The third Metis Strategy Digital Symposium of 2021 is in the books. A special thanks goes to the global CIOs, CEOs and entrepreneurs who offered their perspectives on the future of work and innovation and shared their organizations’ plans for returning to the office and an emerging “new normal.” 

Below are a few takeaways from the event. Check out our YouTube channel in the coming weeks to view recordings of individual panel discussions. 

Digital acceleration focuses on employee and customer experience. The pandemic unleashed a wave of digital acceleration as organizations navigated a rapid shift in how we live and work. As parts of the world begin to reopen, CIOs say they expect that acceleration to continue as organizations seek to create tools that deliver value to customers quickly across both physical and digital channels.  

Hotels, for example, are upgrading Wi-Fi to create a better experience for guests who may blend work and pleasure while staying at a property. Updated apps will allow guests to schedule housekeeping at times that fit their preferences, providing more flexibility to guests while driving changes to internal operations. At B2B companies, digital experiences such as virtual coaching and real estate tours are likely to continue even as more people return to offices. Technology leaders noted continued investments in technology platforms that will allow their organizations to adapt to changing circumstances quickly.  

Hybrid work models get their first big test. As a “new normal” comes into focus, one thing executives agree on is that the future of work will be hybrid. When asked what an anticipated future-of-work operating model would look like, 92% of attendees indicated it would be some form of hybrid work. Indeed, 60% said they have communicated future-of-work plans to employees, while nearly 30% said they plan to do so in the next few months.

While the future may be hybrid, a return to the office will not be uniform across industries and developing a playbook has been more of an art than a science. Leaders noted that while they have established plans around the future of work, they expect those plans to adapt as they test new ways of working and learn what works well (and what does not). Nevertheless, they say a mix of in-person and remote working will create opportunities to attract new talent and foster new forms of innovation.    

Platform investment aids sustainable, scalable innovation. Many executives noted faster decision making as one of the pandemic’s silver linings. A challenge for IT leaders now is figuring out how to maintain a spirit of speed and innovation while providing the tools and governance needed to deliver growth. As one executive put it: delivering “business value at startup speed.”  

CIOs said enterprise-wide technology platforms increasingly play a role in doing just that. At Pizza Hut, for example, platforms have become the foundation upon which new innovations can be delivered. That approach allows for sufficient governance of new initiatives while allowing new solutions to scale quickly, improve productivity, and reduce costs. 

IT increasingly key to enabling enterprise strategy. Vanguard CEO Tim Buckley (himself the company’s former CIO) and current CIO John Marcante discussed how the company’s rotation programs helped develop them as leaders. These programs allow leaders to “drink deeply” in technology while giving them a broader view of the business, a perspective that ultimately helped them understand technology’s role in achieving business objectives. While metrics like productivity and uptime are important, Marcante said, technology leaders’ influence shows itself in how they apply technology to enterprise strategy and create more flexibility for the business.

For CIOs hoping to ascend to the CEO role, or even to be more valuable in their current position, Buckley advised executives to not only know their own role deeply, but to also learn and understand the challenges facing colleagues across the business. “Being good at your job is table stakes,” Buckley said. “If you want to be a change agent, you have to understand other peoples’ [jobs]…”   

Low-code/no-code continues to democratize IT: The pandemic spurred an uptick in adoption of low-code and no-code tools to build work apps, with Forrester estimating that the market has grown by 23% between 2019 and 2021. Quickbase CEO Ed Jennings said that has caused some IT departments to warm to the idea of citizen developers, employees outside IT who create business applications for themselves or others. Jennings said low-code/no-code applications may be part of the solution as companies continue to face talent shortages, particularly among technical staff. Indeed, 56% of executives polled at the event noted that finding candidates with the proper skillset is the biggest obstacle to hiring. If the barriers to creating useful business applications dissolve, Jennings said, IT increasingly becomes the responsibility of the entire organization. Many executives we have spoken with say they continue to experiment with the technology.

Stay tuned for more information on our next Digital Symposium, which will take place September 22.

Nearly a decade ago, Metis Strategy President Peter High coined the term “CIO-plus” to describe CIOs who were expanding beyond their core IT roles and taking on more customer-focused and strategic responsibilities. Fast forward to 2020, when a Deloitte study found that 40% of CEOs see their CIO and tech leaders as the primary partners in driving business strategy, more than all other C-suite roles combined. 

