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Adrian Samareanu: Three Key Enablers of a Successful Digital Organization

Digital transformation does not happen overnight. According to Adrian Samareanu, Global CDO of Volvo Financial Services, digital transformation is an advanced type of change management that involves people, processes, and technology. In this exclusive interview, we speak with Adrian about the top enablers of digital transformation, challenges with integrating digital tools, ways to attract talent with the right digital skills, and more.  

 

There is a lot of buzz around being digital and you have been on this journey for some time. What is digital transformation from your perspective?

For me, digital transformation is a sophisticated change management approach for traditional companies. It involves people, processes, and technology. At the same time, it is about changing the mindset of a company to perform in a digital business environment and engage customers through digital channels. You get a lot of perspectives on digital transformation these days, and there are no wrong or right answers because it reflects the digital maturity in the respective organization. 

 

Out of the many technologies and digital focus areas, why are cloud, data, and customer experience particularly important in a business strategy?

Cloud, data, and customer experience are foundational building blocks for a digital business, as they are key enablers for building new services and achieving sustainable business results. In simple terms, cloud gives businesses the flexibility and ability to scale quicker. Data is the heart of a digital business. Every company relies on data, but not every company is data driven. How often do you hear, “We don’t have enough data” or “We need more data”? The reality is there is enough data, however, very often, the data is not available for consumption. Many years ago, a CEO asked me for more data. We had the data but not a cohesive strategy to play with the data. I asked what data is needed and didn’t hear back for a while, but it triggered a different conversation, and a new data strategy playing offense, rather than defense brought up a fruitful dialogue at the board level.

Traditional financial services companies always rely on data to decide mainly on credit approvals, enhance lending processes or improve back-office. Therefore, I expanded the use of data to improve customer experience, create new business models and help customers and employees more effectively. It was a bold move and an intense process to shift the minds and hearts of many leaders in the organization. This is not limited to my organization. It goes beyond the boundaries of a company because it involves many players in different ecosystems. That means using data to unlock new opportunities, services, and business models. 

 

What are the biggest challenges when it comes to integrating digital tools across all business functions? How do you overcome them?

Digital transformation is not just a matter of the front-end functions along the customer journey. It involves the whole organization including back-end operations. The biggest challenge remains the timely adoption of new technologies in a multi-generation environment. Many times, we try to get the buy-in at the executive level in the boardroom and start a top-down approach during implementation. This is a push approach. While top leadership alignment is necessary, the engagement of the entire organization builds great momentum to increase the speed of change. We often see the development or implementation of new technologies being a roadblock. In fact, it’s the ability of the organization to adopt new tools. There are many ways to overcome this. Using diverse teams working cross-functionally in small groups to form new ideas, finding new ways of working, and nurturing the culture of learning are effective ways to accelerate the digital maturity of an organization. This is a pull approach, which is more effective to create value at scale. 

 

At Volvo Financial Services, collaboration and partnerships with start-ups are key ingredients for continuous innovation. Can you tell us about a recent co-creation that excited you?

The most exciting one? There are so many. I would say, creating a platform for innovation across the enterprise. This way, I think innovation is open to everyone inside and outside the organization to enable creation at scale. I’m always happy to see sustainable progress with innovation. The truth is that the corporate environment lacks certain skills to advance the ideation or that value creation at scale. There was a boom in using digital channels in Asia and Southeast Asia, particularly China, Singapore, and Indonesia after financial crises and I saw the opportunities. I started an exchange program with fintechs and startups and decided to work with them specifically for the acceleration of innovating new products and services like digital payments in China and other parts of Asia, then in Europe and North America. We now have many creative solutions and continuous innovation going on, including mobility subscriptions and a data studio ecosystem. Nowadays, we are on a different level in establishing partnerships and customers ecosystem.  

 

How do good change management practices affect employee onboarding and retention?

It starts with leading with care. When we had to work from home during the pandemic, many startups and smaller companies transitioned well. I think for large corporations, we saw the challenge of keeping everyone engaged. I would say mental health is essential to keep everyone aware and motivated. It’s important to engage your team and ensure everyone is having fun at work whether they are working from home or in the office. 

 

The labor market has shifted drastically in the Great Reshuffle era. How do you attract the right talent to fill the digital skills gap?

Every stage of digital transformation comes with different needs. This is why partnerships are important. Five years ago, we started with a very large spectrum of digital products and services and realized we did not have enough digital skills in-house. When this happens, you have to start upskilling your workforce or hire new people. Believe it or not, some of them find it very difficult to adapt to the corporate world. It is important to ensure that the ecosystem is there in terms of partnerships with fintechs, and identify the critical competencies in-house that are needed.  

Furthermore, leadership and management must ensure necessary care to maintain that engagement across the organization. This is how I lead the digital team to keep that engagement beyond the organization with the fintechs and the startups that are involved. I also see an influx from those companies into the corporate world. Flexibility is important to address the needs of the new generation. They are the ones setting hiring expectations with a focus on work-life balance, and I think it’s very difficult for large companies these days. Therefore, the more open companies are, the more likely they will attract and engage with digital talent from the younger generation. I think the attrition rate will continue to be high as digital skills continue to be high in demand. 

 

What are the elements of an effective change management plan?

As things are changing so fast, the final outcome of change management is always a moving target. This is what I call sophisticated change management which involves processes, technology, and people. Success lies in the orchestration and progression of those three elements. For example, if you are trying to push new technologies too fast and the organization can’t adopt them, it can cause frustration. If you look from a process perspective, you may not be able to create other value propositions and new revenue streams to stay competitive in the marketplace.  

 

What trends should CDOs be aware of in the next five years?

Most CDOs play today a key strategic role in transforming traditional companies. Many focus on process automation and innovation; or shifting the corporate culture towards digital. The pandemic’s impact on the economy pushed us to reimagine business in many aspects. In the next five years, I see CDOs focusing more on digital business opportunities, as well as new products and services driven by the data economy. Other focus areas are driving digital customer engagement, growth, revenue, outcome, and sustainability. If we look to the ambitious ESG goals ahead of us, there is no way this can be done without leveraging the edge technologies and human capital. That means that CDOs should retain sight of the human element of their role. I also think there will be a clear distinction between Chief Digital Officers and Chief Data Officers, which will be higher in demand. In addition, I think the usage of blockchain and cryptocurrency in decentralized finance will play a significant role in accelerating digital transactions and taking the economy to the next level.  

 

What achievement are you most proud of in your role as a CDO?

The most important thing is the culture of engagement internally and externally and having people coming together to create solutions that make transformation happen. My organization bounced back from a financial crisis, where the return on equity performance was at -10% and now 15%, doubling the asset portfolio size, and launching digital services and solutions for the digital marketplace. Having a good ratio between the operational efficiencies, and the new products and services addressing customer needs, as well as staying competitive in the marketplace has been a journey spanning 12 to 13 years. Looking back, I think creating that digital business foundation is something that I’m proud of. 

 

*The answers have been edited for length and clarity.

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5 Reasons Sales Leaders Should Still Care About Virtual Meetings

Many of us reluctantly downloaded video conferencing software on our computers two years ago thinking, “Well, this won’t last long. I’ll meet my colleagues and clients again soon.” Fast forward to today, virtual meetings have completely transformed the way we work and the way we sell. The era of hybrid work is here, giving us the freedom and flexibility to work from anywhere, anytime. Although it’s now socially acceptable to meet your clients face-to-face again, here are five reasons why you should continue to meet them virtually.  

 

Saves time, money, and sanity

Let’s face it, commuting is time-consuming and expensive. It’s sad to know that the average salesperson loses five days a year traveling to and from client meetings. Virtual meetings give you those five days back to travel for a much-needed holiday. They erase the hassle, stress, and cost of commuting – leaving more time to focus on the job and prepare a winning sales pitch. You also don’t have to bother planning the logistics of a face-to-face meeting. Not only do virtual meetings save you money, but your company as well. A study by Global Workplace Analytics states that remote work saves businesses an estimated $11,000 per employee annually, in addition to lower turnover rate and real estate costs.   

