESTABLISH GOVERNANCE: Take a measured approach to ensure collaboration and alignment between the COO and CTO. Follow a top-down approach to avoid clashes with other change programs.

DEFINE A ROAD MAP: Establish a clear vision and strategy for the automation initiative, and consider automation and process improvement tools that suit your business requirements.

IDENTIFY THE RIGHT PROCESSES: Not all processes are suitable candidates for automation. Analyze process characteristics in detail to identify tasks that are repetitive, manually intensive and rule-based, and can be automated.

BUILD AN EFFECTIVE CAPABILITY: Establish robust processes aligned to the broader business, IT and change framework, and enable agile delivery of tactical changes.

PLAN TALENT IMPACT: Automation has a multi-dimensional impact on the workforce. Front-office teams are most likely to welcome it as a positive development. However, for middle- and back-office operations, where the scope of automation is significant, the teams might see automation as a threat to their roles. Therefore, it is important to think through the best way to secure stakeholder buy-in.

Companies that adjust their organization and culture to incorporate intelligent automation as co-workers—rather than people replacements—could reap important rewards: more reliable performance and insight, extension of services to previously unprofitable markets (such as lower-end retail markets and smaller institutions) and continuing cost reductions. Automated intelligence tools and virtual workforces could drive a new, more productive relationship between people and machines through deeper analytics and recommendation engines, maximizing client services and product needs.

While we believe that AI will displace some jobs, it will not only fundamentally change traditional ways of operating for business and individuals, but will also create new categories of jobs to create, train and maintain AI systems. Machines offer strengths and capabilities (scale, speed and the ability to cut through complexity) that are different from—but crucially complimentary to—human skills. We believe that AI represents an entirely new factor of production that enables people to make more efficient use of their time and do what humans do best—create, imagine and innovate new things. Put another way, with AI, our goal is not to create superhumans, but to make humans super.

FACT: AI DELIVERS BETTER OUTCOMES WHEN PAIRED WITH PEOPLE

ACCENTURE’S VIEW POINT

CURATOR

ADVISOR

ORCHESTRATOR

BASIC AUTOMATION: MINIBOTS

Adapting existing applicationsoftware to complete a process.

Primarily based on XL,AutoHotKey and Visual Basic.

UNIFIED DESKTOPS/MASHUPS

Multiple screens are consolidatedinto a single view. Suitable for

contact center type applications.

MORE PROVENINCREASED “INTELLIGENCE”

ROBOTIC PROCESS AUTOMATION

Automation of transaction and workflow activities by handling input, processing and output of

data across systems.

ARTIFICIAL INTELLIGENCE COGNITIVE ROBOTICS/

VIRTUAL AGENTS

Systems gain knowledge fromdata as “experience” and generalize

it. Sense, comprehend, actand learn natural language dialogue.

Source: Getting Robots Right4

AUTHORS

Manish Sharma

Group Operating Officer - Accenture [email protected]

Suvasish Mohapatra

Managing Director & LeadAccenture OperationsAccenture in Indiasuvasish.mohapatra@ accenture.com

For instance, procurement and finance departments can use a design thinking approach to streamline their processes, while HR departments can use it to rethink their end-to-end human capital strategies. Airbnb, for example, used business design to replace its HR department with an Employee Experience Group that focuses on designing extraordinary physical, emotional, intellectual, virtual and aspirational experiences—all with end users (the employees) in mind.1

In fact, in today’s complex digital world, design thinking is increasingly being used as a tool for innovation—a key to a sustainable competitive advantage. However, design thinking on its own is not sufficient—it requires design doing and design culture (Fjord’s Design Rule of 3, see Figure 1).

When the Design Rule of 3 is deployed in unison, organizations can unlock the full potential of design to transform not only their own value and performance, but also peoples’ experiences of the products or services they provide.

Design thinking, as we know it today, is a 180-degree pivot from the traditional practice of design—due to its user-centric and collaborative approach.

USER-CENTRIC APPROACH

Design Thinking keeps the user at the center of the problem-solving process. Fundamentally an exploratory process comprising overlapping spaces rather than sequential steps, it evaluates products and services from the viewpoint of users’ needs, including those they may not yet know they have (see Figure 2).

Take for instance, five years ago, who would have imagined design-driven startups such as Uber and Ola would totally change expectations around payments. Or, who would have imagined the use of voice-based devices. Today, more than three million people chat with Amazon Echo’s conversation-based assistant, Alexa. These sophisticated, intelligent experiences are the result of interactions that are simpler than ever: the Echo acts as a personal DJ, manages schedules and the home as a butler, or orders a car for a trip—and all through the process, people simply talk to Alexa.2

Design Thinking is permeating the business world, and doing so at considerable speed. Today, it is being applied to create services, devise strategies, manage change and solve complex problems.

FJORD’S DESIGN RULE OF 3

DESIGN THINKING

Design thinking uses design practices to solve complex problems within an organization’s structure or in the delivery of products and services.

COLLABORATIVE APPROACH

Organizations need to break down silos and boost cross-functional collaboration. They need to create cross-functional teams that will not only work with each other, but also with the end user to build robust solutions.

Why should organizations move from working in silos to a collaborative approach?

FIGURE 2: DESIGN THINKING PROCESSIt starts with the discovery phase—empathizing with and understanding the user and his problems—and mapping the user journey with the help of design techniques such as observation, research and ethnography.

TAP THE WISDOM OF THE CROWD

CREATE A UNIQUE EXPERIENCE

EARLY BUY-IN FROM STAKEHOLDERS

CREATE CROSS-FUNCTIONAL TEAMS

ADAPT AN AGILE WAY OF WORKING

Ideas can come from anywhere or any function. And, for ideas to work, it is important to draw from the wisdom of the crowd. This would help in anticipating issues—so that designers can work around them.

Organizations need to design for experiences in an ever-broadening context. For instance, designers not only have to think about users using their designs on a computer screen, but also on multiple screens of all sizes. In fact, they also need to think of users with no screen at all, such as voice-enabled devices.

Buy-in from stakeholders help in acceptance of the idea at an early stage, and ensure ideas are brought to market faster. In other words, collaboration on the creation of an idea makes collaboration on the implementation of the idea more likely.

Organizations need to create cross-functional teams or “clans” (a mix of designers, developers and representatives from the business side) to work closely together on the delivery of the product.

