CIO workshop: ROI of customer experience

Customer experience is one of those vague phrases that one hears about digital transformation (itself one of the most common jargon buzzwords of our time). There are two issues associated with customer experience: determining the meaning and quantifying the value or ROI.

To understand the meaning, let’s turn to two authoritative sources, Dion Hinchcliffe and Paul Greenberg, both of whom are fellow columnists for ZDNet.

Dion Hinchliffe positions customer experience as part of what he calls “digital experience management:”

digital experience management attempts to provide a framework — along with supporting processes and platforms — that allows us to better and more systematically organize and manage all of these touchpoints. A subset of digital experience, customer experience management (CEM), is getting most of the focus today since the customer audience is both the largest and most significant in terms of generating revenue for businesses, consequently getting the most attention and priority.

Paul Greenberg talks about engagement as a point of evolution beyond customer experience alone:

So let’s take that back to why my definition of customer engagement? I repeat it here.

“The ongoing interactions between company and customer offered by the company, chosen by the customer.”

To explain.

  1. If the interactions aren’t bidirectional (between company and customer) they aren’t interactions
  2. If they aren’t ongoing then the customer is not engaged for more than a moment, and thus the company has failed at keeping that customer involved.
  3. Offered by the company – the company has to be able to provide the customer what they want to have.
  4. Chosen by the customer

In summary, customer experience drives how that customer perceives a brand, which directly affects their loyalty, purchases over time, and referrals (or warnings) to potential buyers. When customer experience turns into engagement, all those benefits become even stronger.

Despite the intuitive benefit of creating positive experiences for customers, many organizations struggle with allocating resources in this domain. These teams need proof that investments in customer experience will yield tangible results. Despite the intuitive benefit of creating positive experiences for customers, many organizations struggle with allocating resources in this domain. These organizations need proof that investments in customer experience will yield tangible results.

Professional services firm Avanade and marketing platform developer, Sitecore, recently participated in commissioning a study to show the business value of customer experience. The results were precisely in line with what we would expect: investments in customer experience do yield an ROI.

Some of the key findings include:

  • US $3 return on investment expected for every $1 invested in customer experience
  • Almost six in ten (58%) have seen increased customer satisfaction over the last 12 months
  • Close to four in ten (37%) have seen improved sales cycles

The graph below summarizes business benefits from customer experience, including higher revenue, greater profitability, and faster sales cycles.

Customer experience ROI

Customer experience ROI

This chart shows the benefits of improving customer experience. Of course, measures such as customer loyalty and retention quickly translate into higher revenue.


Loyalty and other customer experience benefits

Loyalty and other customer experience benefits

In this research, respondents described their reasons to focus on customer experience, including being more competitive, responding to customer feedback, and lowering operational costs.


Reasons for customer experience

Reasons to improve customer experience

The obstacles, or challenges, associated with improving customer experience include outdated technology and lack of qualified personnel and skills.


Challenges to customer experience

Challenges to customer experience

Consistent with the results described so far, respondents focused on revenue and profitability as the main reasons to improve relationships with their customers.


Lifetime benefits of customer experience

Lifetime benefits of customer experience

What this means for the CIO

From a CIO perspective, we can draw several conclusions:

Improving customer experience is crucial. The value of customer experience should be obvious, but sometimes we need to hear the same message again. In this day and age, can anyone seriously question the importance of developing relationships with customers that lead to engagement?

Technology matters. Doing this right requires a range of tools, from social listening to personalization. Therefore, the CIO and IT have an important role to play.

It’s more than technology. Although technology is important, improving customer experience requires a mindset and cultural shift. It’s really about recognizing that customers are central to all business success. For the CIO, this means getting on board and helping lead this charge.

Customer experience initiatives are one of those pivotal activities that require a coordinated technology and business strategy. Therefore, it presents an ideal opportunity for CIOs to participate at both the tech and business levels.