 

Virtual meetings are more productive and efficient

We all are familiar with the pain of sitting in a poorly organized meeting, and 89% of professionals have named it one of the biggest workplace frustrations. As salespeople, it’s also exasperating to attend meetings only to find out that the right decision makers are not present. Virtual meetings mitigate these challenges as there is more time to plan, prepare, and send invites to the right people. According to a study by Forbes Insights, 87% of survey respondents believe that video conferencing strengthens customer relationships and improves the sales process.  

 

People are more likely to attend  

Who doesn’t love the feeling of relief when meetings end on time? We know that virtual meetings rarely run longer than the time allocated. This means attendees are less likely to cancel and are more willing to block their schedule for you. Therefore, it’s no surprise that 85% of sales prospects are more eager to join a 30-minute virtual meeting rather than an in-person meeting! Also, this study shows that attendees are less stressed in virtual meetings. Maybe because they’re wearing their favorite pajama bottoms or have a pet sleeping next to them. Having clients in a relaxed environment and in a good mood means only good news when you want them to hear about your product.    

 

Meet more people, get more leads

According to HubSpot’s 2021 Sales Enablement Report, 63% of sales leaders believe that virtual meetings are as effective or more effective than face-to-face meetings, and it’s easy to understand why. For instance, a salesperson working remotely can close deals with several international clients without having to claim a single cent of travel expenses from their company. In addition, studies show that B2B decision makers are keener on making purchases remotely, and only around 20% of them hope to go back to in-person sales (we’re shocked by this statistic too). Virtual meeting platforms have made the world borderless, providing opportunities to connect with international customers seamlessly. With virtual meetings, your next customer may just be a few clicks away.  

 

Watch your meeting recordings

Once you get past the discomfort of hearing your own voice on video, you will find that meeting recordings are incredibly useful in several ways. For starters, they’re a good way to keep track of the progress of a particular client. Sharing those recordings with clients who may show them to other stakeholders puts your product out there without you having to present your sales pitch again. In addition, there’s a lot of valuable information in those recordings to add to your CRM platform. How many times have you wished to turn back time during face-to-face meetings to see which points you could have presented better? With virtual meetings, you can watch the recording as many times as you want, identifying areas of improvement and perfecting them, giving you the confidence to rock your next sales pitch.  

 

Considering their benefits, it’s crazy to think that virtual meetings were a rarity two years ago. Now, it’s hard to imagine doing business without them. We may never return to the pre-pandemic days of working, and maybe it’s for the better.

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Thomas Zinniker: As a CIO, I Don’t Drive the Business, I Enable It

Lately, we have heard a lot about the evolution of the CIO role from IT leader to business leader, agent of change, and driver of new technologies. However, Thomas Zinniker, CIO at BKW, sees himself as an enabler of business. In this exclusive interview, Zinniker tells us about IT’s role as an organizational enabler, his thought process behind implementing the right technologies, emerging IT trends, and more.

 

Companies are under constant pressure to digitally transform their products and processes. As a CIO, how do you determine which digital tools and technologies bring value to your organization?

First of all, I would like to clarify something: BKW is not a tech company. The BKW Group is an international energy and infrastructure company that offers integrated solutions in the fields of energy, buildings, and infrastructure.

We distinguish ourselves in the market through services; technology is merely an important enabler.  First and foremost, we develop new services that meet our customers’ needs and define new ways of doing business with them. Then we consider which technology fits best.

Typically, we don’t go for the latest leading-edge technology, because that does not really help our customers. We focus more on proven technology. For which technologies are sufficient skills available? How reliable is the technology? Has it matured over time? That way, we cannot only count on it for the next 6 to 12 months but for years to come. Once we have developed a new business service, we will not have to keep replacing it.

Overall, we focus on technology which helps us to become more agile to allow fast integration of new channels and products. As a CIO, I would rather count on proven and reliable technology supporting our innovative business services. While experimenting with new products or customer interactions, we need to be on the safe side in terms of stability, reliability, and security. 

 

What are the key elements needed to build a successful IT strategy to drive business growth?

As a CIO, you need to understand what your business is doing, what drives your business, and which external factors are influencing it. Adapting to it means adapting modern ways to develop business services in a more agile way. An IT or business strategy doesn’t last for five to 10 years. The change cycles are much shorter. Therefore, being flexible and having the ability for quick changes is the most important skill. I’m not building an IT strategy based on the actual business strategy. I base my IT strategy on how the business strategy evolves because I do not know what will happen in five years.

That has been the biggest challenge for us in the past, and I think we were quite successful in mastering it. We were able to easily adapt to new business processes. For example, five or six years ago we introduced Office 365 and mobile working. There was constant pressure and questioning, “Why are you bringing in new tools? We will never need that.” When we had to send the workforce home due to the pandemic, everyone was amazed at how easily and trouble-free we could keep going. From an IT perspective, the beginning of the pandemic was a very relaxing time for me because we were prepared. That’s exactly what I’m continuously doing. I always look two or three years ahead of the business and try to anticipate what might come.

 

How has the CIO role evolved in the last two years? What are the common misconceptions about CIOs you hope to debunk?

No CIO role is the same. A few years ago, I was told that as a CIO, I have to drive the business, I have to change the business. Today I know, I’m an enabler for the business and that is completely different from being a driver. We started our cloud-first strategy in 2015, not because we wanted to be more tech or reduce costs. Our goal was to become more flexible. Many companies do not see IT as an enabler. Even though digitalization is on top of an executive’s agenda, the role of the CIO has not changed. If you want to be an enabler today, you would have had to start five years ago. Some things simply cannot be implemented in three months.

 

BKW strives to develop solutions to reduce CO2 emissions in the energy sector. From a CIO’s perspective, how do digitalization and technology lead to a sustainable future?

I think technology is absolutely key for a sustainable future, especially in automating and controlling energy consumption in a smart way. For example, centralized heating systems or air conditioning units that maintain certain temperatures regardless of occupancy are wasting energy, the smart way is to act on the effective need.

Technology is needed to make our infrastructure fit for the challenges that arise with the production and consumption of sustainable energy. In a smart building or environment, technology can do much more. Technology or digitalization is not a challenge, it’s actually the answer.

 

What are the top 3 emerging trends IT leaders should be aware of?

Trends are always coming and going. As an enabler, you don’t need to be on top of the trends. You can look at them and say, “Well, let’s see whether this trend will be still there in two or three years.”

Nevertheless, artificial intelligence is definitely an important trend at BKW because it is one of the key elements of a smart energy business. When it comes to AI the big question is: how do we adapt our skills and processes in order to have the right data at the right place? What roles and responsibilities can leverage the potential arising from AI? Thanks to public cloud, the technology is already there and improving every month. 

As BKW is an operator of critical infrastructure, the whole area of cybersecurity is an uphill battle. We have to continuously strengthen, monitor, and implement.  We are always up to date with the latest trends in cybersecurity and improve our infrastructure and platforms step by step. Although this is not an IT trend, I have to mention the disruption of the supply chain. We need to have different supply chain strategies in the future to ensure that we get the right technology in place, especially the hardware we need in critical infrastructure.

If you needed a spare part three years ago, it was delivered in two weeks. Today, you have to keep enough spare parts on hand for the next two or three years. Right now, we are in the process of restocking thousands of units for a big project. We ordered them last May – they are still not here.

 

What project or achievement are you most proud of in your time with BKW?

When I started at BKW six and a half years ago, we had around 3,500 employees. Now we have more than 11,000. The diversity of the company has also grown dramatically. In the beginning, it was a pure energy and utilities company. Today, we also offer infrastructure services, engineering services, building technology, and smart building services. 