Organizations need a collaborative, flexible and agile way of working—rather than a top-down “waterfall” approach.

Design Thinking in ActionFjord helped Metrolinx, an agency of the Government of Ontario, simplify public transit for more than 1.8 million riders of streetcars, buses and subway trains in Canada. It helped create a smart card payment system that connected a variety of payment methods to enable riders to move around more conveniently. Fjord designed a universal user interface aided by easy-to-understand illustrations and on-screen controls. Launched in 2016, the smart card payment system has dramatically reduced the average transaction time and virtually eliminated payment failures.3

Design Doing in Action:Take the case of Google. Great design did not always come easy in the engineering-driven culture of Google. But in 2011, the company started crafting a common design language for experience that, for the first time, unified a vast collection of offerings into one coherent family. C-suite support, willingness to invest and strategic commitment created a program led by a core team of designers that enabled and applied design doing across Google’s diverse initiatives. An everyone-for-themselves approach to design was replaced by design becoming a central guiding force for the organization. The results speak for themselves. Google products are now perceived by many as having made great strides at improving design, according to KPCB’s 2016 Design In Tech report.4

Design thinking is just the beginning—a catalyst. What’s critical is using that catalyst to bring about a change. This is where design doing comes in.

DESIGN DOING AT WORK

DESIGN DOING

DESIGN CULTURE

DESIGN THINKING

DESIGN DOING

DESIGN CULTURE

Using design methods and mindset to solve complex problems; considering people, their context and their needs first, and using iterative prototyping to get to the best solution

Translating ideas into actual experiences; services that are not only usable but delightful and enjoyable for customers and employees to use

Building a corporate culture in which innovation is valued and design can thrive

Design thinking is a team effort. It requires a user-centric mindset and design capabilities that are deeply ingrained/embedded into the fabric of an organization—into the DNA of the organization.

1 Design in Business https://www.accenture.com/t20170117T045518__w__/us-en/_acnmedia/PDF-39/Accenture-806035- Strategy-Business-Design-POV-v03.pdf 2 Source: Accenture Technology Vision 20173 Source: https://www.fjordnet.com/workdetail/simplifying-public-transit/4 Source: http://www.huffingtonpost.com/advertising-week/time-to-re-think-design-t_b_12455924.html

This is the glue that makes design thinking and design doing work, but it is also the toughest to crack. Some of the most common challenges organizations face include hierarchies, silos, and rigid structures and roles—which are hard to break.

Many companies, including Apple, 3M and Capital One, have appointed chief design officers (CDOs) to help foster a corporate culture in which design can thrive. But just one person cannot ensure its successful adoption across the entire organization—even if that person brings an executive title and focus.

FIGURE 1: FJORD’S DESIGN RULE OF 3

DESIGN THINKING IS A STRUCTURED APPROACH TO GENERATING AND DEVELOPING IDEAS THAT ARE USER-CENTRIC, COLLABORATIVE AND HOLISTIC.

IDEATE PROTOTYPEDISCOVER

Learn about people and the

context oftheir problem

Synthesize learnings from the identified

users' points of view

Iterative ideation—

prototyping cycles

Test ideas and prototypes with

actual users

Deploy the chosen solution

and refine it

DESCRIBE TEST IMPLEMENT

AUTHOR

Mark Curtis

Chief Client Officer and Co-Founder [email protected]

Traditional models of costly long-cycle in-house research and development can no longer keep up with the fast-evolving innovation landscape, and businesses are now opting for open innovation. It allows them to use external as well as internal ideas and paths to market by partnering with digital startups. Annual investments in early stage companies are now pegged at a healthy US$73 billion—with technologies such as artificial intelligence, blockchain, cybersecurity, and augmented and virtual reality accounting for a large slice of the pie.

India has a thriving startup ecosystem that is now the third largest in the world after the United States and the United Kingdom. Tech-savvy companies across industries are adopting open innovation at varying levels of development.

Take for instance, the financial services sector. Technological innovations in payments, investment, alternative lending, insurance and consumer finance are disrupting business models of traditional financial services providers—and leading this transformation are fintech startups. In 2015-16, 76 fintech startups received funding of US$860 million. To keep up with innovation, traditional banks are partnering with startups. For example, State Bank of India (SBI) partnered with Primechain to launch a blockchain consortium.

The ecosystem in this space is also conducive to open innovation. Not only is the government promoting innovation and startups under its Startup India program, but also through its Digital India initiative. India Stack application programming interface (APIs) that allows governments, businesses, startups and developers to utilize a unique digital infrastructure to solve India’s problems are gaining significant momentum.

The startups in this sector also enjoy support from investors and accelerators, and not just from established players in this segment. Similar instances of active open innovation programs and successful incubators can be found across sectors (see Figure 1).

For large companies, open innovation is a means to inject new technology and talent into their innovation processes. However, more than 95 percent startups fail, and this poses a challenge for large organizations seeking to identify the right startup (see Figure 2).

Companies can leverage various options in their open innovation partnerships ranging from startup tourism to joint ventures—each with varying of levels of engagement and reward sharing (see Figure 3).

Building a mutually beneficial open innovation partnership is both an art and a science. While it involves a careful analysis of the potential of a startup, it also requires nurturing and building a trusted relationship. Large companies often lack confidence in a startup’s ability to move from idea to marketability in the context of a broader business strategy, while startups experience slow engagement cycles with enterprises and lack of clarity in defining the success criteria.

Such collaborations between large companies and startups can accelerate the pace of innovation, and is a win-win for both.

Over the last five years, more and more companies in India are adopting open innovation. As the Indian economy takes the next leap in digital transformation, this trend of collaborative innovation is set to rise. In our experience, while most corporates consider their engagement with startups important or even mission critical, more than 50 percent of such engagements have not delivered value for corporates and startups. To avoid this pitfall, companies need to align open innovation to their business strategy, ensure CXO-level sponsorship and partner with bridgemakers. This will ensure that the investment delivers business value and the desired outcome, and enrich all the stakeholders.

Innovation is key to market leadership—and even survival—in the digital era. Companies, the world over, are investing heavily in digital and in innovation.

THE INDIA SCENE

GETTING THE RIGHT 5 PERCENT

WINNING WITH OPEN INNOVATION

CONCLUSION

The top 1,000 companies on an average invest about US$823 billion every year in innovation, including in-house research and development, and tech acquisitions. But more money does not necessarily mean better innovation. In fact, as many as 90 percent of the tech acquisitions fail.