CIOs already played an essential role in transforming their organizations to compete in the digital age, even before the COVID-19 pandemic forced companies to alter their strategies and operating models practically overnight. A broad shift to remote work put CIOs even more in the spotlight, giving them a more prominent seat at the table as digital acceleration took hold.  

That acceleration shifted CIO priorities and changed the trends on technology leaders’ roadmaps. In conversations with nearly 100 CIOs and technology leaders in 2020 as part of our podcast, Technovation with Peter High, we observed an increased focus on collaboration tools. Technologies such as cloud, AI, and analytics remained top of mind for many executives, but conversations now focused on business and strategic implications. 

Source: Metis Strategy analysis of Technovation with Peter High podcast

Below, we take a closer look at the trends and insights behind the data and get a glimpse of what’s to come in 2021.

Digital transformation accelerates

Throughout our conversations with tech CXOs, one thing we heard consistently was that the pandemic accelerated the overall shift to digital. “We have seen a massive acceleration in trends we were already seeing,” said Ed Mclaughlin, President of Operations & Technology at Mastercard. “We felt we were about three years away from digital supremacy, [but] that actually happened this year.”

At MGM International, then-President of Commercial and Growth Atif Rafiq noted that efforts to develop a mobile check-in capability were accelerated by nine months. Meanwhile, at Domino’s, Chief Innovation Officer Dennis Maloney shared that the percentage of sales coming through digital channels rose from 65% to 75% as a result of a “massive movement [of] consumers into digital ordering platforms.” 

From internal efforts like the shift to a digital workforce or adoption of best-of-breed SaaS tools to external trends such as the explosion of e-commerce and changing customer expectations, it’s clear that COVID-19 massively accelerated the digital trends that have been gaining momentum for years. Technology executives who recognize that changes they thought were several years away are here today will be the ones best positioned to help their organizations thrive. 

Cloud-based collaboration tools explode

As mentioned above, cloud-based communication and collaboration tools exploded in 2020. Less than 4% of technology leaders mentioned tools like Zoom, Slack, or Microsoft Teams in 2019, but in 2020, nearly a quarter of interviewees discussed video conferencing, chat platforms, and similar capabilities. That was certainly the case at Ally Financial, which hit more than a million minutes per day on Zoom during the pandemic, according to Sathish Muthukrishnan, the company’s Chief Information, Data, and Digital Officer. 

As CIOs remain focused on empowering remote workforces, we expect to see companies accelerate adoption of cloud-based capabilities while strengthening fundamentals such as security, bandwidth, redundancy, and availability. As the “new normal” slowly emerges, CIOs and digital leaders who have successfully enabled employees to turn their homes into an office will then have an opportunity to help define how technology can differentiate the in-office experience and define the vision for a hybrid work experience.

Data, analytics & AI drive automation

Artificial intelligence continues to dominate the mindshare of CIOs and digital leaders. It was the top tech trend mentioned on the podcast for the third year in a row. At our Metis Strategy Digital Symposium in January, when asked which emerging technology holds the most promise for companies in 2021, 60% of the executives responded with “advanced AI.” 

At NetApp, CIO Bill Miller rolled out over 150 software bots to optimize workflows ranging from legal and procurement to HR, supply chain, and customer service. Meanwhile, at Intel, Global CIO Archana Deskus noted how the company is applying data, analytics, and AI to the domains of business outcome optimization, product and service design, and manufacturing optimization. 

As the volume of data continues to explode, opportunities around AI, analytics, and automation will only increase. While we encourage organizations to accelerate their shift to an AI-first business model, it is important to do so while considering the strategic, ethical, and societal implications. At Mars, for example, CDO Sandeep Dadlani is looking to leverage automation not to replace workers, but to reduce menial tasks and empower associates to focus on more meaningful activities. Meanwhile, Bank of America Chief Operations and Technology Officer Cathy Bessant led the formation of the Council on the Responsible Use of Artificial Intelligence, in partnership with Harvard’s Kennedy School of Government, to explore ethical and policy issues related to AI.

Looking to the future, CIOs and digital leaders who not only understand the technical aspects of data and AI, but also the broader business and societal implications, will be best positioned to lead their organizations’ AI transformation. 

We expect more companies to see results from AI initiatives in the year ahead. We are also seeing an increased focus on the underlying tools and technologies that enable these initiatives and increasing occurrences of companies developing data strategies.