Disclosure: Avanade is a CXOTALK partner.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

#CXOTALK: Technology innovation advice from Accenture’s CTO

The consulting firm, Accenture, is a member of the Fortune 500 and one of the largest companies in the world, with revenues over $32 billion and approximately 300,000 employees.

During the 45-minute discussion, we focused on issues surrounding digital transformation and innovation.

You can watch the entire conversation below and read a complete transcript on the CXOTALK site.


Of course, innovation is an important part of digital transformation, and Daugherty explained Accenture’s multi-layer process for ensuring the large firm retains a leading position on important new technologies.

Equally, or perhaps more, importantly, he emphasized Accenture’s focus on linking technology to business results. For Accenture, technology provides value when it solves business problems and practical use cases.

Bear in mind that Accenture’s core business strategy reflects business value based on technology innovation. Therefore, it must address the needs of ongoing, present-day client work while anticipating future business and technology shifts. The combination of present and future underlie Accenture’s rich approach to innovation.

Of course, many companies face a similar challenge, but Accenture’s large scale is a prime motivator behind the institutionalized approach to innovation presented in our conversation.

Here is an edited transcript of sections where Paul Daugherty discusses innovation at Accenture:

How does Accenture view technology innovation?

Every year we have to add $3 billion of profitable revenue. So, in essence, we have to add 100,000 people every year, and that is what we hire every year with new skills that generate profitable growth equivalent to 3 unicorns of revenue.

To make that happen, we need a lot of innovation mechanisms in our business. Technology moves so fast today that if you are not at the forefront with the important technologies, you’ll miss key parts of positioning and growth.

As an example, two years ago blockchain wouldn’t have been singled out by many people as an important technology for us. In just two years, it’s now important for us to have a blockchain practice. We’ve invested in a couple of blockchain startups, so we work with them more closely to drive change. And we’ve got blockchain R&D and we have blockchain work going on with clients across different industry groups.

That’s just in a couple of years, and that’s the type of speed in which the technology is moving.

How does Accenture drive innovation internally?

We have something we call our innovation path, which is how we make innovation work. It starts with research. We have Accenture research, which generates thought leadership and provocative points of view on the game-changing trends like our technology vision. That’s Accenture Research.

Then we have Accenture Labs, a major R&D investment in seven labs that we have around the world, with researchers and Ph.D.’s driving hands-on applied research. We have the hands-on experience to drive those technologies as they take off.

We have Accenture Ventures, which is where we invest, reach out, and work with start-ups, VCs and entrepreneurs through an open innovation approach. We also take investments in companies where we can create a special relationship and create a good way to grow their business and our business, together going forward.

We have something we call Accenture Studios, where we bring our clients to ideate and co-innovate together in an environment that combines everything from design thinking, to experiential, hands-on technology, to new development techniques like extreme programming and agile development, where you can quickly ideate and build solutions.

Then, those skills get into our global delivery network and all of the businesses of Accenture. We are investing increasingly in that, and if you look at our business we’re again 30 billion in revenue, and we invest about 3 billion a year in improving our capability, about 10% of our revenue. It’s about a billion in internal investment and about a billion in acquisitions and about a billion in people in training. And that for a company of our size in our industry that is a lot of investment to make, but we believe that’s what’s required to keep moving the organization at pace.

To round out one point that I mentioned — acquisitions. We have acquired over 40 companies in the last 36 months. Bringing in that new capability to accelerate this kind of rotation is a key part of the strategy as well.

How do you connect innovation to ROI and practical use cases?

That’s what gets us excited. You can get anybody excited at Accenture when you talk about innovation and business value. That’s exactly the way which we look at it. Even starting on that innovation path and the research stage we’re looking the potential.

For example, when we started working with drones some years ago, it was, “What are the applications?” and we started working with oil and gas companies around pipelines inspections using drones. We just deployed an application using drones for a very large agricultural producer in Asia to use drones to improve their agricultural productivity dramatically, etc.