 I am very proud to be working with my team to transform BKW’s IT organization in line with our decentralized approach.  As an energy provider, we had a completely centralized approach. Today, as an infrastructure company, our motto is: as decentralized as possible and as centralized as necessary. This means a complete paradigm shift, turning around our organization and its services.

Cost reduction is an important thing. Three years ago, every megawatt of electricity produced was a loss. Therefore, we had to dramatically reduce costs. With the help of IT, we reduced the cost by around 30% in the infrastructure area. However, increased flexibility and reliability made it much more secure. The public cloud project played a big part in this, helping us a lot to reduce costs and manage the transformation process.

 

*The answers have been edited for length and clarity.

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The Russia-Ukraine War: How Will It Impact Future Business Decisions?

What issues do business leaders need to be aware of in the unstable economic climate the Russia-Ukraine war has created? Economists Heleen Mees and Olga Pindyuk answer burning questions on supply chain disruptions, the role of China in the war, trade with Ukraine, and more, in the session, The Cost of War: How are Businesses Paying the Price?  

 
Heleen Mees is an economist, opinion writer, and author. She has done extensive research on China’s economic rise and its global implications. Olga Pindyuk is an economist and country expert for Ukraine at the Vienna Institute for International Economic Studies.
 

The Russian Oil Dilemma 

The energy landscape in the EU has become volatile as more countries announce oil embargos against Russia. Poland became the first country in the EU to commit to decreasing its dependence on Russian oil and gas by the end of the year. Lithuania followed suit and has stopped importing gas from Russia since April 1.  

In response, Russia has doubled down with President Vladimir Putin signing a decree demanding payments for gas to be made only in rubles. This has received backlash from Russia’s biggest customers, Germany and France, as previous transactions were made in dollars or euros, and are considering their backup plans if Russia decides to cut the cord completely. 

What is the likelihood of Russia cutting off its gas supplies to the EU? 

According to Pindyuk, it would not be a rational move as the Russian economy is still badly impacted by Western sanctions. However, she warns that it is not totally impossible as Russia has cut off gas supplies to the EU before in 2009. “It lasted a few weeks and was quite painful for Eastern European countries, as they have the highest consumption of Russian gas,” she says. 

A number of countries in the EU still have a high demand for Russian gas, and although there are plans to explore alternative energy sources, it will take a long time. If Russia ever decides to pull the plug on its gas supplies, Pindyuk says it will be a detrimental move. “In the long run, this would be counterproductive for the Russian economy because it would accelerate the European move towards diversification from Russian fuel. It’s not so easy for the Russians to develop all the necessary infrastructure to supply gas to alternative locations,” she says.  

Mees echoes Pindyuk’s sentiment but says there is still plenty of uncertainty regarding a total oil ban on Russian gas. “The Europeans have difficulty agreeing on a total gas and oil boycott from Russia. But I think [businesses] should really take into account the possibility of President Putin cutting gas supplies, and how irrational it would be from a Russian perspective,” she adds.  

 

China’s Role in the War

China has not made any big moves to support the Russian economy due to fears of secondary sanctions. In fact, several Chinese financial institutions have already discontinued deals with Russian-backed firms and restricted financing for purchases of Russian commodities. However, China is still one of Russia’s biggest allies and has not openly condemned the invasion of Ukraine. Mees talks about the possibility of China being the last resort for Russia when it comes to gas supplies, but this transition will be difficult. “China will be happy to buy Russian oil, they already trying to do transactions in Yuan. Russia will have a problem because it will take time to have the pipelines to deliver gas to China,” she explains.  

Mees also believes that China will prioritize having good trade relations with the West. She says there is much at stake for Xi Jinping politically this year as he plans to hold his position as leader of China for life. “I’m not so sure that once he has been [elected] to lead for life that trade relations with China will stay the way they are. I suggest business leaders prepare for that,” she adds.  

 
For more on the initial economic impact of the war in the EU, check out our previous article, Impact of the Russia-Ukraine War on the Global Economy: What We Know So Far. Click here to read.
 

An Update on Ukraine’s Exports and Imports  

Ukraine supplies a substantial amount of wheat, corn, and vegetable oil to the EU. With imports coming to a halt, food prices in the EU have soared as there is difficulty procuring raw ingredients. European farmers are also feeling the pinch as prices of fertilizers have increased by 142% compared to last year.  

According to Pindyuk, Ukraine is doing what it can to salvage its economic situation. Prior to the war, more than half of its exports were exported through the Black Sea ports. Access to those ports is now completely blocked. “Ukraine is trying to find new logistics routes to transport its exports,” Pindyuk says. Not only is Ukraine’s infrastructure for exports important, but its ability to harvest crops as well. “Ukraine [recently] announced that it’s ready to do some agricultural work in regions which were affected by shelling, but it’s too early to say how successful this would be,” she adds. 

 

More Supply Chain Disruptions Expected 

Almost 300,000 companies in the U.S. and Europe have suppliers in Ukraine and Russia. The global supply chain has taken a turn for the worse, especially in the food production and metal industries. Geopolitical instability due to the war and existing disruptions from the pandemic are spreading supply chains thin. Companies have no choice but to rethink their supply chain strategies, find alternative suppliers, and consider reshoring operations.   

“Companies [must] reassess the importance of political risks in their decision making. In terms of their investment decisions about supply chains and locations, these political risks will feature more prominently. There will be an increased urge to assure the resilience of their supply chains as sanctions won’t be lifted anytime soon,” Pindyuk says.  

“It seems there is a new Iron Curtain being raised in Europe. The position that Xi Jinping so far has taken should give all businesses a reason to reconsider their own activities around the globe, especially in China. There may be some reshoring but I don’t think it will [happen] quickly. I think we will see businesses resorting to Europe, America, and maybe South America. If Ukraine joins the EU, it would be a wonderful place to reshore part of your activities,” Mees adds. 

 

Emergency Financing Needed for Ukraine 

Ukraine has shifted to a war economy and needs emergency financing as long as the war lasts. “The majority of the population still resides in the country, and the macro-financial situation at the moment is remarkably resilient. This will not last long because about half of the enterprises have stopped operating. Salaries are not being paid; credits are not being repaid. Now, practically all the banks have introduced credit repayment holidays, but the quality of their assets is deteriorating rapidly,” Pindyuk says.  

When the war ends, Ukraine could benefit from extra military aid and a Marshall fund to get the country up and running again. Mees says it is important that a recovery fund be put in place in the EU similar to the one set up during the pandemic, “which will be financed by issuing euro bonds for all the member states.”   

“In Ukraine, the GDP per capita is far below other countries that joined the EU. There’s momentum for Ukraine to eventually join the EU. If that happens, Ukraine will become an attractive place for investments,” Mees adds.  

 

Despite ongoing peace talks between Russia and Ukraine, the war shows no signs of ceasing. Furthermore, Russia is expected to be hit with tougher sanctions in light of recent atrocities. Only time will tell the economic toll these additional sanctions will have on businesses and consumers worldwide.   

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Matthew Bertram: The Biggest Mistakes Companies Make with Digital Initiatives

We were delighted to feature Matthew Bertram, senior consultant at Future Point of View, at a recent session, Digital Transformation: Charting the Course for Sustainable Success vs. A Temporary Fix. In this exclusive Q&A session, Bertram shares expert insights on pressing topics such as digital investments and emerging technologies, as well as advice on how to overcome talent shortages and improve company culture.  

 

The Digital Transformation Journey

 

What are the biggest mistakes companies make when it comes to digital initiatives?

Failure to invest! You need to be taking 1% of your revenue to invest in research. I see so many companies put in 0% because they have so many operational issues. They then get caught by surprise by something that they should have seen coming. It really doesn’t have to be that expensive. You can buy two VR headsets for less than $1,000 and give them to people in your organization. Ask them to take a couple of hours a week to set up a remote VR meeting and see how it goes. This does not have to be rocket science. 

