The Aikido Approach to Digital Transformation

[See Q&A with webinar panelists]

Although there is no written-in-stone means of thriving during this chaotic new normal, Softtek welcomes a panel of experts to discuss a strategic approach inspired by a modern Japanese form of martial arts.

Aikido

Like many martial art forms, Aikido is “a type of self-defense, in which you hold and throw your opponent and use his or her own movements.” However unlike many other fighting styles, it does not leverage brute strength and is instead based on the principle of disarming the threat without causing physical harm.

Softtek CMO, Alex Camino, relates the concept’s ideation to the general economic surplus we saw near the end of 2019, which was then followed by a swift decline: “We were in a growing economy… we were on the offensive… And suddenly, the pandemic hits us and puts on the defensive.”

Faux Shields

Among many players, any cost-optimization strategy during hard times is generally seen as a good thing. However, this isn’t always the case, as former Forrester analyst and current SVP of Marketing for Softtek, Stephanie Moore, introduces faux shields— defensive cost strategies that look great on the surface, but derail savings and true modernization in the long run.

  1. Maximum spreadsheet cost-out
  2. Cheaper is better
  3. Lipstick evolution (glamorize tech portfolio)
  4. “Concession” deals
  5. Mess for less megadeals
  6. Trojan horse savings

The future is here, and we have the technology to help us leave these common, yet flawed defensive techniques in the past, replacing them with modern and strategic alternatives. And as we will continue to see reiterated, the trick is to invest with value, not cost, in mind.

Predictable paths to recovery

Shafqat Azim of ISG takes a customer-data-and-research-driven approach to explore how businesses impacted by Covid-19 can realize the highest value in their digital initiatives.

Three Horizons Framework

While Covid-19 has brought liquidity and profitability issues to about 2/3 of ISG’s clients, the remaining 1/3 (particularly those in industries like life sciences and healthcare) deal with the overwhelming increase in demand brought upon them in a very short amount of time. No matter the challenge, survival is key for all players before entering the “Three Horizons” identified through ISG research.

  1. Recover and Resolve: After surviving through immediate cost take-outs, companies will use the following 1-2 business quarters to evaluate how to get back up to speed—or in Azim’s words—how to “peel off the band aids without having the blood gush out again.” How can companies balance technology spend, become cloud- ready and continue critical processes, without damaging sustainability?
  2. Invest Differently: Costs have been reduced, and future sustainability is looking brighter. At this point (1-3 business quarters), Azim explains while drawing upon a common theme throughout the webinar, that we must “start to invest with value in mind, not just cost reduction.”
  3. Business Change in the Next Normal: By next year, businesses will need to evaluate how to behave differently, based on different ways of investing and executing strategies.

The common denominator

Across these Three Horizons, Azim identifies a common denominator: How do you recognize value from your ongoing investments?

ISG leverages a “digital value assessment,” using data from over 550 organizations to evaluate the capabilities, level of investment and business value realized (in the form of revenue, customer retention or operational efficiency) from digital initiatives.

Since the top 25% of these businesses have shown significantly above average numbers, their recipes for success were able to be studied and put into capability groupings:

  • Clients who realize higher than average revenue increases:
    • Regularly assess automation’s impact on employees
    • Analyze IoT data streams
    • Co-create digital products with customers and partners
  • Clients who realize higher customer retention:
    • Adopt common tech platforms
    • Create end-to-end visibility into product
    • Service backlog in development teams and IoT streams
  • Clients who see higher OpEx reduction:
    • Adopt personalized content for employees and clients
    • More strongly leverage automation
    • Adopt common tech platforms

History tells us the best thing we can do is embrace the new norm

Anja A. Allen of Ernst & Young begins by reminding us to take a step back and think about other events that have drawn change on a global scale. Humanity has dealt with plenty throughout history, and we can learn from it (read more).

“As much as we feel that our life is out of our control, there’s typically a pattern to these things; there’s always order and chaos” – Anja A. Allen

Ernst and Young has found with its clients that it’s not good to fall into the cycle of mindless cost cutting, but it’s also not good to be overly tactical. Instead, success comes from coordinating cost-cutting initiatives and transformations for the future; we must embrace the new norm and adopt new ways of doing business.