We look for those combinations of technology and use case.

Virtual reality as a great example. One of the exciting things that we did last year was work with a manufacturer to apply augmented reality in the manufacturing setting. An assembly worker using augmented reality, with laser guided precision and machine intelligence and machine learning built into the software, could operate at a far more skilled level using augmented technology. It makes that person a better worker, a safer worker, a more productive worker, and [produces] better quality products. A win-win for the worker and the company.

Those kind of scenarios are exciting and go across many domains.

What is the relationship between innovation and culture?

The days of top-down, multi-year strategies are gone in the same way as the era of very rigid fixed organization structures are gone; people need to work differently. Understanding how the culture of the company changes to become more innovative and more adaptive is essential.

The pace of change is so extreme; you need an organization that can adapt quickly accept change as a new normal rather than something you just do once in a while.

Disclosure: Accenture is CXOTALK partner.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

Changes in the Venture Capital Funding Environment

Changes in the Venture Capital Funding Environment

The funding environment for tech startups is an ever shifting ground as we go through predictable shifts that go hand-in-hand with the slowing of the overall market.


The most important shift I would characterize as the market moving from “high conviction” and thus strong follow-ons to “limited conviction” and lots of gamesmanship / games of chicken … at your expense.

Here is a brief history first to put the changes into context.

  1. Rise of Seed. To understand today’s trend it’s worth stepping back a decade or so. Prior to then the concept of “seed funds” barely existed and as I’ve argued before the seed fund phenomenon was largely driven by: Open source + horizontal computing + Amazon AWS. In other words, it isn’t that VCs suddenly got smart, it’s that the costs of starting a company went down dramatically.
  2. Rise of Angels. The second major trend was the rise of the angel that was a function of the boom in Silicon Valley wealth (Google, Facebook, Zynga, Twitter,, etc) plus the rise of crowd-funding platforms (AngelList) plus the rise of Y Combinator / 500Startups / TechStars.
  3. Boom in Number of Startups. There was an explosion in number of startups both because it was cheap and there was tons of available capital.
  4. Explosion in Seed Funds. I remember when seed funds first started (they were being incorrectly called “super angels” and then Micro VCs before Seed Funds stuck) and every LP (who invest in VCs) told me they weren’t convinced about Seed Funds (too small, too hard to pick winners, would they be able to follow on?). Now seed funding is conventional wisdom. I
  5. Leaderless Rounds. With a massive increase in companies created and a huge number of sources one trend that we witnessed from 2012–2015 was the rise of the undisciplined round. Specifically I mean teams that were going too fast at raising, optimizing around the highest price or avoiding larger investors because they wanted a lot of small players who couldn’t exert any control (terms, price, etc.). This works in a booming market or in a company that never hits any headwinds.
  6. Non VC Growth Rounds. The other major trend of 2012–2015 was the entrance of “non VCs” into late-stages of venture capital, which mostly consisted of hedge funds, mutual funds, corporate investors, sovereign wealth funds and even LPs doing direct deals. This led median valuations to triple in 3 years and led to this stupid phenomenon that people refer to as “unicorns,” which I am convinced will the the thing most historians laugh most about in this era. The fact that I still see it referred to in pitch decks is farcical.
  7. Late-Stage VCs Pay Up. VCs of course responded to all of this by raising larger funds, raising growth funds and making sure they didn’t miss out on marquee deals — even if it meant investing when a company was already worth billions of dollars (otherwise not known as venture capital). Some called this “buying logos.”
  8. The market eventually slowed down. In Q3/Q4 2015 the market changed noticeably for VC funds and the market started to realize this by Q1 2016. While a slowdown is hard to pinpoint to a single event, I’d say the most telling “Black Swan” event was the day that LinkedIn and Tableau lost 50% of their public market caps in a single day. It had come on the heels of a long, public slide at Twitter and the beginning of a questioning about valuations overall.

Where does that leave us now?