Trends likely to rise in 2021

In addition to the major technology trends noted above, there are a few topics noted by CIOs that are worth mentioning, as they show signts of gaining importance in 2021:   

  • 5G is [almost] here. The wireless standard made our top-10 trends list for the first time as executives expect 5G to enable use cases from edge computing to autonomous vehicles. 
  • 5G is enabling IoT. As 5G becomes widely available, many executives expect the Internet of Things to finally come into its own. 
  • Renewed focus on cybersecurity: The pandemic has dramatically expanded the threat landscape and forced companies to rethink their approach to cybersecurity, with many shifting focus from building impenetrable defenses to using artificial intelligence to accelerate threat detection. 
  • Democratizing quantum computing: While it is not among the top 10 technology trends, a number of companies have begun offering Quantum Computing as a Service. As the barrier to entry for quantum continues to fall, we believe we expect more organizations ramp up experiments while digital leaders begin to identify game-changing capabilities.
  • Pandemic accelerates AR and VR use cases: During the pandemic, companies increasingly looked to AR and VR to provide immersive ways for people to interact with each other and with the digital world. As the technology matures, we expect companies to continue investing in new use cases long after the pandemic ends. 

From detailed homework review to back office automation, progress in artificial intelligence will continue to explode in the year ahead. In 2018, Metis Strategy interviewed nearly 40 CIOs, CDOs and CTOs of companies with over $1 billion in revenue as part of our Technovation podcast and column. When asked to identify the emerging technologies that are of growing interest or are making their way onto their 2019 roadmap, 75 percent of the technology leaders highlighted artificial intelligence, while 40 percent said blockchain and 13 percent cited the Internet of Things.

AI, an umbrella term for technologies that enable machines to accomplish tasks that previously required human intelligence, could rapidly upend the competitive landscape across industries. While many companies continue to explore AI business cases, seek executive support, and mature their foundational IT and data capabilities, a growing number of enterprises are deploying the technology at scale.

1. Walmart deploys hundreds of bots to automate back office processes

Walmart, the world’s largest company by revenue, has deployed more than 500 bots into its internal environment to automate processes and drive efficiencies, CIO Clay Johnson said. Early use cases focused on automating processes such as accounts payable, accounts receivable, and compensation and benefits. More recently, robotic process automation (RPA) has been applied to Walmart’s Shared Services organization, where it automates ERP exception handling such as matching purchase orders to invoices.

As expectations rise for technology to unlock business value, Clay is looking to scale AI across the company. Having recently adopted a product model and end-to-end ownership, the company is well positioned to apply machine learning to everything from merchandising operations, which coordinates supplier-relation interactions and affects the in-store displays across more than 5,000 US stores, to improving the productivity of the world’s largest private workforce.

For more insight from Clay, listen to the podcast.

2. Western Digital saves CapEx by using AI to optimize test equipment

One of the biggest expenses in hard drive manufacturing can be test equipment, so for $19 billion Western Digital, optimizing the test environment can save hundreds of millions of dollars in CapEx. Given the foresight with which the company has developed its AI and big data strategy, it’s no surprise that among its most advanced AI use cases is optimizing that test environment. “We’re using advanced machine learning and convolutional neural networks to improve our wafer yield management,” said CIO Steve Phillpott. “And we’re using those same algorithms to start identifying and optimizing our test processes, which can help us save hundreds of millions of dollars in capital.”

With a global workforce of 68,000, Western Digital has built a big data and analytics platform that supports a variety of workloads, architectures, and technologies to deliver value to business users of all skill levels. While entry-level analysts can leverage the platform to visualize data in Tableau or perform ad-hoc queries in RStudio, data scientists can make use of advanced techniques to monitor and optimize manufacturing and operations capabilities.

As Western Digital finds increasingly advanced AI use cases in 2019, its flexible platform ensures that the organization continues realizing value while its analytics capabilities mature.

For more insight from Steve, listen to the podcast.

3. Bank of America and Harvard team up on responsible AI development

As companies race to develop and deploy increasingly powerful AI systems, there’s a growing recognition of the responsibility companies have to mitigate unintended consequences. Internet pioneer Vint Cerf and former FCC CIO David Bray have noted that engineers often don’t have the capacity to fully imagine the implications of the technology they develop. That’s one reason why Bank of America (BoA) Chief Operations and Technology Officer Cathy Bessant has teamed up with Harvard Kennedy School to create the Council on the Responsible Use of AI.