Unfortunately, embracing today’s change is hard for many organizations. It’s human nature to pursue things that are familiar.

What's the trick?

Embracing new norms and adopting new business models places even more prominence on technology, and fundamentally different approaches to the way that technology is delivered. There are 3 things to consider:

  1. Humans are at the center of every strategy. Businesses must determine how to source internal and external talent to tackle various initiatives. Additionally, they must activate strategic partnerships to help one another enable strategies and delivery models.
  2. Innovation at scale. “If we had Covid-19 in the 1980s, we would have not been able to work the way we work today.” Now we have platforms, like Microsoft Teams  or Zoom, that allow business to carry on, and we can leverage these platforms to better align our pre-Covid-19 business strategies with the changes taking place.
  3. Technology at speed. Many businesses tend to glamorize their technology portfolio rather than modernize, which ties back to the previously mentioned “lipstick evolution.” The better choice, Anja explains, is to simplify the technology portfolio and only consider elements that drive operational efficiency. Finally, these kinds of standardizations should be done with transparency—the last thing businesses need is to lose client trust or upset an entire workforce.

Funding your digital future

Softtek Managing Director for the US Beni Lopez revisits a topic from the past webinar, with a refreshed outlook.

Optimizing costs

If cost reduction wasn’t a primary concern for your organization in January 2020, like the rest of the world, with the exception of a few outliers, it likely secured a top spot in lockstep with the start of the “Great Shutdown.” Cost optimization is also the first step in laying the groundwork for a digital future. This step has ideally been completed already, but includes:

  • As soon as the CEO calls for a % cost reduction, CIOs must look to short-term quick hits: (reduce hardware spending; renegotiate maintenance, monthly Saas fees and telecom usage; and rationalize procurement process and the existing vendor landscape).
  • Next, optimizing costs involves accelerating the digital labor force with cognitive Robotic Process Automation, enabling AI, clearing a path to scale and integrating new processes and workflows.
    • Big takeaway: these are value-focused, not cost-focused optimizations.
  • Honoring the Aikido reference, organizations must use momentum from these optimizations to remain advantageous amidst unfavorable circumstances. Through further digitization and automation of operations, costs can be reduced by up to 30% in just one year.
    • Big takeaway: these initially costly steps have a fast time-to-value metric
  • Lastly, businesses should consider divesting non-critical processes to digitally enabled partners. This is becoming more common, as organizations are starting to see the benefits of outcome-based outsourcing strategies like Build Operate Transfer (BOT) CoEs, digital hub nearshoring (with partners in nearby tech hubs like Monterrey, for example), moving from CapEx to OpEx, amongst others.

Invest in the right direction

Also mentioned in a previous webinar, businesses must identify, protect and enable their “A team,” talent who have adopted and adapted with more fluidity and confidence. More analytics and AI are one way to enable these individuals to continue creating above-average value in their projects.

Get ready for the recovery

Organizations who have adopted any combination of the strategies highlighted will have freed up a substantial amount of financial and talent resources, allowing for new business models, new lines of service and an understanding of new expectations related to customer experience.

Conclusion

We live in the best of times to deal with the worst of circumstances. Even before the pandemic, the word ‘disruptive’ has become an exemplary aspect of the aggregate business environment. And in dealing with all things disruptive, we have learned to better adapt. It is through these adaptations that even the most unlikely businesses to survive have shown resiliency—grocery stores have become pickup centers, movie theaters have become streaming platforms and healthcare players have expanded digital capabilities in record time to keep up with unprecedented demand.

Hasty cost take-outs have been proven to destroy future resiliency, demonstrating the need to be strategic in our adaptations. We must leverage strategic partnerships with an “I scratch your back, you scratch mine” attitude. We must avoid tunnel visioning a cost-focused mindset, with the consideration that sustainably reducing costs may require an initial expenditure through hiring consultants or contracting different digital projects. We must stop yearning for the old way of doing things and embrace the inevitable change.

Finally, in returning to the Aikido reference, sometimes the best offense is defense. If we keep an eye on the enemy’s movements, we can use the force imposed upon us to make it out in one piece, or better yet, in a more advantageous position than before.

[See Q&A with webinar panelists]

Webcast On-Demand. Using the COVID-19 Cost-cutting Imperative to Realize your Digital Ambition