There is a lot of resetting that has already taken place. I have spoken about some of it here in my quick video primer I called “clash of the titans” and you can get some more broad-based fund-raising environment commentary on my snapstorms/fundraising page, which I’ll continue to update.

But there are two major trends worth understanding that most VCs know by now and I suspect most entrepreneurs do not. That is simply because we see 20–25 deals / year across our funds (new and follow-ons) and entrepreneurs usually see 1 deal every 2 years.

  1. VC Infighting. In a booming market everybody felt like each stage of investors’ interests were aligned. In fact, sometimes they were synergistic. Angels / seed often wanted to exit early and late-stage wanted more ownership than founders would sell so secondary transactions were common. But now the trend is in-fighting. If a company raised a big B and/or C round and needs more money the late stage guys have the bucks and that early-stage guys often don’t. So in companies with high burn rates you can find the following: Seed funds wanting to sell the company / get a return or growth investors pushing for a recap or massive down round. I’ve seen this a bunch in the past 12 months. These are extreme positions and often the deals settle in between but it can be U-G-L-Y and the financings are at times coupled with changing management teams.
  2. Lack of Conviction / Follow Through. In a booming market the trend was that everybody was fighting to take their full prorata shares. In fact, many seed funds set up “opportunity funds” or “overage funds” so they could follow longer. But with inside rounds (where there is no outside lead) more common these days the most worrying trend I see is the lack of support exiting investors are showing. If you have 2–3 traditional VC funds they usually work together in tough times. There are unwritten rules in The Valley — you don’t screw other investors when everybody decided to pitch in and help out the company. It is a norm that is held because it’s a multi-party game (Prisoner’s Dilemma) in which you want to work with these funds again. It helps control bad instincts / behavior. But with so many newer seed funds in deals, with so many VC funds created in the last 5–7 years (never managed through a non-booming market) and so many non-VCs around — these norms aren’t holding.

Some examples

  • There was an A-prime round of a high-profile deal coming together. 3VCs agreed to fund an inside round and cut costs. But at the last minute one got cold feet after looking more closely at the data. They were the smallest of the three shareholders in ownership but the largest fund. They pulled out. The other two didn’t want to shoulder the burden. Fighting broke out, time was running out … and the company went bankrupt. Expect more of this.
  • There was a C-round deal where the company ran out of money unexpectedly. The largest fund saw this as an opportunity to drive down price since they felt they overpaid in the last round. Early investors fought. It dragged for months but a deal got done. People lost jobs.
  • A company that had an offer to be acquired but needed time to complete the M&A process. Some funds came in — one literally said “we have no more reserves” and ended up funding a trivial amount. The committed funds bit their lips because the company was going to miss payroll and just funded it anyway to preserve the peace.
  • A company with strong prospects but needed a bridge round to get to a fund raising event. One lead fund agreed to do prorata, 2 other funds decided they’d prefer to do “half of their prorata.” This lack of support is now commonplace and is a warning sign to those who believe that: leaderless round or “dumb money, highly priced” are good ideas. There are good VCs and bad VCs and I don’t want to pretend otherwise. But in this industry you are way more likely to see consistent actions from those who understand the rules of the game vs. new entrants who can be fair-weather friends.

The industry is changing in predictable ways. Be thoughtful about from whom you raise capital. Always assume that if you’re able to raise money in good markets but will have to also raise in tougher markets. Think through your strategy when money is easy and ask yourself how these funding sources will act in a tough market.

For year’s I have counselled to “raise at the top end of normal” and in my seminal “lines, not dots” post I’ve pointed out many times in public speeches that if VCs need to get to know you above time (a line) then you need to know your investors even more so. VCs can afford to get a few decisions wrong. One wrong decision by an entrepreneur can torpedo all of your hard work or your future.

Choose wisely.

(Cross-posted @ Both Sides of the Table)

#CXOTALK: Design for innovation, digital transformation, and organizational change

Design plays a crucial role in modern technology companies. From creating user experience to helping organizations become customer-centric, design is fundamental to digital transformation.