While BoA’s most visible application of AI may be Erica, its virtual banking assistant, the Fortune 25 company is increasingly exploring how AI can be applied to fraud detection and anti-money laundering. As proponent of “responsible automated intelligence,” Cathy recognizes that the bank must maintain transparency into the decision-making models and ensure that outcomes are unbiased. Further, as employees begin to question how AI might impact their jobs, Cathy is thinking proactively about how to guide career transformation and development in the age of AI. To explore these critical questions, the Council on the Responsible Use of AI will convene leaders from government, business, academia, and civil society, including Bessant, to discuss emerging legal, moral, and policy implications of AI.

“If you’re a company where your business strategy can be described by the two words, ‘responsible growth,’ then the concept of responsible AI is not a stretch,” says Cathy. “In fact, it is the tough soul of who we are.”

For more insight from Cathy, listen to the podcast.

4. 7-Eleven leverages chatbots and voice to innovate on the user experience

7-Eleven defined convenience for a generation, but today, the most convenient storefront is the one in consumer’s pockets. In a 2018 interview, CIO/CDO Gurmeet Singh discussed how the company uses new technologies to reduce friction for customers and improve their overall experience.

7-Eleven thinks about technology in two broad categories: proven technologies that are ready to scale, and emerging technologies. For emerging technologies, the company has adopted a fast follower approach, which Gurmeet describes as “watch closely and actively experiment.” In addition to operating several global R&D labs, Gurmeet has tasked the company’s CTO with testing new technologies and conducting proof-of-concept tests. Already, 7-Eleven has deployed a Facebook Messenger chatbot that allows users to sign up for the 7Rewards® loyalty program, find a store location, learn about the latest discount offers, and more. The bot, which was developed through a partnership with the tech firm Conversable, is part of Gurmeet’s strategy to redefine the customer experience through technology.

In 2019, 7-Eleven’s technology organization will leverage open-sourced AI libraries such as TensorFlow to explore how AI can streamline back-office processes such as merchandising and operations. They’ll also look to apply voice interfaces to redefine the customer experience.

For more insight from Gurmeet, listen to the podcast.

5. At 174-year-old Pearson, AI is at the heart of the latest product innovations

Albert Hitchcock is the CIO turned COO and CTO of 174-year-old education company Pearson, where he oversees not just IT and digital transformation, but also product development, procurement, supply chain, customer service, and more. Given his broad purview, Hitchcock is well positioned to apply AI across the business. “AI is not five years out. It’s real and it’s happening today,” he said in a 2018 interview. “We’re looking at how we transform all spokes of our business using AI, from how we transform customer call centers using chatbots to how we bring AI, learning design, pedagogy, and insights into brain functions to create a personalized learning experience.”

Machine learning is at the heart of many of Pearson’s most recent product innovations, from authentic assessments and automated essay scoring to adaptive learning and intelligent tutoring. To accelerate the infusion of AI into current and future products and services, the company has hired Intel veteran Milena Marinovaas its first SVP, AI Products and Solutions. While Marinova’s initial focus is updating Pearson’s math homework tool to provide more detailed feedback, the vision to to create omniscient virtual tutors personalized for every student. “[Education] is different for every human and therefore you can potentially accelerate learning and delivery, improve outcomes, and help everyone progress in their lives of learning,” notes Hitchcock. “AI is at the center of that thinking.”

For more insight from Albert, listen to the podcast.

12/5/17

By Chris Davis and Brandon Metzger for CIO.com

Technology is transforming our world at an unprecedented rate. New technologies like virtual assistants and augmented reality are changing consumer expectations faster than ever. The impact of cybersecurity breaches is intensifying. And digital enablers are allowing upstarts to steal market share from incumbents in a matter of months or years, rather than decades.

While it is tempting to believe that these disruptive times will eventually stabilize, our analysis suggests that the rate of technological progress will only accelerate. If this year indeed represents both the fastest rate of change we ever haveexperienced, and the slowest rate of change we ever will experience—as many experts have posited—then this raises a critical question for executives in all industries:

How do I understand the consequences of accelerating technological change, and position my company to capitalize on the opportunities presented by emerging paradigms?

To accomplish this, companies can develop innovation systems that consist of a variety of methods and processes, ranging from strategic foresight to a portfolio of corporate innovation programs. One such program — innovation labs — is gaining steam in corporate America, with some of the biggest and best-known companies opening new outposts focused on developing and scaling breakthrough technologies, processes, and business models.

Through Metis Strategy’s work with Fortune 500 companies and rapidly growing businesses alike, we have identified seven critical factors to consider when creating such a corporate innovation lab.