 

How should different forms of automation be considered in a company’s digital journey?

My favorite is robotic process automation, which is what you do when there’s no computer interface or API available. It’s not a technology question but a business question. What metrics do you want to move? Do you want to increase profitability? Do you want to increase time to value? Do you want to reduce the error rate? First, start with the measures that are affecting your business that you want to improve, then move in with process mapping. Work backward to find out what needs changing. Once you know what to change, then it’s simply a matter of what’s the best technology.  

 

Do you think companies will keep investing heavily in digital projects?

I think it will be a mix. There’s this great desire to go back to the way it was before. I think that the further we get away from another black swan event, the greater the draw is for people to maintain the status quo and go back to business as usual. That’s why this is always a great opportunity for any company that’s willing to invest and maintain the discipline of consistent intentional investing. 

 

How do we improve employee engagement around cybersecurity to protect our assets?

One of the trends I foresee is that cyberattacks are going to get worse. I personally believe in Incident Response playbooks. For example, a ransomware attack has just occurred in your organization. What are you going to do? Being able to help them work out not just a checklist, but a playbook of what is going to happen is very useful. Not only does it prepare you when an incident happens, but it also helps with prevention. Playbooks are a great training tool for cybersecurity in your organization. 

 

Emerging Tech: Metaverse, Blockchain, and More 

 

How will the Metaverse affect businesses moving forward?

The Metaverse is three-dimensional, it moves from screens to spaces. We’ve already seen the gaming and entertainment industries move into the Metaverse. Where this is going to work well in business is with near-term opportunities like training simulations. For example, engaging customers throughout the sales cycle by walking them through a building versus just showing them pictures. Also, product design — think of remote engineering teams working on the same components together in three dimensions versus screen to screen. 

 

Is blockchain technology still relevant?

Absolutely. Back in 2018, it was at the peak of the hype cycle but now it’s going through a trough of disillusionment. The big problem is scalability because being able to scale up to real-world numbers of transactions is hard for blockchain as it’s so processor intensive. My projection is that over the next three years, blockchain is going to emerge out of the trough of disillusionment. We’re going to begin seeing industry-wide products that are built on top of blockchain. There are some early ones now with NFTs and cryptocurrencies. But we haven’t seen anything that’s really moved into wide-scale adoption yet. 

 

Are there any other technologies that are up and coming like blockchain?

Absolutely. Augmented reality is taking digital content and putting it on top of the physical world. Augmented reality blends the virtual and the real world together. Over the next several years, you’re going to see growth in this area, especially in enterprise applications, where you’ll be able to interact with objects and get an overlaid human interface. For example, this is going to change the way we interact with banks. 

 

What are you most excited and afraid of when it comes to technology?

Losing freedom of speech. When we moved into Web 2.0 and the social web, there were a handful of companies moderating all the dialogue on the Internet. They can turn people on or off as they wish. History proves to us that we need contrarian views. I’m concerned that private technology companies are going to effectively cause us to lose our freedom of speech. 

 

Talent Shortage and Company Culture 

 

What impact will the hybrid working model have on attracting talent?

I see my clients struggling with this, especially with HR policy. I know one organization with 900 employees where the HR department tried to put in an organization-wide policy on work-from-home unsuccessfully. They’re just trying to be fair, but the reality is that the work-from-home model has to match the particular job function. It is going to be a huge requirement to capture talent because the model you choose determines where you’ll be able to go look for talent, whether locally or around the world. 

 

How can organizations build teamwork and nurture company culture in a work from home environment?

That’s a tough one since every culture within an organization is different. Remote companies need to clearly articulate their branding in writing. It works very well for them to maintain their culture. If there’s a human-to-human connection, one simple thing I do is start weekly staff meetings five minutes earlier to catch up with everyone and see how they’re doing. It’s a great way of maintaining that personal connection. Something else that works well for us is scheduling physical meetups a couple of times a year so we can maintain those relationships. 

 

Do you have any advice on how to work around the current talent shortage?

Whenever it’s practical, buy rather than build, and offload the burden of finding talent to someone else. When it’s not practical, I would invest in tooling and look at how we can reduce the human workload as much as possible. Finally, there’s this idea of IT decentralization, moving a lot of functions that are curling into IT into self-serve out into the organization. It’s been very effective at being able to balance workloads within the organization. 

*The answers have been edited for length and clarity. 

 
Future Point of View is a digital consulting firm based in Oklahoma City, OK. For additional information about the firm contact at info@fpov.com or go to FPOV.com

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Insurance Fraud Detection Using Machine Learning: What You Should Know

Fraudulent insurance claims cost insurance companies and consumers in Europe €13bn annually. Insurance fraud is rife, especially in the property, automotive, and healthcare sectors. Insurance companies are recognizing the need to adopt digital innovations urgently to reduce instances of fraudulent claims and better prepare for future threats. According to a report by Forrester, global investments in Insurtech exceeded $15B in 2021. 

How can AI and machine learning help your organization detect insurance fraud more effectively?

 

How to Detect Insurance Fraud

 

Investigating fraudulent claims is costly and time-consuming for insurers. It is physically impossible for insurance companies to do a thorough check of the thousands of claims that enter their systems daily.   

Early computerized systems could do so much – only allowing rudimentary analysis and search for fraudulent indicators known as red flags. A big limiting factor with this system is that fraudulent claims had to fit into a particular template or else they would not be recognized. Therefore, new technology is a blessing to insurance companies, providing game-changing solutions to enhance and automate processes along the insurance value chain.  

Nordic insurance companies have already modernized their fraud detection processes with RPA, which assists in verifying information located in different sources to detect the right data. Using RPA, an insurance company recorded a decreased claims cycle time from 6 – 10 minutes to 90 seconds. 

That being said, how do insurers ensure the utmost accuracy in filtering out fraudulent claims? This is where machine learning comes in. 

 

Machine Learning to the Rescue  

 

AI is known for simplifying menial tasks and freeing human agents to do more complex analyses. In terms of insurance fraud detection, machine learning applies aspects of AI to give systems the ability to improve from experience with no extra programming by analyzing large, labeled data sets.  

Machine learning can improve fraud detection techniques in the following ways: 

  • Processes data in a short period of time.  
  • Highlights where connections can exist between various factors that human eyes cannot detect. 
  • Applies various data analysis techniques to allow the discovery of new fraud schemes. 

Although it borrows underlying principles found in statistical models, the main focus of machine learning is producing predictions. These predictions are based on the analysis of known outcomes, known as “ground truth.” Machine learning also can search for fraud in unstructured and semi-structured data such as claims notes and documents.  

Furthermore, machine learning can prevent fraud by detecting suspicious patterns in claims processing and customer background checks, which can potentially save insurers a lot of money. Since investing in a fraud prevention system, this Turkish insurer saved $5.7 million and recorded a 210% increase in ROI.  

 

The Insurance Fraud Detection Dataset 

 

The ground truth provides a label that identifies the outcome of each claim based on a historical dataset of insurance claim information and patterns. While there are varying outcomes between insurance claims, the labels are generally divided into “valid” claims or “fraudulent” claims.  

Health Insurance Fraud Detection Dataset 

In this case study, there are close to a million claims records with more than 20 variables. Claims have been assessed and labelled as normal and flagged for possible fraud. Claims that were flagged showed signs of suspicious policy profiles or malicious agencies, claims, or hospital-related fraudulent behavior. A machine learning model was created, a so-called binary classifier, to detect the two labels as accurately as possible. A supervised learning approach was applied since the data was already labelled.  

Auto Insurance Detection Dataset 

This project highlights the challenge of building a model that can detect fraud, where legitimate insurance claims far outweigh the fraudulent ones. This problem is known as imbalanced class classification. The data set consists of 1,000 auto incidents and insurance claims which had a total of 39 variables before any cleaning or feature engineering. Specific types of machine learning models, such as neural networks, natural language processing, and network graph analytics were also utilized in this dataset. 