Design in Tech 2016

Design in Tech 2016

This broad concept of design, going far beyond attractive screens and pretty colors, is connected closely to innovation and evolving business models. For this reason, both startups and large, established companies have recognized the importance of creating user experiences that are both functional and compelling.

John Maeda is one of the world’s most prominent voices advocating this expansive view of design. Currently a partner with the leading VC firm, Kleiner Perkins Caufield Byers, Maeda was previously President of the Rhode Island School of Design and held posts at MIT and other prestigious organizations. His work is in the permanent collections of the Museum of Modern Art, the San Francisco Museum of Modern Art and the Cartier Foundation in Paris.

Maeda’s 2016 Design In Tech report, analyzes the state of design among technology companies and is an essential reference and compilation of data. The report examines M&A activity and offers advice to both small and large organizations on the economic importance of design.

Maeda has extended the concept of design to include economics, leadership, and organizational change. He describes three kinds of design (and designers):

  • Classical design
  • Computational design
  • Design thinking

As part of the CXOTALK series of conversations with innovators, I spoke with Maeda to learn about the report and gain color on his findings. Listen and watch our conversation, which is embedded below. You can also read a complete transcript of the discussion.

What are the three kinds of design?

Classical designers are trained in the old way. The way of the physical world and in print; all the most beautiful thought design for centuries has lived in this space.

Design can be applied to making a user experience; that’s computational design.

And then there is design thinking. It’s the idea that your company doesn’t move fast enough, and if you can think more creatively, like a designer, your company can innovate better.

Of the three kinds of design, design thinking and computational design are going to have the biggest impact on the economic success of countries today.

What is design thinking?

Design thinking is all about organization agility; rediscovering innovation over execution. In the case of design thinking, they’ll take Post-it notes and use a whiteboard and think about ideas and move them around as if they’re sketching the organization, the people roles. So it’s all about the ability to sketch. Not just to draw, mind you; the ability to ideate very quickly.

People who do design thinking may not be classical designers; they may not be computational designers. But they’re a kind of designer that can think in the medium of organizations and ideas and people.

It’s going to help your team, your units; the whole company gets a little more malleable by sketching ideas, testing them and working them out together through a non-rigid medium; in this case, post-it notes and whiteboards, clips of paper.

Is design about active ideation rather than the specific output or medium?

The whole idea behind design, at the most basic level, is process. It’s a process of approaching a problem. It’s medium-agnostic at its highest level. A great experience is made by having plastic processes, meaning to iterate and test ideas before you execute. What is the famous phrase by Frank Lloyd Wright, “It’s better to put a pencil to paper than have a sledgehammer at the construction site.”

What is the role of empathy?

You have to care about what the customer feels.

But, in the world of pure software engineers, empathy isn’t part of the goal. The goal is to execute on durable code, test it with code. Code that won’t fall down, like a bridge maker, like a person who designed a bridge wants to make sure that, number one, it doesn’t fall down. But while doing that, they need to think about the person that’s going to cross the bridge.

Designers in Silicon Valley have been bringing in the viewpoint, which is obvious to everyone except the people making the bridge, which we have to ask, “How does a person crossing the bridge feel?”

Empathy. So, empathy is what designers bring to the table all the time. They ask, “How does that make you feel and how can I make you feel better? How do I improve the experience?”

So, successful design combines empathy with creating a meaningful experience that’s appropriate for the context?

Engineering is important in relationship to design. And a business model to make that product affordable. Good business, good engineering, and good design are important together; they make great products, but not in isolation.

It’s synergistic but depends on the product too. They’re three things that pull on each other, but at the base level, the engineering has to work. Design can’t solve a bad engineering solution.

What about teams and leadership?

At a startup, you’re not designing a product; you are designing a team that can build a product. At large companies, you are designing products, designing companies to make great products in perpetuity.