REIMINNO VATION

AGINING

FIGURE 1. OPEN INNOVATION INITIATIVES ACROSS SECTORS IN INDIA

Yes Bank has tied up with incubator T-Hub to set up a center of excellence to offer its products, payment gateways and open APIs to startups. It has also launched a fintech app store in partnership with iSPIRT.

RBL Bank’s Indian Startup Club is an active player in the early stage and growth venture ecosystem.

Global financial service providers, including Swiss Re and Societe Generale, have launched their startup engagement program in India.

Reliance Industries’ incubator program GenNext Hub has helped more than 100 startups.

ONGC and India Oil have setup an INR10-billion and an INR3-billion fund, respectively, for collaborating and investing in startups.

Telecom incubator Startup Village in Kochi, Kerala, aims to nurture more than 1,000 student startups and intends to invest about INR100 billion.

Reliance Jio has created an INR500-billion fund to invest in startups over the next five years. It is also working with a number of startups through its GenNext Hub platform.

Airtel acquired strategic stake in Seynse, a digital lending platform, and has joined the OneWeb initiative to provide affordable Internet access to all.

New Call Telecom has launched a US$50-million India-centric fund to promote startup companies that are managed by its parent company, New Sparta.

Procter & Gamble’s Connect + Develop program has fostered more than 2,000 partnerships in the past decade.

US discount retailer Target Corp is incubating Indian startups through its accelerator in Bengaluru.

Global players such as Lowe’s and L Brands have launched their proprietary startup engagement programs in India.

Indian retailers such as Aditya Birla Retail have been working with startups to drive innovation.

Rolls-Royce launched India Open Innovation Program (IOiN-RR) to help identify new ideas outside its traditional areas of operation.

Airbus BizLab in Bengaluru supports Indian startups in technology, finance and marketing.

Tata Motors is setting up offices in startup hubs Palo Alto, Pune, Warwick and Tel Aviv to tap into startups.

GE innovation centers in Bengaluru and Hyderabad is supporting innovative ideas in digital technology.

FINANCIAL SERVICES

OIL AND GAS

TELECOM

RETAIL & CONSUMER GOODS

MANUFACTURING

Dynamic founders and CEOsImpressive marketing materials

A compelling concept and productStrong reviews

Promise of “easy” integrationSeemingly robust proposition

Are the founders credible and respected?

How easy is it to integrate their technology and business with ours?

What is the basis of their funding and financial performance to date?

Is the idea really theirs?

How strong is their business plan for

the future?

Is it going to be a nightmare to mange?

Have they actually

delivered value?

Do customers really value

what they offer?

FIGURE 2. Checklist for an open innovation venture

However, opting for one-off startup engagements might not lead to the expected business outcome. Open innovation is a journey of multiple phases, but large companies tend to focus on the early phases—startup tourism, hackathons and proof of concept. In fact, in several cases companies tend to squeeze out the startups for a free proof of concept.

Companies need to adopt a strategic approach to open innovation and take highly coordinated steps to embrace open innovation. This involves:

Level of engagement

Rew

ard

shar

ing

STARTUP TOURISM:Visit startup hubssuch as Silicon Valley, Tel Aviv and Bangalore

HACKATHONS & HACKDAYS:Exploratory prototypebuildout sessionlasting a few daysto a few weeks

ACCELERATORS/INCUBATORS:Structured program to solve identified innovation use cases and also explore commercial options

GTM ENGAGEMENTS:Joint go-to-market engagementspecially leveraging enterprise’scustomer base

ACQUI-HIRE:Acquire smart startups to getaccess to nichetalent

ACQUISITIONS:Acquire for IP and talent apart fromaccess to client base and othersynergies

JOINT VENTURES:Create a new entitywhich will hold theIP and go to market, leveraging enterprisechannel and network

CORPORATE VENTURES:Set aside dedicated capitalto invest in startup in returnfor equity

IP CREATIONS:Create intellectualproperty (IP) that canbe commercialized if successful

Low

High

High

FIGURE 3. Types of Innovation Partnerships

ALIGNING OPEN INNOVATION DECISIONS WITH BUSINESS STRATEGY

ENLISTING A CXO-LEVEL EXECUTIVE SPONSOR

PARTNERING WITH A BRIDGEMAKER

Companies need to factor in their long-term business strategy, while planning an open innovation partnership. They should identify the “hot spots,” or key innovation areas that could prove to be critical for their businesses, and then decide which model or models would be best suited given their objectives and the maturity of startups in terms of technology and market readiness.

Buy-in and involvement of the leadership, which includes CXOs and business unit leaders, is key to nurturing an open innovation partnership, and establishing a conducive corporate culture for collaboration. HR, legal and procurement processes need to be tweaked to make them conducive for open innovation. The two partners need to agree jointly on what constitutes success for the engagement. And this level of engagement requires an executive sponsor.

A successful ecosystem of open innovation requires active involvement of “bridgemakers” or organizations that help connect the dots among participants, solutions and markets. Bridgemakers can help connect an organization to the appropriate partner, act as a buffer between partners with conflicting cultures, provide support in mitigating risk, and assist in piloting and deploying technologies.

OPEN INNOVATION CAN TURN DIGITAL DISRUPTION INTO AN OPPORTUNITY OF COLLABORATION FOR MUTUAL BENEFIT.

Companies need to align open innovation decisions with their business strategy.

AUTHORS

Avnish Sabharwal

Managing DirectorAccenture Ventures - Open InnovationAccenture in [email protected]

Jitendra Kavathekar

Managing Director Accenture Ventures - Open [email protected]

Traditionally, telecom companies have been at the center of the customer’s world and have built deep customer relationships. However, they are rapidly getting displaced from that position by the likes of GAFA (Google, Amazon, Facebook and Apple). Today’s digital customers have moved beyond voice and data, and their digital life now involves social media, video calls, work-related services, navigation, entertainment, shopping and a host of app-based services. It is time for telecom companies to step back into the game, and be the focal point of consumers’ digital life.

These imperatives are particularly relevant for telecom players in India. Valued at US$37 billion in 2017,1 the telecom industry is big in the country and the stakes are high. With more than a billion mobile subscribers, India also has the world’s third-largest Internet user base.