1. Define the charter

The charter is a concise description of the innovation lab’s objectives and its method for achieving them. But a charter is not just lofty PR: many of the best innovation labs use their charter as a guiding light that provides a deeper sense of purpose and direction. Subsequently, the charter should also clarify what the lab is not focused on.

Consider the differences between the charters of Lowe’s Innovation Lab and of Bayer’s U.S. Innovation Center and Science Hub:

  • Lowe’s Innovation Lab: Understand how new technology may play a role in the future lives of customers and employees by thinking about potential applications for disruptive technologies to build an innovation roadmap and rapidly prototype new ideas.
  • Bayer Innovation Center & Science Hub: Enable our scientists to reach out to academic institutions and life-science firms to forge new drug-discovery collaborations.

While Lowe’s focuses on identifying and utilizing new technologies to enhance the retail experience, Bayer’s priority is forming partnerships to accelerate drug discovery. Given their differences, it should be no surprise that these innovation labs utilize different metrics, governance models, funding sources, and innovation ecosystems to accomplish their objectives.

2. Identify innovation metrics

Large companies thrive when business conditions are certain and their targets are clear. While execution metrics can measure the performance of existing business models, they are less capable of accurately quantifying progress at innovation labs, where the work is sometimes less precise, longer term, or more conceptual. Kyle Nel, Executive Director of Lowe’s Innovation Lab, has noted that “it does not make sense to apply mature metrics to something in its nascent form.”

Innovation labs can develop a portfolio of innovation metrics to measure not only the results of the innovation effort, but also the preconditions and innovation process itself.

With this focus on measuring both process and progress, innovation metrics help labs assess their innovation maturity, but may also bolster the support of their executive sponsors, especially in the early days. For example, Harvard Business Review notes that “revenue generated by new products,” an output metric, is the metric most commonly used by senior innovation executives. By establishing a portfolio of innovation metrics that also includes input and development metrics, the conversation can shift from focusing solely on results to focusing also on the maturing evolution of the innovation capability. This ability to develop unique innovation metrics has helped Nel push back when Lowe’s executives expect significant revenue growth from new and disruptive products.

3. Employ a process for innovation

Innovation is as much a cultural attitude as it is a business process. A generic approach to innovation may begin by defining the customer and uncovering their unmet need, formulating a hypothesis on what product or service the company can offer to meet that need, and validating the hypothesis by using customer feedback to rapidly experiment and iterate. Further, to foster the right mindset, innovation labs should:

  • embrace customer centricity
  • experiment relentlessly, with the desire to learn from failures
  • leverage new technologies and business models
  • accelerate the build/measure/learn cycles; and
  • utilize the customer development method and lean methodologies.

That said, many of the best labs develop unique processes influenced by their charter. Consider Lowe’s Innovation Lab (LIL), which uses a narrative-driven approach to identify and articulate opportunities. First, LIL conducts market research, compiles trend data, and collects customer feedback on unmet needs and pain points. Next, LIL shares this information with science fiction writers who create strategic documents in the form of comic books, which follow characters through a narrative arc that illustrates a new solution to the character’s problem. Then Lowe’s executives use the comic books to make prioritization decisions, and, finally, LIL works with its partners to create the solutions introduced in the comics.

Another example of an organization employing a unique process is X, Alphabet’s “moonshot factory,” which is charged with creating world-changing companies that could eventually become the next Google. X adheres to a three-part formulafor identifying opportunities: (1) it must address a huge problem, (2) it must propose a radical solution, and (3) it must employ a relatively feasible technology.

Using this formula, X has spun out numerous subsidiaries under the Alphabet umbrella. One of those companies is Waymo, the autonomous vehicle pioneer that Morgan Stanley recently suggested could be worth $70 billion.

4. Who and how to recruit

If companies believe an innovation lab will help them more effectively navigate the waters of disruption, it is essential that they recruit for passion and cognitive diversity, rather than just skill. Labs often include a wide range of technical and non-technical roles, from data scientists and designers to experts in anthropology and psychology. Breadth and depth of both skill set and mindset are essential components of a successful innovation lab that creatively explores new technologies and business models.

Ideal job candidates should be innate risk-seekers, strong questioners and connectors, and comfortable with failure and restarts. Deloitte Center for the Edge Co-Chair John Hagel described people who have these traits as personifying the “passion of the explorer.”