 

Anomaly Detection in Insurance Fraud

 

Deep anomaly detection is a popular form of machine learning that can be utilized by the insurance industry to detect fraud. In claims processes, anomaly detection will analyze genuine claims by consumers. It then forms a model of what a typical claim looks like which is then applied to larger data sets. Insurers can also use anomaly detection to identify the suspicious behavior of users on an insurer’s network. In addition, deep anomaly detection can be combined with other AI applications such as predictive analysis to further automate the fraud detection process. 

 

Insurance Fraud Detection Using Big Data Analytics  

 

The Digital Insurer recommends a 10-step approach to implement analytics in fraud detection: 

  1. Perform SWOT – A SWOT analysis of existing fraud detection frameworks and processes to identify gaps must be conducted.  
  1. Build a dedicated fraud management team – It is important to have a team, not an individual, handling fraud claims.  
  1. Whether to build or buy – Companies must evaluate whether they have the capacity and resources to build their own analytics framework or whether they need to engage an external vendor. 
  1. Clean data – Remove inefficiencies and redundancies and integrate siloed databases. 
  1. Come up with relevant business rules – Companies should leverage existing domain expertise and experienced resources. 
  1. Come up with pre-determined anomaly prediction thresholds –Companies should provide inputs for threshold values for different anomalies.  
  1. Use predictive modelling – An effective fraud detection method is one that uses data mining tools to build models that produce fraud propensity scores linked to unidentified metrics.  
  1. Use of SNA – Effective identification of fraud activities by modelling relationships between various entities involved in the claim.  
  1. Build an integrated case management system leveraging social media – This allows investigators to capture all key findings that are relevant to an organization including claims data and social media data.  
  1. Forward thinking analytics solutions – Insurers should always be on the hunt for additional sources of data to improve existing fraud detection systems.  

An insurance company’s efficacy in distinguishing between valid and fraudulent claims plays a big part in determining its financial strength, allowing optimal compensation and support for its customers. 

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Impact of the Russia-Ukraine War on the Global Economy: What We Know So Far  

Almost a month has passed since Russia’s unprovoked invasion of Ukraine. Sadly, the war and humanitarian crisis are not over. Governments, private companies, and financial institutions have responded to the war by imposing harsh sanctions against Russia. The domino effect of these sanctions has already begun, taking a huge toll on the global economy. During our session titled The Cost of War: Decoding the Economic Crisis on EU, Ukraine, and Russia, we were fortunate to host Artem Kochnev and Olga Pindyuk, economists from The Vienna Institute for International Economic Studies. 

Both Kochnev and Pindyuk have been doing extensive research on the Ukraine-Russia conflict over the past few years and are subject matter experts on the economic history of Eastern Europe, foreign trade, and financial markets. They give us a clearer picture of the current economic situation, its impact on major sectors, and strategies for leaders to maintain macro-financial stability in an increasingly volatile environment. 

 

Ukraine’s Economy Comes to a Halt 

“Available data shows that more than 50% of the economy has completely stopped operating. This has happened in regions that are currently under direct military attack, as well as in regions with infrastructure destruction,” Pindyuk says. 

The Ukrainian city of Odesa, a major port and transport hub, ceased operations when the war began. Once known as the pearl of the Black Sea, Odesa has transformed into a fortress to prepare for a possible Russian attack. 

Pindyuk refers to the economic situation in Donetsk and Luhansk where the military conflict began in 2014, to assess the possible scale of economic loss of the current war. “In the first two years, the territory which was under attack and ended up not being controlled by the government of Ukraine lost almost 70% of GDP,” she says.  

However, the cost of an economic downturn and destruction of physical infrastructure is nothing compared to the loss of human capital. Pindyuk laments that the biggest loss is the “death, health deterioration, displacement, and worsening of living standards of the vast amount of people currently residing in Ukraine.” 

In terms of economic recovery, Kochnev says it depends on the length of the war. The shorter the war, the quicker the recovery, and vice versa. “The longer the time passes, the higher the chance that the skillful population; people who know how to do business, create products, and organize basic public services, will never come back,” he adds.  

The EU’s Support for Ukrainian Refugees 

Over 3 million people have already fled Ukraine – marking the biggest exodus in Europe since World War II. Poland has welcomed most of the refugees, approximately 2 million people. Refugees have also entered Slovakia, Hungary, Romania, and Moldova through the border checkpoints in Western Ukraine. Fortunately, Ukrainians who fled to the EU are allowed to live, work and study for up to 3 years in EU member countries under the newly enacted temporary protection directive.  

Pindyuk says the EU job market will benefit from the influx of Ukrainian citizens and mitigate the aging population issue in the region. “There is a vast network of Ukrainians who are already residing in the EU. If the refugees are here to stay, the chances of integration into the job market are quite high, especially given the fact that the Ukrainian population is on average, quite well educated,” she adds.  

 

Russians Brace for a Major Recession 

“According to a recent study by the Central Bank of Russia, the country is going to experience a major recession this year,” Kochnev says. This is inevitable due to the combination of sanctions, high interest rates, rising inflation, and weak consumer confidence. “The consumer prices in Russia are skyrocketing by European standards. The median increase expected by the forecasters is about 20%,” Kochnev warns. Panic buying has been widespread as Russians grapple with shortages of imported goods and an impending cost-of-living crisis. Prices of food products such as sugar and bananas have already increased by 15%. 

Kochnev adds that “sanctions first hit the financial markets in the Russian economy, and we have seen a very strong depreciation of the national currency.” The Russian currency has already depreciated more than 100% (200 rubles per US dollar). A whopping Rb2.5tn was withdrawn from the Russian banking system during the first week of the war. Furthermore, many Russians who earn income in foreign currencies have been unable to receive payments since Visa, Mastercard, Western Union, and PayPal revoked their services. 

“The sanctions regime is not going to be uplifted in the near future. I would not expect a quick and robust recovery [for the Russian economy]. It will be a sluggish recovery at best,” Kochnev says.  

 

Significant Effects on the Global Market 

Although Russia and Ukraine are relatively small economies, they account for significant shares of agricultural commodities traded globally, namely wheat and corn. “Ukraine alone exports about 10% of foreign wheat in the world and 16% of all corn. Together with Russia, they account for 30% of global wheat exports. The majority of these exports are geographically concentrated in the Middle East, Southeast Asia, and China,” Pindyuk explains. 

Countries in the EU may feel the pinch of more expensive goods, but Pindyuk points out that less affluent countries may suffer through “increased poverty rates and political risks due to worsening of living standards.” Pindyuk adds that Ukraine and Russia are big players in global metal markets, and the effects can already be seen in prices for many different metals and commodities.  

In addition, the future of energy in Europe hangs in the air with growing restrictions on Russian oil and gas imports. Kochnev expects “an increase in prices of key energy supplies, given the announced plan of the European economy to diversify their energy inputs away from the Russian suppliers.” 

Russia makes up around 40% of the EU’s gas imports. Gas prices in the EU and UK surged at the beginning of the war due to supply shortage worries but seem to have stabilized for now as Russia and Ukraine hold more peace negotiations. Nonetheless, this has not trickled down to consumers as they are still dealing with high energy bills and petrol prices.  

Earlier this month, the EU introduced a plan to remove its dependence on Russian fossil fuels by 2030 by focusing on renewable energy sources and increasing energy efficiency. However, the effects of surging gas prices are already in motion. “Our simulations showed that doubling the gas price would lead to an increase in inflation rates by 3.5%,” Kochnev explains.  

 

Mounting Inflation Rates in the EU

Consumer prices in the Eurozone unexpectedly increased by 0.9% on a monthly basis since the beginning of the year. Economists are predicting inflation will rise above 6% this month due to severe disruptions to the energy and commodity markets. Based on the official forecast by the European Central Bank, EU residents must prepare for an inflation rate of 8.5% by the end of the year. If this happens, Kochnev says it will be the EU’s highest inflation rate in decades.  