However, recent years (2014-17) have seen revenue growth slowing to 5.2 percent, compared to the double-digit growth the industry enjoyed before this period.2 Currently, telecom operators are also facing competition from over-the-top (OTT) service providers. Accenture research has mapped the growth in the telecom industry in India in three phases (see Figure 1).

In the current Access/Data phase, telecom companies are focusing on data as the area of revenue growth. But this strategy faces diminishing returns in the long run. Accenture analyzed the usage pattern of customers of three telecom companies in developing markets and correlated it to individual average revenue per user (ARPU). The results show that while initially the movement toward greater data increases customer wallet size, once the wallet share breaches the 50 percent threshold, the ARPU actually declines to about 56 percent of the original ARPU (see Figure 2).

To succeed in the current Digital Life phase of telecom growth, operators need to change their approach to customer-centric services, content-based services and partner ecosystem.

Telecom operators need to move beyond their traditional strategies of chasing subscriber volumes and driving data usage. They need to understand customer needs to play a vital role in users’ digital life, build customer loyalty through content-based services and develop an ecosystem of partners to transform themselves from being providers of “plain data” to becoming purveyors of “intelligent data.”

From growing their subscriber base to enabling digital life—telecom operators need to change the rules of the game.

GETTING READY FOR DIGITAL LIFE

CONCLUSION

Operating at the intersection of the old and the new economy, the telecom industry is well-positioned to ride the trends emerging from digital disruption. But to realize this opportunity, companies will need to respond to fast-changing technology and market trends.

Data usage as a percentage of telecom bill:A. Less than 25 percentB. 25-50 percentC. 50-75 percentD. More than 75 percent

Figures are average revenue per user (ARPU)

FIGURE 1: INDIAN TELECOM INDUSTRY'S GROWTH STORY

FIGURE 2: GROWTH IN DATA USAGE DOES NOT ALWAYS TRANSLATE TO GROWTH IN ARPU

GROWTH PHASE 11995–2015

GROWTH PHASE 22010–2020

GROWTH PHASE 32015–2025

Hypergrowth

Shake-out phase

Subscriber Penetration

Net

Rev

enue

Voice Access/Data Digital Life

Double-digit revenue growth plateau out as the market for mobile voice matures.

Revenues from data services outpace that of voice services.

Telecom operators move beyond providing data to enable customers’ digital life.

ARPU Data

ARP

U V

oice

A

B

C

D

100.00119.00

96.38

56.05

This is because the heavy data users tend to use the data plan to consume new voice and messaging services offered by OTT providers, rather than those offered by telecom operators. Thus, higher data usage does not translate into higher revenues for operators. The telecom companies also lose out on revenues from the many digital life-related services that they enable through data services.

These purchase trends reflect the growing impact of digital disruptors, whose data-based OTT services are commoditizing traditional mobile services and chipping away at customer loyalty. For example, data apps (such as Whatsapp, Google, Skype, Viber and Facetime) have almost completely taken over the international long distance (ILD) call services that used to be one of the most profitable revenue streams for operators in India.

Clearly, higher subscriber data usage has not been a panacea for operators. In fact, it can prove to be detrimental to operators’ profit margins.

One underlying problem is that in the past operators have been content to provide “plain data,” and to leave it to OTT providers to provide users with the valued content distributed through that data access. As a result, data subscribers treat mobile operators like “plain pipes,” and look elsewhere for truly value-added services.

DEVELOP CUSTOMER-CENTRICITY

PROVIDE CONTENT-BASED SERVICES TO DRIVE LOYALTY

BUILD A PLATFORM-BASED BUSINESS

Shift from a product-centric strategy to a customer-centric value proposition. Switch to dynamic segmentation based on tariff architecture, usage layer, customer signal and actions. Operators can focus on the usage categories where they can win greater loyalty.Read customer signals to provide a proactive personalized proposition to a high-value customer. Switch to one-to-one personalized marketing. Advanced analytics solutions, coupled with automation technology, can enable such customer-centric services.

Convert “plain data” to “intelligent data” by taking steps to drive usage of video, music and other content-based services on own platform.Serve as a one-stop shop for all of the customer’s needs—move from being data access providers to experience enablers. Bundle services to develop a strong loyalty loop. Bundling can extend to all digital lifestyle services such as payments, entertainment, education and health.Develop one unified experience that combines location-based services, education, entertainment, retail and banking—all accessible through a single, simple interface.

Create new content and mobile value-added services by building an ecosystem of partners—a platform to team up with potential partners on an equal footing, rather than acting as the dominant partner. Adopt asset-light, idea-intensive business models that enable extreme agility in operations and better utilization of resources. Use their central positions in consumers’ digital life to build large platforms that deliver value-packed, seamless experiences to consumers, while creating new opportunities for other ecosystem players.

To enable these interventions, telecom operators need to transform the way they work. While the latest technologies, such as artificial intelligence, robotics and analytics, can be used to drive efficiencies and reengineer processes, telecom players need to develop a culture of innovation in the workforce that will allow new ideas to flourish.

TELECOM SERVICE PROVIDERS NEED TO REINVENT THEMSELVES TO KEEP PACE WITH THE DIGITAL DISRUPTION IN THE MARKETPLACE.

1 https://www.accenture.com/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Dualpub_23/Accenture-India-In-FY2016-Report.pdf2 http://www.thehindu.com/business/Industry/india-telcos-mobile-data-revenue-may-hit-rs-955k-crores-in-5yrs/article8728689.ece

LOGON TO

ODIGITAL LIFE

AUTHORS

Aditya Chaudhuri

Managing Director and LeadCommunications, Media & TechnologyAccenture in [email protected]

Luc Grimond

Managing DirectorCommunications, Media & [email protected]

IN THE LINEAGE OF DIGITAL TRANSFORMATION, BLOCKCHAIN OFFERS THE NEXT LEAP IN REORGANIZATION OF BUSINESS, POTENTIALLY EVEN MORE THAN WHAT THE INTERNET DID.

Blockchain technologies are set to impact the way business is conducted across multiple sectors. Financial services, in particular, will see large-scale changesacross all areas of financial transactions.

The extent of blockchain’s potential impact is evident in its fast rate of growth—the blockchain services market is clocking an impressive 60 percent (see Figure 1). This year it is expected to top US$1 billion and by 2021 it can touch US$7 billion.