Organizations searching for these passionate explorers will find advantages and disadvantages in looking both internally and externally. Internal employees may more deeply understand the customer, but they also may have difficulty looking at problems from a different perspective. External hires may bring new viewpoints and skills, but recruitment may prove challenging.

Companies can use several tactics to attract talent. Buzzfeed’s Open Lab for Journalism, Technology and the Arts, for example, targets specific individuals and groups based on their past projects. Recruitment efforts have been successful, in part, because Buzzfeed offers company resources that support their creative freedoms. Alternatively, companies can be deliberate in how they share their innovation initiatives with the public. For example, Airbus has a blog that reports news from the company’s A3 innovation lab, Airbus Ventures, and from other teams across its innovation ecosystem. This type of focused communication both targets and attracts an audience of individuals who are the most knowledgeable and interested in innovation currently taking place within the industry, and, in so doing, Airbus can create an informal pool of potential new hires.

5. Establish a funding source and budget

The process for establishing a funding source will differ depending on the company. For example, Allstate CIO Suren Gupta has described how a formal Innovation Council evaluates ideas and allocates funding. At other companies, if the innovation ties closely to a particular business unit, then funding may come from that group’s budget.

Though the specifics will vary, a generic process for establishing funding may include

  • identifying and articulating the need for an innovation lab,
  • hiring a small, diverse, highly talented team,
  • minimizing initial long-term commitments, such as major capital expenditure for office space
  • demonstrating the effectiveness of the innovation process by delivering against the charter,
  • requesting more funding and resources for dedicated teams that are mapped to value streams, and
  • evaluating ROI based on leverageable output, not detailed initial business cases or realized commercial value within a short window (scalable value may take time).

The actual size of the budget depends on whether a lab is building the technology itself, partnering with other organizations, or acquiring a company, product or talent. Amazon and Google have spent millions of dollars developing parcel delivery drones. Meanwhile, companies like UPS and Daimler AG have opted to partner with—and make strategic investments in—established drone makers. This lowers both the risk and the cost of innovation while still allowing the company to develop new capabilities.

Regardless of how funding is established—or the size of the budget itself—it is critical to measure how much money was spent at each stage of the process: preparation (i.e. percentage of capital budget allocated to innovation projects), development (i.e. R&D spending at each phase of development the innovation process), and results (i.e. percentage of sales from innovation projects). As with the portfolio approach to general innovation metrics, the use of financial metrics across the innovation lifecycle reduces the focus on ROI, which can cripple innovative projects in the early stages.

6. Where to locate the lab

Silicon Valley is the quintessential innovation ecosystem. The region’s unique characteristics undoubtedly make Silicon Valley the right innovation ecosystem for many labs—particularly those charged with discovering and/or acquiring startups, or gaining business and technical intelligence about emerging technologies.

Other locations should not be overlooked, however. Cities such as New York City, Austin, and Chicago in the U.S.; London, Paris and Berlin in Europe; Tel Aviv in the Middle East; and Singapore, Shanghai and Tokyo in Asia all offer rapidly maturing innovation ecosystems, each with their own unique advantages and disadvantages.

To determine the ideal location for an innovation lab, consider which ecosystem characteristics (such as those highlighted in the adjacent visual) best support the objectives defined in the charter.

For example, former ADP CTO Keith Fulton (now CIO of Bank Systems with Fiserv) has described how ADP’s innovation lab is focused on creating “best-in-class user experiences.” Accordingly, ADP opened its second lab in Midtown Manhattan, since the proximity to top visual design and creative firms provide high concentrations of the right skill sets.

7. Develop a strategy for successfully integrating innovation

There is one final challenge, even for innovation labs that successfully deliver results in accordance with their charter: integrating the innovation with the core organization. From Kodak’s invention of the digital camera to Xerox pioneering the GUI, there is no shortage of companies that failed to capitalize on their innovations.

To be sure, innovation integration is the culmination of an innovation lab successfully delivering on its charter, so the way in which the company captures the value of the innovation very much depends on decisions that were made along the way. We recommend that executive sponsors and innovation leaders discuss early and often what successful innovation integration looks like. Here are a few key questions to consider:

  • Will the innovation become a foundational component of the core organization (i.e. Google Brain)?
  • Will the innovation become a separate business unit or wholly owned subsidiary (i.e. Waymo)?
  • Will the innovation be spun off as an independent, venture-backed company (i.e. Illumina’s spinoff, Grail)?
  • Will the innovation be rolled out in a controlled manner to the core organization’s customers (i.e. Lowe’s Innovation Lab)?