Inflation will impact each of the EU’s 19 countries differently. “Poorer countries are going to be hit a little bit stronger, and richer countries probably are going to fare a little bit better,” Kochnev says. Russian regulators and authorities are also keeping a close eye on the financial assets of European companies in the Russian economy. “They account for a significant chunk of the Russian financial market, at least in banking. Russia doesn’t want to lose management competencies to foreign companies. They don’t want to disrupt the consumer patterns in Russia, in addition to what has already happened,” Kochnev adds. 

In terms of trade, Pindyuk says there is no need to panic yet as “the effects are going to be quite small based on our estimates.” Based on her research, there will be a small decline in exports of air transport, mining services, other transport, machinery, and pharmaceuticals.  

What Happens if Russia Surrenders?

Kochnev talks about the effects on investors in the EU if Russia defaults on the war. He reminds us that Russia lacks foreign currency due to ongoing financial sanctions, especially the euro, which is the major currency of Eurobonds issued in the last six years.  

“Russia has a very low likelihood of paying its debt obligations in foreign currency. If you have certain obligations in the Russian government or Russian companies, you will probably have to drop their valuations down to zero. You will have to cut your books and recognize certain losses, and then struggle for several months or years to recover those assets, transforming them from ruble to euro,” he adds.  

On the other hand, Kochnev cautions EU citizens that inflation rates are not likely to normalize this year. “The recovery in the EU after the COVID crisis has not finished yet. It is fair to say that inflation will stabilize in the second half of 2023,” he says.  

 

Navigating the Growing List of Sanctions 

According to Kochnev, compliance executives are working around the clock as sanctions against Russia and supporting regulations are being updated on a daily basis. Unfortunately, these sanctions are “not always very carefully elaborated, at least when it comes to the EU regulations.” 

Kochnev splits the sanctions into five categories to provide a useful framework for compliance departments:  

  • Symbolic — For example, media restrictions. “They are not going to have a very big economic impact; they just make the life of the Russian government a bit more complicated.” 
  • Individual — “Government officials, members of Parliament, and top businessmen, account for the largest number of overall sanctions.” 
  • Finance — “These are banks and operations with the Russian Central Bank and state-owned enterprises. This had a particular impact on the Russian financial markets.” 
  • Export bans — This includes arms, gas and oil equipment, and luxury items. “Gas and oil equipment is very significant because it affects the ability to modernize and explore new gas and oil sites and mining locations.” 
  • Import bans (fuels and metals) — These account for 60% to 70% of Russia’s exports. “So far, fuel restrictions were introduced by the United States and Canada because they do not import as much from Russia. The EU also recently introduced a ban on metals.” 
 

Three Key Risks for Industry Leaders 

If your organization conducts business with Russia, what possible risks might you face? Kochnev breaks down the risks in three areas: 

Compliance

“The sanctions list is being updated at least every day. This will be critical in the areas of banking, business and deposits, and investments in European banks. Check for the secondary effects of sanctions, taking the U.S. as the best-case scenario.” 

Regulatory

“In European jurisdictions, trade has stopped in both Russia and in Ukraine. You will have to follow up on how to conduct new ways of trade and transfer money from one account to another if you have assets in these jurisdictions.” 

“You will have to assess very quickly and carefully. What might asset freezing potentially mean? What are legislators in Russia and Ukraine going to do with imposing restrictions on moving capital and blocking accounts of certain companies?” 

Macro

“Due to rising inflation rates, you will either have to reduce your limits when it comes to trading. If you are part of finance, you will need to start actively hedging. Sitting and not doing anything will probably expose you to huge risks and losses in your trading book. You will need to find certain investments that can compensate the losses.” 

 

While it’s still too early to gauge the full impact of the war on the global economy, the crisis has shown that organizational resilience and agility are more important than ever. Industry leaders must monitor the war closely and proactively make changes to their business when necessary.  

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Joost van der Vlies: What Tech Leaders Should Know About Software-Defined Logistics

Disruptions are commonplace in the supply chain and logistics industries. Thankfully, technologies such as Software-Defined Logistics (SDL) offer game-changing solutions to obstacles in the supply chain. We speak with Joost van der Vlies, CTO and Head of Architecture at PostNL, on the benefits and challenges of implementing SDL, as well as important insights on cloud technology in the logistics space.  

 

SDL is an emerging approach for EDGE computing and PostNL is one of the pioneers in this area. How do you define the use of SDL for enterprises? What benefits does it bring?

SDL is all about using data and algorithms to steer the supply chain in all its aspects, from forecasting, planning, execution, monitoring, communication, and making real-time decisions automatically. For example, our network setup before determined the physical flow of a logistical item (e.g., parcel), now it is the digital twin of that item that determines the physical flow through our third-party networks. The digital twin contains not only the metadata of the parcel and the order but also customer and operator preferences which can be updated in real-time. For example, deciding on the sorting belt to change the operator from home delivery to retail delivery as the consumer updated their delivery preferences, or to change the operator from bicycle delivery to truck delivery as the item was much heavier than communicated. This means SDL is about sense, deciding, and responding, which makes logistics much more flexible and dynamic. Interestingly, this also creates a lot of new data, which can be leveraged in ways not thought of before. 

 

For PostNL, how are you effectively utilizing SDL as part of your cloud strategy? What is the framework and how can CTOs apply it to their organization?

Our cloud strategy is a multi-cloud strategy comprising SaaS, PaaS, and IaaS service providers, and a strong connectivity layer that also includes Edge environments. SDL is part of a more digitized business and cloud is the de facto delivery model for digital business. Within our cloud strategy, the emphasis is on cloud-native component-based application architectures, which can automatically scale depending on the logistical volume and can take part in the sense and response patterns that SDL requires. We train our machine learning models in the cloud and deploy them where decisions are made, that can be both in the cloud or on the edge. As response time and throughput are essential factors, we use global tier 1 internet service providers that provide abundant capacity, maximum uptime, and truly global coverage (for our international business), and private network partners where necessary. 

 

Of course, with any emerging technology, there are challenges and obstacles. Currently, what are the main challenges that tech leaders need to be aware of with SDL?

One of the challenges is that not all existing applications have been designed to operate in a real-time use case, so temporary measures might be necessary as well as a structural re-architecture. Here’s another example — when using machine learning models, it can have a more complex deployment model having an AI platform develop and re-train the model, and have it embedded in an algorithm in or near the business application it is used. And with SDL events can occur from a multitude of actors, which need to be handled in a highly scalable rule engine and using a single source of truth state machine of logistical items. Tech leaders should also be aware of the impact of the business operations on the people working thereof which their work will be impacted. Business and IT should jointly work on SDL and have a change management process from the start. 

 

How did PostNL overcome these pitfalls? What can other CTOs learn from your approach in tackling challenges?

Regarding algorithms, in the past years, we moved from data science hypothesis projects to the development of algorithms with learning models for use in production. That is only possible in a multi-disciplinary approach combining data scientists, data engineers, and the DevOps teams where these algorithms will run or with which it will be integrated. We were not afraid of taking a high-profile initial case and started working on this, learned from it, and eventually earned a computable award in 2020 with an algorithm that predicts when a parcel will really arrive. This is the same for the real-time data case. It requires a multi-disciplinary approach, time, and capacity for innovation, as it has a lot of consequences not all immediately known from the start. 

 

While cloud adoption is gaining momentum, there is still hesitancy among enterprises to fully adopt it. What should the approach be for CTOs to encourage technologies such as cloud and SDL within the organization?

Technology is not an island. Technology supports businesses to become successful. The processes of our customers and our own are getting more and more digital, and increasingly we do business with applications and machines instead of human interaction. Yes, an API is a technical way of accessing data and functionality, but in essence, it is a 100% digitized business service. Together with high volumes, the increasing number of digitized actors in our ecosystem, and the increasing flexibility our customers are asking in the e-commerce domain, cloud and SDL are essential capabilities for digital business. 