EARLY MOVERS

UNLOCKING VALUE

THE ROAD AHEAD

CONCLUSION

In India, the fintech software and services market is expected to grow 1.7 times by 2020 to touch US$8 billion, according to NASSCOM, a trade organization for the information technology sector.

Blockchain’s business applicability and use cases have also grown beyond what was initially anticipated—and continues to grow. Numerous fintech startups have already launched innovative solutions and large banks are investing heavily in adopting these solutions at scale.

This trend is fast catching up in India too. Adoption of digital technologies, including blockchain, in the financial sector is gathering momentum. The big push for Digital India in 2015, followed by the demonetization of large currency in November 2016, have resulted in an exponential jump in digital payments in India. Blockchain is being adopted in other areas too. The DigiLocker promises to be one of the key blockchain use cases to be implemented at a never-before scale. Coupled with the security of biometrics, it can transform digital identity management across India.

The services supported by this technology is expected to touch US$1 billion in 2017.

Some banks and nonbanking financial corporations (NBFCs) in India have taken the lead in exploring blockchain solutions across cross-border payments, supply chain financing, trade finance and other transactions using distributed ledgers and smart contracts.

Globally, too, banks are experimenting with blockchain adoption. A recent Accenture survey in the United States, Canada and Europe found that nine out of 10 leading financial institutions (FIs) were exploring the use of blockchain in digital identity management, cross-border payments, trade finance, supply chain financing, among others.3

Leading banks and financial institutions have partnered with fintech companies to find innovative blockchain solutions. Other industries such as healthcare, oil and gas, utilities and other natural resources organizations are also experimenting with blockchain solutions in their digital transformation journeys.

On the ground, blockchain promises to transform many key financial functions and operations, and unlock unprecedented efficiencies. These solutions can help banks not only reduce the cost of operations, but also create new products and services that can generate additional revenue streams.

For the financial services industry as a whole, this adds up to savings of billions of dollars. The benefits are spread across various functions. An Accenture report estimates that this technology could help the world’s eight largest investment banks cut their infrastructure costs by US$8 billion to US$12 billion a year by 2025.4 Applications in finance reporting could lead to better data quality and transparency, and reduce infrastructure costs by an average of 30 percent. Costs associated with compliance, business operations and centralized operations such as know-your-customer checks could fall by up to 50 percent. Similar efficiencies can be identified in other segments of the financial sector including banking, insurance and NBFCs.

Industry analysts and technology visionaries have differing views on the size, scale, impact and adoption of blockchain, but many believe that this transformation trigger is here to stay. They are convinced that 2017 could be the landmark year for blockchain solutions, and this year will see a pan-industry and global adoption of these solutions.

To build on this immense opportunity, financial institutions will need to focus on three areas:

The next wave of digital transformation is here. Blockchain technologies will significantly disrupt the way banks and financial institutions do business. Early adopters will be best placed to optimize costs, drive new revenues and benefit from everything blockchain offers.

Collaborated with startup firm Primechain Technologies to set up BankChain, a consortium of banks for exploring, building and implementing blockchain solutions. Members of BankChain have instant access to a private blockchain with one-click deployments, and access to source code of all active projects and proof of concepts. Leading public sector banks have teamed up with SBI for this initiative.1

Successfully executed transactions in international trade finance and remittance in partnership with a leading banking group from Middle East.

Are conducting pilots for cross-border remittances to enable real-time affordable money transfers.2

Implemented a multi-nodal blockchain transaction using smart contracts to digitize vendor financing for a consumer electrical equipment firm.

STATE BANK OF INDIA

AXIS BANK AND KOTAK MAHINDRA BANK

YES BANK

ICICI BANK

1 http://www.bankchain.org.in/2 http://www.livemint.com/Industry/loztj0R98Ea6m58Ng8jUzM/Blockchain-technology-catches-Axis-Kotak- Mahindras-fancy.html3 https://www.accenture.com/us-en/insight-blockchain-technology-how-banks-building-real-time?src=ECAMP4 https://www.accenture.com/us-en/insight-banking-on-blockchain?src=ECAMP

FIGURE 1. THE BLOCKCHAIN OPPORTUNITY

While there is a lot of focus on building consortiums and networks of banks and financial institutions, it is important to leverage solutions to drive blockchain solutions in the enterprise.

Banks the world over are looking at leveraging blockchain solutions to drive a range of operational efficiencies, but it is equally important to harness the power of this transformation to create new products and revenue streams.

While the potential of this technology is still being unlocked, leading financial players and fintech companies are investing in finding pathbreaking solutions. It is critical for financial services companies to get actively involved and adopt these solutions and be a part of the transformation, or risk being disrupted themselves.

CO-CREATE AND COLLABORATE

FOCUS ON EFFICIENCIES AND NEW REVENUE STREAMS

ENGAGE NOW

2016 2017 2018 2019 2020

Size of the Services Market

Size of the Tech Market

$ figures are in US dollar2021

$630 M

Source: Research and Markets, “Blockchain Technology Market-Global Forecast to 2021,” October 2016

$210 M

$1,020 M

$340 M

$1,644 M

$548 M

$2,655 M

$885 M

$4,290 M

$1,430 M

$6,936 M

$2,312 M

AUTHORS

David Treat

Managing DirectorFinancial Services and Lead - [email protected]

Piyush Singh

Managing Director and LeadFinancial Services - Asia [email protected]

INTEGRATING PLANT, PROCESSES AND PEOPLE TO DRIVE OPERATIONAL AGILITY AND BUSINESS EXCELLENCE.

Evolving and converging technologies are revolutionizing plant operations. To stay relevant and competitive, companies across asset-intensive industries need to build a future-proof plant that is agile and intelligent.

ADOPTING AN AGILE, COLLABORATIVE AND CONNECTED

OPERATING MODEL

DEPLOYING ROBUST TECHNOLOGY BASED ON AN AGILE DIGITAL

ARCHITECTURE

Accenture has identified three critical success factors to enable the plant of the future:1. Adopt an agile, collaborative and connected

operating model (processes)2. Deploy robust technology based on an agile

digital architecture (plant)3. Create a flexible organization with a future-ready

workforce (people)

Heavy industry companies around the world are facing cyclical and increasingly unpredictable markets. Leaders are revisiting their operating models to improve agility. Their goal: to create a model that’s connected, collaborative, contextual and capable (see Figure 1). Accenture describes this end state as “high velocity operations” (HVO) because it gives organizations the ability to respond fast when conditions change, or when disruptive technologies arise.