While there is no set template for innovation integration, a definable, well-articulated vision of what the desired success will look like should be a primary priority, not an afterthought.

More than ever before, established companies are struggling to keep up with both the deployment of new technology by their competitors and consumers’ rapidly changing expectations. Careful consideration of these seven factors can empower companies to build an innovation lab that fosters energetic challenges to preconceived notions, creative experimentation with new technologies and business models, and thorough exploration of potential products and services that will enable it to survive—and thrive—amidst the accelerating forces of disruption.

Brandon Metzger, Metis Strategy Associate discusses how commerce and the customer experience is becoming conversational

12/16/15

It is impossible to overstate the explosive growth that mobile commerce (m-commerce) is about to experience.

In the next three to five years, tapping and swiping will give way to a far more familiar interface: conversation

By 2020, there will be roughly four billion new consumers — not to mention an estimated 21 billion ‘things’ — connected to the Internet. With tens of trillions of new dollars flowing into the global economy, multi-billion dollar organizations will rise and fall largely on the strength of their mobile strategy.

Mobile is quickly becoming the primary channel through which customers and businesses interact, and hopefully it is already a major focus of your organization’s digital strategy.

Source: Activate

However, as communication becomes constant, it is increasingly clear that the future of mobile interactions is not websites or native apps.

Instead, in the next three to five years, tapping and swiping will give way to a far more familiar interface: conversation

Ask and Ye Shall Receive

A few weeks ago, I needed to book travel arrangements for a business trip. Rather than navigate to an airline website or online travel agency such as Expedia, I opened a new app called Operator.

Rather than navigate through countless drop-down menus, imputing everything from destination and dates to preferred airlines and class, I had a pleasant conversation with one of Operator’s ‘travel experts.’

At any given time, I may be engaged in multiple conversations simultaneously (e.g., colleagues on Slack, friends on GroupMe, roommates on Facebook Messenger, etc.) As such, it was effortless — even natural — to book a flight through a conversation.

Further, though the conversation lasted roughly 30 minutes, it was far more convenient than using a travel website or app. I rarely respond to texts as soon as I get them, nor do I expect an immediate response. Indeed, the variable speeds that messages can be produced and consumed are a major advantage of messaging interfaces.

As mobile eats the world and messaging surges — we sent a staggering 43 trillion messages globally in 2015 — businesses and entrepreneurs are beginning to recognize the opportunity for commerce provided by the constant communication that is inherent to mobile messaging.

Source: Mary Meeker

Rise of the Conversational Interface

Led by Tencent-owned WeChat in the East and Facebook Messenger in the West, messaging apps are rapidly evolving to allow users to buy products and order on-demand services, send payments, communicate with businesses, and more generally engage in conversational commerce.

Conversational interfaces allow users to ask questions, receive answers and even accomplish complex tasks in both the digital and physical world though a natural dialog.

The move by major messaging platforms comes years after tech giants such as Apple, Google and Microsoft made conversational plays at the operating system level (Siri, Google Now and Cortana).

However, the tech giants are not alone. There is an ever-expanding list of conversational and invisible apps that do everything from schedule your meetings and book your travel to monitor your health and save you money.

Conversational Interfaces (CIs) allow users to ask questions, receive answers and even accomplish complex tasks in both the digital and physical world though a natural dialog.

Our relationship with the digital world will completely change due to intelligent agents you can interact with. — Yann LeCun (Director of Facebook AI Lab)

While it is increasingly clear that conversational interfaces are the next big thing in business, design and technology, there exists no clear best practices for how to implement them.

When I was booking my flight, Operator’s CI acted as an intermediary between American Airlines and myself. However, the interface can also be used to give businesses a more direct relationship with their customers.

As a launch partner for their Businesses on Messenger program, KLM will send your itinerary via interactive chat bubble in Facebook Messenger after you book a flight. When it is time to check in, you will be notified in the same thread, as well as receive your boarding pass and any updates. If you want to change your flight, simply search “KLM” on messenger, open the thread, and ask. By providing permanent context, the experience becomes friction-less.

A Virtual Personal Assistant in Every Pocket

The true promise of conversational interfaces are realized when the conversational user interface intersects the trend of intelligent agents:

Source: Opus Research, accessed via Venture Beat

As the price-performance of computation continues to advance exponentially, technologies such as machine learning, natural language processing, neural networks, and cloud computing are finally powerful enough to realize the Sci-Fi holy grail of intelligent conversational interfaces — or Virtual Personal Assistants (VPAs).