 

Finally, what advice can you give to other organizations that are starting to invest in cloud technology? What are the common mistakes that CTOs should avoid when making their transition into the cloud?

Firstly, cloud is not an infrastructure play. It is a full-stack play and includes, or starts with, an application strategy. Rehosting only will not provide true benefits. Understanding business drivers and the requirements for the applications in the future will be input for decisions to buy, consume or make. It also influences decisions to retire, replace, or re-architect those applications, which has direct consequences on the cloud strategy and roadmap. 

Next, skills around networking, storage, and high-performance computing are important and still very relevant when moving to cloud. You should continue having these skills onboard to avoid problems in the long run.  

In addition, the term multi-cloud is used a lot in the industry, though it is much more than using two or more public clouds. For us, any service a partner provides through the Internet is a cloud. This multi-cloud has to be managed from an overall functional, technical, and multi-supplier perspective. Lastly, when starting from a pure on-premises environment, the current IT department setup will probably not be aligned to cloud. Therefore, setting up a cloud competence centre is crucial.  

*The answers have been edited for length and clarity. 

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Swarovski’s Jochen Schmidt: Embracing Digitalization in Retail and the Need of Reliable Data

One of the keys to achieving success in the retail industry is to adopt a data-centric approach to make educated, fact-based decisions for customer satisfaction, better return on investments, and having an overall better retail experience. However, with only 16% of retailers considering themselves experts in data harnessing, it’s clear that retailers are still behind in fully utilizing the power of data. 

As the Vice President of Distribution & Real Estate for Swarovski Corporation AG, Jochen Schmidt shares with us his insights on embracing the digital transformation, the need for clean and reliable data, and why talents are the key enablers for data-driven retailers. 

 

Embracing Digital Transformation and Abandoning Legacy Systems 

The value of digitization has increased significantly in the last few years due to the pandemic with digital transformation efforts for retailers focusing more on improving the overall customer experience, becoming more agile, and providing better collaboration within the supply chain. 

With the global digital transformation market expected to reach 388.51 billion by 2026, Schmidt shares his insights on what challenges await retail leaders that have yet to embrace digital transformation and how they overcome and abandon legacy systems. 

 

What are the challenges for retailers to fully embrace digitalization?

The challenges might be different from organization to organization. Larger retailers with a global footprint have the challenge of overcoming legacy systems, which is a hurdle. Others might face challenges in resources or strategic priority and the speed for implementation of the transformation. That can be a real challenge because the world is evolving so fast and COVID brought an acceleration into it.  

Swarovski operates in more than 100 countries and has legal entities in more than 30 countries. The challenge for us, which goes along with the speed of transformation, is the need to relate with local laws, to adjust processes and systems, depending on the country. It’s not like you just push a button and roll things out on a global scale. There is a complexity which comes with operating in different countries.  

So, think “speed”, whether the systems in place today correlate with each other, and the complexity with different legislation through different countries. 

 

Legacy remains a challenge for retailers. How can retail leaders encourage their organizations to abandon legacy systems?

It’s just a matter of priorities, providing the right funds and the right resources. When given the funds and resources, then every organization can move towards abandoning legacy systems. If there is no investment into IT infrastructure, then there won’t be any movement. 

Essentially, it starts with the willingness to invest and the need to invest is understood by the management. And it is what Swarovski has done in the past. where we released budget to significantly invest into our systems to upscale online and bring systems together. 

This is the starting point. You then bring the different teams, the organization behind it, have change driven by the leaders of every department, create transparency, create understanding, and have one joint vision of where you want to go. So, a good game plan and change management is needed. 

 

Cleaning Up the Data and The Key Enablers for Data Utilization 

Data is the fuel that drives the decision-making process for organizations. In the journey towards becoming a data-driven organization, retail leaders will have to understand and prepare for the major hurdles along the way. 

Whether it’s ensuring that there is clean and reliable data to power a better decision-making process or utilizing data effectively with the right tools and people, Schmidt highlights the necessary foundations for data-driven organizations. 

 

What hurdles do Swarovski and other retailers face in their journey to become a data-driven organization?

One of the key elements for Swarovski was to clean up our internal data. When Swarovski started working with data, we also saw the need to improve the quality of data, as some of the fields were not maintained properly. And we have not been paying attention to data quality over the last couple of years as much as we should have, which affected how we used data.  

And to be honest, this was one of the key hurdles of data. That partially was just not updated and maintained. When it comes to third-party data from external sources, it was the same thing. There is a need to double-check if the data is clean and whether it makes sense to use it in a certain way. Here, it comes down to the people who work with the data itself, who process the data, and how they need to have an eye on data quality both internally and externally. There needs to be a process set up to ensure data quality and bring the organization behind this idea. 

That’s the first step. You need to have your data checked, and once you have that, you need to have the right team. The experts that can work with this huge amount of data, make it readable, make it understandable for the people in the business and create an outcome that is understandable and allows you to act on it. 

 

In terms of data adoption, what initiatives or strategies should retailers adopt? What can others learn from Swarovski’s approach to data utilization?

One of the key elements we work with quite a lot is GIS, Geo Intelligence Software tool. This strong partnership helps to understand the technical capabilities of the software, brainstorm with externals (without being influenced by internal structures) It basically helps us to make the most out of the system, learn and adopt fast.  

This tool makes data more tangible when it comes to geographics, store locations, to let us see the correlation between offline and online sales, develop distribution masterplans from it, and see consumer data and identify the market potential.  

As well as bringing “live” data to see consumer behaviours on a local level. This approach is very changeable because you can, for example, specify your data such as for the US on a county-level or a double digital postal code in Europe. 

 

Attracting Talents and Transitioning into a Data-Driven Organization 

As the demand for talents in data science continues to rise, retail leaders will have to find ways to attract better talents to handle the immense volume and complexity of data available effectively as they transition into becoming a data-driven organization. 

“Another enabler is having the right people in your organization. I always say, if you want to play Champions League, you need to have the best players.  A company needs to attract the best talents to be able to make best use of the data available and set the right action.” 

For Schmidt, the strategies for attracting talents do not have to be complicated and the main priority for retail leaders in becoming data-centric should always come back to the main foundations of clear governance, data, resources, and the deployment of talent. 

“Once you have the right people brought together, you can see the difference in results. There’s so much movement, but also the quality of the outcome is so good. Having the right people in place is a key pillar of the strategy because someone needs to process the data and work with the data.” 

 

How should organizations approach nurturing and attracting talent in data science? What initiatives or strategies should retailers push for?

I think what organizations can do is to provide a good workplace, culture, leadership, and have good employer branding. Having an attractive location, or an attractive working environment that also provides a good package for the people that lets you tap into those highly talented people and attract them into our industry. Make them understand the bigger picture, their contribution to the overall strategy, and let them do their job. 

The retail industry isn’t known for that background in working with huge data whereas other industries are more advanced in terms of data talent. But I think retail is such an exciting industry and there are really cool brands out there that want to work with data.  

If you provide the right work environment, good scope of responsibilities, and make work fun with the other teams. Not just purely data crunching stuff, because we sometimes forget how isolated working with data can be. Make it fun to work cross-departmental and celebrate successes together. 

 

What should be the priority for retailers transitioning into a data-driven organization? What pitfalls or mistakes should they avoid?

Again, I would repeat and emphasize getting the data right. That is one of the first things your organization needs to focus on. Have an internal assessment of where you are and fix it if there is something to fix. And trust me, we found topics to fix. 

The second is to define the processes and structures that works on a central level through all the necessary departments with clear roles and responsibilities. Then kick off with a strong external partner and talents to define the main topics you want to solve. If done in the wrong order, you process data, but you maybe won’t be able to draw conclusions.  