The HVO model integrates processes, systems and data, and is based on capturing information from a wide range of connected sources. With this, the model visualizes, analyzes, contextualizes and propagates the information in real time to a connected workforce operating within a flexible organizational structure.

To enable HVO and build a plant of the future, heavy asset companies need to build a digital architecture with the following elements (see Figure 2).

Analytics is a key element for fast decision making. By deploying an advanced, cloud-based analytics platform as part of the HVO model, the plant of the future can:

PREDICT equipment performance degradation and failure.

PROVIDE dynamically generated decision options.

CREATE intelligent systems that self-learn and update automatically.

Mobile and wearable computing devices are a central element of the HVO model. These connected devices make information available at the point of consumption and can enhance plant operators’ productivity and safety in numerous ways:

OVER-THE-SHOULDER COACHING allows experts located remotely to transmit context-specific operating procedures that enable less experienced operators to take corrective actions in the plant, reducing rework and improving wrench time.

HEADS-UP DISPLAYS provide real-time process and location information, assisting plant operators and minimizing the probability of mistakes.

AUGMENTED REALITY provides information overlays for a given piece of equipment, using real-time data to improve decision making and enrich training.

PERVASIVE WI-FI AND RADIO FREQUENCY IDENTIFICATION (RFID) TAGS enable tracking of worker and equipment movement to monitor safety, security and productivity.

Cloud computing takes advantage of mass data, low cost of storage and computing power to enable new kinds of optimization. An example of this is the “virtual plant”: a software-based, cloud-hosted replica of the physical plant that incorporates 3D models, real-time data sets, financial models, business simulators and more.

Adopting a “cloud-first” policy, combined with the Industrial Internet of Things (IIoT) sensors, will enable companies to:

PERFORM cloud-based planning and scheduling that provide high-powered computing to multiple users.

EXECUTE integrated planning models quickly to capture crude trading opportunities and respond to market events in a faster and more effective manner.

COMPARE simulation results against real-world data.

MEASURE and improve operating limits.

OPTIMIZE production and yield.

The HVO model requires the plant of the future to integrate its IT and OT systems and “connect everything.” Organizations can use sensors on everything from vehicles to equipment to workers, all connected via site technology. This will allow data to be collected and analyzed in real time to drive safety, productivity and efficiency.

Data governance is critical for benchmarking operations and sharing knowledge across an organization. The HVO model enables a robust data regime that provides a “single source of truth” for all data elements that determine how the plant will operate and maintain. This requires a strong data governance framework, which should include: • A data governance body made of senior stakeholders.• Clear roles and responsibilities for those tasked with

data governance.• A clear set of data governance principles and standards.• A program to measure and improve data governance.

Decision making in the HVO model is faster, based on better information, and carried out directly by workers involved in a task or project. This means highly autonomous workers will be required to collaborate in a cross-functional operating model, working toward common goals, making functional departments and business silos less significant.

Achieving a future-ready workforce will enable companies to realize and create additional value with the HVO model through improved workforce productivity, an innovation mindset and employee value proposition. The benefits include:

ENHANCED PRODUCTIVITY through direct access to information.

IMPROVED HEALTH AND SAFETY using intelligent technology and machines to monitor health and environmental conditions.

INNOVATION AND GROWTH through social collaboration.

IMPROVED EMPLOYEE VALUE PROPOSITION enabled by a dynamic flow of information.

It is critical for capital-intensive organizations to future-proof their investments in new plants by considering tomorrow’s realities today. Through the adoption of the HVO model, deployment of an agile digital architecture, and creation of a future-ready workforce, companies will become more connected, contextual, collaborative and capable. These new capabilities will lead to better decision making, optimized operations, and improved management of health and safety, ensuring companies can respond quickly to new opportunities now and in the future.

• Multiple, niche approaches through local improvement activities

• Poor integration of information across the enterprise; decision making happens within departments in isolation

• Plan and react• Value improvements

depend on individuals’ knowledge and experience

• Holistic focus across the value chain optimizing and addressing changing market context across multiple plants and functions in a coherent and dynamic way

• Collaboration, real-time information and speed of decisions drive value

• Plan, predict, prevent and optimize

• Integrated platforms, data, applications and processes enable consistent sharing of knowledge

TODAY— BUSINESS AS USUAL

ANALYTICS

MOBILITY

CLOUD

IT/OT INTEGRATION

DATA GOVERNANCE

TOMORROW— HIGH VELOCITY OPERATIONS

An Australian oil and gas company worked with Accenture to harness the power of analytics in predicting and preventing unplanned shutdowns, due to foaming in the acid gas removal unit, at one of its LNG plants. Accenture has developed a road map for implementing predictive analytics on the company’s maintenance and process controls across its LNG assets. This provides insights to expand the oil major’s decision-making capabilities, making it more predictive and proactive in managing its LNG operations.

Accenture enabled a leading Indian metals company analyze and detect maintenance productivity issues of its high-value assets through digital intervention. The result: a 30 percent improvement in downtime and a 40 percent reduction in quality defects.

A US-based electric and natural gas utility implemented enterprise-wide analytics and Big Data capabilities through a flexible data and analytics platform. At its core was an IT/OT integration solution that combined business, sensor and external data feeds to create a unified data model. This has provided deep insights into company’s asset base and enhanced the its decision-making capabilities.

CREATING A FLEXIBLE ORGANIZATION WITH A FUTURE-READY WORKFORCE

CONCLUSION

FIGURE 1. CHARCTERISTICS OF THE PLANT OF THE FUTURE

FIGURE 2. ELEMENTS OF DIGITAL ARCHITECTURE

The plant of the future requires security that is integrated across the full life cycle of components and services. Organizations will need security strategies for the process control domain that effectively secures plant operations, plant applications and distributed control systems (DCS), and field instrumentation.

SECURITY

New wireless network technologies improve plant operations by enabling the efficient capture and consolidation of IT/operational technology (OT) data across the site. By embracing newer, more resilient network technologies to connect the physical site space, the plant of the future can support advanced applications, devices and capabilities.