Infused with intelligence, VPAs anticipate users’ needs, further reducing the friction between the user and their goal. Imagine how my interaction with Operator could be different in the not too distant future:

  1. Operator sees that a business meeting in Dallas has been scheduled on December 2nd from 1–3pm.
  2. It immediately determines the distance the meeting is from the airport and looks up historical traffic data to narrow down flight times.
  3. Knowing I prefer to fly American Airlines and directly when traveling for business, it further narrows down the likely flight options.

Only then does it require my attention.

The night before, I set my alarm for 3:30am and go to bed.

I awake at 3am to a message from my VPA informing me that travelers are complaining of broken security equipment and long lines on twitter. It suggests I depart earlier than intended to ensure I make my flight.

I agree, and at 3:30 I get a message that my Uber is arriving.

Strategies to be Heard in a Conversational World

In the current discovery based landscape, companies largely rely on brand recognition and marketing budgets to drive customers to their website or use their app.

However, as messaging and notifications replace search and discovery, the factors of competition will change. By 2016, Gartner projects that companies will compete primarily on the customer experience they provide.

Guided by the philosophy of anticipatory choice, concealed by the familiarity of messaging, and armed with powerful technologies and mountains of data, conversational interfaces will prove to be the preferred point of contact between customers and the digital realm.

In this new age, those that succeed will do so not on the strength of their brand, but on their overall ability to accomplish the tasks and sub-tasks that make up a user’s goal.

As functions such as sales, advertising, customer service and CRM increasingly shift to conversational channels, Gartner predicts that by the end of 2016, $2 Billion in online shopping will be performed by digital assistants. This may prove to be a low estimate, but Gartner echoes Ben Thompson’s analysis that conversational assistants will be the “killer application.”

Old systems will collapse as entrepreneurs figure out how to optimize and reinvent inefficient businesses, products, and services to provide consumers with all things better, faster and cheaper. — Peter Diamandis

Gatekeepers of our Attention

Looking forward, companies like Viv — founded by the team behind Siri — are aiming to provide an intelligent interface to the world around us. In the new paradigm they are working to usher in, intelligent conversational interfaces become the “orchestrating mechanism to the world of information and services.” As co-founder Dag Kattlaus writes, billions of connected ‘things’ and thousands of services will cooperate and compete with each other to accomplish the user’s goal in a massive marketplace hidden behind a familiar messaging interface.

As these feedback loops continue to accelerate, conversational interfaces will quickly bring about a tectonic shift in the relationship between businesses and consumers.

Companies may be tempted to study the best practices of their competitors before committing to a strategy. However, the time it takes for a technology to go from deceptive to disruptive is plummeting, as are the barriers to entry. It is better to forge your own path — even if you are uncertain — than to be caught flatfooted.

Let there be no doubt, as conversational interfaces proliferate and consumers adapt, businesses that can provide the best experience, with the least friction between the user and their goal, will enjoy massive success.

To best position themselves, companies can prepare by taking the following steps:

Address fundamental values

Companies must put legacy, reputation and ego aside and address fundamental questions about their core values, as well as the value they provide to customers. Such questions may include:

  • Do we sacrifice our direct relationship with the customer to improve their experience?
  • Why build a brand if we are going to become part of the back-end fulfillment process for some other consumer app?
  • Fundamentally, what do we enable our customers to achieve?

Digitize your business

Companies should digitize as many aspects of their products and services as they can.

In the hypothetical scenario to the left, Mattel looses a customer — despite their preference for the brand — because they were not best positioned to accomplish the user’s goal. Meanwhile, Disney gained the customer because they digitized their product and made it easily accessible.

Automate

Finally, organizations must automate as much as possible. To achieve this, companies must be able to collect, analyze and repackage data effectively, as well as be willing to integrate. As the Internet of Things explodes and machine-to-machine communications surpass human-to-machine communications, this will be critical.

Source: Acceleration Watch

In 2003, systems theorist and futurist John Smart observed that the number of words per search query was increasing at a quasi-exponential rate. Given that the average human-to-human query length is 11 words, he predicted that intelligent conversational interfaces would emerge in the 2015–2020 time frame.

Their emergence, he said, was likely to be the most important enabling information technology development and collective intelligence advance our planet would see in the next quarter century.

This is just the beginning.

Brandon Metzger is an Associate at Metis Strategy, a business and technology strategy and management consulting firm headquartered in the Washington D.C. metro area