Another pitfall that organizations need to be aware of is to provide the right resources. Compiling data is the first step, step two is to make the data understandable, actionable and visualize it. And to do that, you need to allow resources for your people to work with the data.  It’s a time investment where you need to have people quantify, qualify, and draw conclusions out of the data. If you don’t provide the resources to understand the data, you’ll just wade through endless data with no action. 

I’m involved in a project where we work with heavy data and when the team is provided a fantastic tool to work with, we also need to make sure that people in the field have time to work with it and get the actions from it. Otherwise, you have this fantastic tool but you’re not able to get the benefits out there if your team does not have the time to work with it. So, I would say it’s about providing the time, the right resources in the field, to work with the data and earn your return on investment. 

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How to Equate Your Digital Transformation Journey to Sustainable Success

Have the following questions ever crossed your mind? 

  • What is the pace of digital transformation in my organization?  
  • Do recent digital initiatives align with the company’s overall business strategy? 
  • How far ahead are my competitors? 
  • What do I need to do to remain ahead of the game?

Matthew Bertram, a Future Point of View (FPOV) senior consultant, has answers to those questions. We were happy to host Bertram’s insightful presentation on digital transformation in a recent installment of 90Minutes CxO Insights — Fast & Furious Digital Transformation: Charting the Course for Sustainable Success vs. A Temporary Fix. Here are the highlights of his presentation. 

 

Digital Transformation: 50 Years of Digital Assimilation 

According to Bertram, the birth of digital transformation can be traced back to 2000. Although we are halfway through the age of machine intelligence, we have only just begun to scratch the surface. “We have AI and ML beginning to truly integrate with our society and our daily lives.” Bertram predicts that by 2050, society will be truly connected through the concept of transhumanism, “where you have computers and machines that are fully assimilated.”  

“One of the challenges that we have with digital transformation is risk.” Bertram explains the biggest risk in the digital business world is data extortion and AI attacks. “What you’re going to see is more of machine intelligence, extortion, and machine learning that targets AI. Whereas right now, attackers are targeting the data.” 

In addition, Bertram highlights that the rate of change in technology is not in tandem with the rate of change in people and organizations. Technology grows exponentially, while organizations grow logarithmically. He calls this the transformation dilemma.  

“What does that do as a leader? That creates a risk, it creates a gap between what’s possible, where we are, and where our organization is.” Bertram names this gap the Leadership Danger Zone. “This is the zone where we as leaders have to bring our organization up, we have to get them from where we are now, see what the capabilities are, and what it is in the future that we can move our organization to.” 

 

The Power of Pre-Emptive Vision

“Think about the technology that we’re talking about over the next five years or 20 years. You can break that technology down into five different categories.” The categories are conceptual technology, leading-edge technology, early technology, established technology, and mature technology. 

With each technology, there is timing, advantages and disadvantages, market reward, and market cost. When should leaders implement a new technology, taking these factors into account?  

“The longer you wait to implement a technology, the less risk there is in implementing. However, the reward from the market from being able to implement that technology goes down first, there’s a first-mover advantage. The goal is to be able to take advantage of new technology without having to be leading edge without being bleeding edge.” 

Bertram says leaders should have a good idea of conceptual technology five to seven years out, and leading-edge technology like blockchain, two to three years out. There are a lot of doubts about the metaverse, augmented reality, and specific types of AI. How do leaders know whether these technologies fit within their organization?  

Awareness, exploration, and adoption of new technologies

Firstly, leaders have to be aware of available technology, explore ways to bring that technology into their organization, and finally, make a bet to adopt the technology through investment. However, Bertram says that most organizations’ field of vision of the future is limited. They start exploring technology only to find out that they are already too late. “For example, Meta virtual reality. There are companies right now that are just now starting to talk about Meta, that are just now starting to wonder about this VR.” 

To avoid lagging behind the latest technology, Bertram calls for leaders to extend their vision as it is a critical skill set. “The way you do that is something that we call rivers of information®, which is simply a systematic way of learning.” 

“Winning organizations don’t look at what’s right in front of them today. They look at what’s coming out several years down the road and begin to explore. So right about the time it becomes leading-edge technology, they are prepared and ready to adopt.”  

According to Bertram, a combination of the rivers of information® and the high beam process has the potential to give leaders a two-year lead over their competitors.  

 

High Beam Strategy Process

Shared future vision 

“It’s important to be able to come to this shared understanding.” Leaders and employees should have a common picture of what the future holds for them and what it means for their organization. 

Trend identification and extrapolation 

Bertram says there are three types of trends to look at — macro trends, global trends, and industry trends. The goal is to identify the top three trends that are going to affect your organization. Once the trends have been identified, the next thing to do is to figure out whether these trends are hurting (anchor) or helping (sail) your organization.  

Develop a portfolio

This portfolio should include three types of investments — “Investments in people, investments in process, and investments in specific tools. Once you have this portfolio, once you have these investments, then you’ve got a way to be able to communicate this out.”  

Bertram stresses that this process should be repeated every year to assess the progress and development of technology investments and make any changes if needed. When executing a strategy or process, Bertram asks leaders to consider eight environmental factors which are culture, motivation, skill and will, key opinion leaders, personality styles, automation acceptance, tolerance for change, and market trends. 

 

Three Capabilities to Help Your Organization in a VUCA World  

The world is getting more unstable from a VUCA (Volatile, Uncertain, Complex, Ambiguous) perspective. “We’ve seen in the last few years what happens when you have a black swan event that totally changes all your assumptions that you did not see coming. How do you deal with a major global event that surprises you?” 

Bertram names three capabilities that are integral in helping an organization navigate a VUCA world. “No matter where you are in your transformation journey, these are capabilities that you need for your organization.” 

Citizen data scientist skill set

According to Bertram, citizen data scientists have a specific skill set to “fill in the white space that a data science team would not be able to catch.” 

The skill set of a citizen data scientist:  

  • Understand the purpose of data activation and the framework for excellence 
  • Thoroughly know your company’s data environment 
  • Understand analytics and how to enrich data insights 
  • How to use visualization, storytelling, and mashups to communicate with impact 
  • Using rules, triggers, and actions to automate insight 

From Bertram’s personal experience, organizations that are made up of 10% to 15% of data scientists have an enormous advantage over their competitors.  

Citizen application specialist 

The next capability is a citizen application specialist who has the following skill set: 

  • Understand concepts of process automation and the future of work 
  • Thoroughly know your company’s automation environment and tools 
  • Systems thinking, data and automation basics 
  • Sustaining automation over time 
  • Proactively solving common challenges of automation  

“An essential part of being a citizen application specialist is understanding how to proactively solve the challenge of displacement and what to do with reskilling and retasking humans.” 

Rivers of information®

The third and final capability is rivers of information® which aims to foster a culture of learning that is intentional and continuous. This is an initiative that needs to be constantly maintained and reviewed. Bertram says it is a big part of an organization’s upskilling program.  

“With rivers of information, it’s not just you as the leader. It’s not just your executive team. It’s not just your board. It’s the entire organization. This is typically driven by HR, sometimes by Learning & Development. As you implement rivers of information®, each department would have their own sources, reviews, and the ability to make this part of job descriptions.” 

 

The Next Steps

Bertram recommends that leaders start working on the following: 

  • Use high beam planning to get a clear vision of the next 3 to 5 years 
  • Identify investments in people, processes, and products 
  • Integrate citizen data science, citizen automation specialist, and rivers of information training into your organization  

“Building centaur capabilities into your organization is a huge advantage that augments any digital transformation. A centaur is a highly advanced human. Someone who has good EQ and good learning habits.”  

A digital centaur is an individual who has the skills of a citizen data scientist, citizen application specialist, and rivers of information® expert. When you pair a digital centaur with advanced technology, they know how to activate data, automate system processes, and continually learn to keep up with the latest developments in technology.