NETWORKS

CONNECTED

Real-time IT/OT (operational technology)

convergence and the ability for remote

management of assets and operations will provide

services that the connected workers require to operate

the plant.CONTEXTUAL

Capabilities such as 3D models

will help in the integration of information, enabling faster

and easier asset management.

COLLABORATIVE

Collaboration technologies such as Wi-Fi,radio-frequency identification (RFID)

and mobility will change how businesses organize and

individuals behave to drive operational excellence.

CAPABLE

Real-time insights will enablea predictive tomorrow based on today,

powering a flexible and scalable organization.

MONITORS

Automates and orchestrates

processes and applications, and

configures the dynamic

infrastructure requirements

DATA

SECURITYNETWORK

PREDICTS

Learns from usage patterns

and predicts needed capacity

SELF HEALS

Automates workload

management, detects

problems and takes steps to

solve them

OPTIMIZES

Analyzes infrastructure services using

di�erent providers to

optimize cost and

performance

LEARNS

Learns from past behaviors and

trends to automatically

and proactively make changes

PROTECTS

Proactively analyzes security

threats and patterns to

pre-empt risk

AUTHORS

Sandeep Dutta

Managing Director and LeadResourcesAccenture in [email protected]

Senthil Ramani

Managing Director and Digital Business [email protected]

Case in point: abof.com, part of the Aditya Birla group, recently launched AISHA1, an artificial intelligence-based personal fashion advisor available on Facebook messenger. Consumers can chat with AISHA anytime, anywhere, and get fashion advice. Yet another case in point are Ikea’s customers—they can see products in their homes using augmented reality before they buy them.2

Examples such as these are just the tip of the iceberg. As consumers’ lives continue to seamlessly integrate with digital technologies, the path to purchase will keep evolving. For instance, by 2020, 50 percent of all transactions in India are expected to be conducted online (see Figure 1 for Asia’s digital commerce shopping landscape).3

How will the constantly evolving consumer make his/her purchasing decisions in the future? Recent Accenture research sheds light on the consumer journey in the future— from 2016 to 2020 and on to 2025 (see Figure 2).

The fundamental needs of today's consumers in 2016 are clear enough: convenience and value, combined with the right level of choice and information. But the path to purchase has shifted dramatically. Instead of being linear (awareness—consideration—purchase), it has become more complex. The explosion of digital touchpoints has transformed this journey, making it more dynamic, accessible and continuous.

Most purchases are based on a mix of online and offline interactions. Consumers discover products in store, on websites, via social media and through advertising. Prices are compared online and offline, and social reviews provide comparisons. Ultimately, whether to buy online or offline depends on convenience, time and price.

CPG companies need to act now. If they don’t, they risk losing out to the new generation of digital commerce players—the disruptors. Having enabled the upsurge in digital commerce, these disruptors have become fearsome competitors. Amazon has already released its own private label line. How long until Alibaba does the same?

Five steps for CPG companies to expand their view of digital channels beyond the "buy" button"

Accenture has developed a comprehensive approach to help companies embrace the new age of digital commerce and meet the growing demands of the evolving consumer.

Such an integrated approach allows companies to take control of their supply chain, generate demand, carry out digital marketing and manage their digital commerce operations. This is achieved through a combination of technology enablers such as data analytics, product and Web content management systems, payments, order management and logistics planning to deliver a best-in-class customer experience (see Figure 4).

This traditional mindset needs to change, especially in the digital era. An era where not only the face of competition is changing, but also the consumer.

UNDERSTANDING THE DIGITAL CUSTOMER IN 2020 AND 2025

TIME TO ACT IS NOW

ACCENTURE DIGITAL COMMERCE CONTROL TOWER

Digital is fundamentally changing the way consumers shop, and transforming their path to purchase.

AUTHORS

Rajat Agarwal

Managing Director and Lead Products Accenture in [email protected]

Mohammed Sirajuddeen

Managing Director – Products/ASEAN Accenture [email protected]

FIGURE 1. THE ASIAN DIGITAL CONSUMER SHOPPING LANDSCAPE

E-commerce sales in India are expected to increase six times to US$79 billion by 2020.4 What are CPG companies doing to capitalize on this opportunity? Unfortunately, not much—even though e-commerce in CPG is expected to grow at a CAGR of 43 percent (2015–2020 estimates)5. Yet, CPG companies are making only small, piecemeal efforts to increase their digital presence by offering e-commerce options, being visible on social media channels and creating smartphone apps—which are not sufficient.

Only those companies that can understand the evolving consumers’ needs—today and in the future—and get the right mix of bricks and clicks will stand a chance to win in this competitive digital landscape.

APAC Digital Commerce Shopping Landscape: India vs China vs Indonesia vs Singapore

Low High

Mature online ecosystem Payments/delivery/infrastructure

Highly evolved consumer with sophisticated demandsReadiness to embrace technology interventions in life

Social aspect of shoppingEntertainment and family bonding

Comfort level with the online ecosystemTrust and reliability. Quality of products is an issue

Intensive research before shopping: consumer awarenessResearch limited to price and deals in Indonesia and Singapore

Key technology adoptersRise of m-commerce is an example

China Indonesia Singapore India

Low High

Low High

Low High

Low High

Low High

Hi hh

H h

CCC SSS

h

InI e In

WINNING IN THE FUTURE: Consumers want a seamless experience as they see gaps in the current path to purchase. This could be a key driver for digital-born companies to capture increasing market share.

FORWARD TO 2020, and priorities have evolved. Technology has made life easier for consumers, and the purchase journey has changed to address many of the gaps that existed four years ago. Consumers are looking for instant solutions to life situations, personalization and value—all delivered seamlessly. Expecting to get the solutions they want whenever and wherever they need them, they are shopping in a truly omnichannel environment—across physical and virtual worlds.

WINNING IN THE FUTURE: Every purchase is based on multiple micro-moments, often happening simultaneously. Companies that act as “smart assistants,” providing solutions wherever they are needed, are winning market share.

FAST FORWARD TO 2025, and consumers’ lifestyles have become even smarter—shopping is seamlessly integrated into their day-to-day lives. The purchase journey is in a continuous state of motion, with consumers expecting instant gratification and no hassles. Automated purchases are the norm for certain types of products.

WINNING IN THE FUTURE: Leading companies are predicting when consumers need key items and delivering them automatically. They are true smart assistants and they are reaping the rewards.

• Discover the role of each digital touchpoint in the consumer journey (see Figure 2).

• Unbundle activities, along the path to purchase as well as post-purchase phase, into smaller and more manageable (winnable) scenarios.

• Develop partnerships with the disruptors. Such partnerships will help CPG companies secure market share in a connected, hyper-competitive marketplace.

• Protect your brand on partners’ digital platforms through robust data management and real-time insights into consumer experiences on digital platforms.

Case in point: A global consumer goods major recently partnered with a digital commerce player to extend its access to a growth market. It also launched a flagship store on the another e-commerce platform, which promotes its popular brands on a massive scale.

• Explore hunger marketing opportunities by opting for exclusive online-only offers.

Case in point: 22 percent of impulse food sales are online. Online-only offerings can also include product customization and value-based promotions— prices on e-commerce platforms are typically 20–30 percent lower than in-store prices.

• Go mobile. The number of unique smartphone users in Asia are likely to double between 2014 and 2019 (from 1 billion to 2 billion).

• Remain connected with your consumer 24/7. Ensure information fits into the screen size, contains deep details, appetizing images and, above all, is easy to use and navigate from start to checkout.

• Develop seamless online-to-offline (O2O) capabilities that complement and expand e-commerce-related opportunities. Consider this: by 2020, 65 percent of transactions in Asia will begin online and finish offline.

Case in point: A health and beauty products company, with multi-level marketing, has built seven experience spaces in a growth market that create unique brand experiences in physical settings. The efficiency of Internet-based business models allows stores, and sales representatives to offload a large amount of inventory online and focus on more interesting areas in-store, such as serving its customers and creating an experience that reflects its brand values.

Give me what I wantwhen I want it.

Give me what I wantwhen I need it.

Give me what I wantbefore I want it.

Today... Tomorrow... 2020 Beyond: “Nirvana”...

• I make a shopping list.

• I can tap into personalized assistance, where needed.

• But…shopping = chore.

All at best price

• My shopping list is on my smart device.

• I get expert guidance along the way.

• Shopping = fun adventure.

Seamless shopping experience tailored to “my need”

• What shopping list?

• I chose what’s automated.

• Take things off my thinking list.

• Shopping = automatic task.

Shopping fully integrated into life’s moments

Basic Shopping + Experience Product + Convenience = Value

Smart Enhanced Shopping Smart Lifestyle: Integration Focused

FIGURE 2. THE CONSUMER REVOLUTION

Enhance interactions across multiple touchpoints

Establish partnerships with e-commerce platforms

Identify ‘hunger marketing’ opportunities

Think ‘mobile first’

Develop online-to- offline capabilities

CASE STUDY 1: Accenture partners with one of the largest consumer packaged goods companies in India to enhance digital commerce. Now, growth is just a click away.

Accenture helps drives the following outcomes for the client:• Achieve significant increase in e-commerce sales.• Develop strategic and tactical value drivers by category and brand.• Target consumer engagement through business intelligence data. • Increase “search rankings” and “banner click through” rates.• Enhance brand imagery through “hero images” and “A+ content” delivery.

CASE STUDY 2: Accenture partners with a global snack food powerhouse (with billion-dollar brands) to unlock the full potential of digital commerce in India.

Accenture helped invigorate the client’s presence on the e-commerce platform. Accenture followed a four-pillar approach to drive online traffic, improve conversions, maximize consumer purchase and enhance consumer experience (see Figure 3).

FIGURE 3. ACCENTURE’S FOUR-PILLAR APPROACH

ACTIVATION

& PROMOTION

PLANNING

MEDIA BUYING

& EXECUTION

CONTENT

& SEARCH

IMPROVEM

ENTS

STREAMLINE

SUPPLY-SIDE

DESIGN

Plan media based on revenue forecast and marketing budgets

Create a detailed quarterly activation plan across each category and retail

Understand retailers' event calendar

Build media plans with retailers with clear metrics for KPI targets and tracking

Create campaign details, creative and visual elements required to execute plan

Track and monitor executions across retailers

Assess catalogand product listing across retailers

Assess current search priorities, order to fields, taxonomy and navigation

Create recommended action plan on catalog

Evaluation and selection of suppliers

Commercial analysis and supply model selection

Build capabilities of partners in areas of inventory forecast, scalability and regulatory requirement

1 http://cio.economictimes.indiatimes.com/news/business-analytics/aditya-birlas-abof-com-launches-ai-based-personal-fashion-advisor/573230252 https://www.accenture.com/t20161102T014727__w__/cn-en/_acnmedia/PDF-8/Accenture-ECommerce-PoV-v6-FINAL.pdf#zoom=503 http://economictimes.indiatimes.com/tech/internet/by-2020-rural-india-will-be-home-to-most-of-countrys-internet-users/articleshow/53747011.cms4 https://www.emarketer.com/Article/Indias-Retail-Ecommerce-Sector-Small-Still-Growing/10143425 Euromonitor International 2016, eMarketer 2016, Accenture Research estimates6 https://www.accenture.com/t20160729T064247__w__/us-en/_acnmedia/PDF-8/Accenture-ECommerce-PoV-v6-FINAL.pdf7 https://www.accenture.com/t20160729T064247__w__/us-en/_acnmedia/PDF-8/Accenture-ECommerce-PoV-v6-FINAL.pdf

Source: IPSOS/Accenture survey

DIGITAL COMMERCE VALUE

ASSESSMENT

DIGITAL COMMERCE

SUPPLY CHAIN

DIGITAL COMMERCE

DEMAND GENERATION

DIGITAL COMMERCE

DIGITAL COMMERCE

DIGITAL COMMERCE

OPERATIONS TECHNOLOGY ENABLERS

CUSTOMER EXPERIENCE

ANALYTICS

FIGURE 4. ACCENTURE DIGITAL COMMERCE CONTROL TOWER

BRICKS OR CLICKS. IT IS NOT AN EITHER-OR CHOICE; BOTH ARE EQUALLY IMPORTANT. BUT CONSUMER PACKAGED GOODS (CPG) COMPANIES CONTINUE TO PLAY “FAVORITES” BY RELYING MORE ON BRICKS THAN CLICKS.

COM

THE FUTURE OFDIGITAL

ELT

MERCE

ABOUT ACCENTUREAccenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions—underpinned by the world’s largest delivery network—Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With more than 411,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com.

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