The hands-on makers have a hard time becoming leaders, and so in the report, I feature two characteristics of a company in which design leaders can make a difference: culture and systems.

How can companies create a culture of design?

It requires the CEO to care about design. Not just as a buzzword, but to understand there are three kinds of design and to understand there are three kinds of designers in their company.

It requires the executive team to understand that design is not just about pretty things, like a good looking shirt. But, there are business design thinkers who can help the company think in a more agile way. There are computational designers who work [at huge] scale and reliability. And yes, there are the traditional designers who design amazing, quality experiences in print in the old way.

Bring design expertise into the boardroom, into the executive team meetings. Not to review design, but to ask how can design thinking be used in our company? How can we help our culture innovate better?

Watch CXOTALK for in-depth conversations with the most innovative business leaders on the planet!

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

Half Lives. Social Media. And Snapchat Stories.

I’ve been online for nearly 30 years (yes, there was CompuServe and Prodigy before the www), blogging for 10 and using social media tools since the earliest days.

I love to watch networks evolve, see how crowds gather and communicate and curate and share.

Twitter was the most unique social sharing platform that had emerged in my experience because it unintentionally innovated on a constraint of 140 characters (initially so that it could send messages as SMS, which it self had a size constraint). The constraint forced people to use links and link shorteners and thus to drive traffic.

In the early days of Twitter most users didn’t follow too many people, which was good and bad. On the good side we had a lot more public “conversations” on Twitter, making it feel like a chat room. Because it felt small and we also felt like we didn’t miss much and when we shared our friends saw it.

As Twitter grew everybody’s followed counts grew, which meant that we missed things in our timeline and our friends missed a lot of what we shared. Twitter became ephemeral. I found that if I shared a post at 5am PST it would get 300–400 clicks and then drop off a cliff. By the time my West Coast friends were awake and Tweeting nobody would see it.

I began experimenting with time-of-day, number of Tweets, headline text, etc and learned a ton about usage patterns of Twitter and I even invested in a social media analytics company called, an influencer network called Adly and a data firehose company called Datasift (who now powers the Facebook Topics feed).

I learned that the “influencers” I wanted to reach — often my friends — used Twitter late at night when other people were off the network and few used it during the day when we were all at work. We secretly still wanted that small network chat room experience as a place to chat amongst friends.

Because Twitter was a reverse chronology network once a Tweet had passed by your stream you were unlikely to see it. The “half life” was very short. As somebody who invested his time heavily in writing and wanting to share his thoughts through a blog I learned that I had to Tweet a post 3 times to get it read: 5am, 8am and 10pm. The readers seldom overlapped so nobody seemed pissed off at me as being an “over sharer” but it was clearly a fear of mine. You don’t want your friends to stop following you because they think you’re polluting their stream.

Facebook had an elegant solution to the “half life” problem in that it developed an algorithm that determined what users saw in their feeds. I’m not an expert in the algo but essentially if a “post” got some heat (lots of people clicking, favoriting & sharing) in a short period of time then more people saw the post in their feeds. The more heat you got the more your post would stay at the top of the feed of your friends.

Of course there was good and bad to this also. The bad was that it seems like when I shared media on Facebook I wouldn’t get any heat initially so Twitter was my go to place to share my blog. But if a post got read and resonated then Facebook finished stronger than Twitter.

I’m sure Twitter knew this but the community of Twitter was so public and vocal about “not fucking with the feed” that they resisted changing anything to the “purity” of followers seeing everything that got posted and always is reverse chronology. Twitter was “full fidelity” and Facebook was “curated” by an algo controlled by the company.

The puritans in us loved the former, the pragmatists in us knew the algo produced more engaging results. Eventually Twitter acquiesced and started putting Tweets that you missed “while you were away.” I actually think they did a pretty good job of introducing what was a controversial change and navigating the trolls in all of us that resist change.

As a technology prognosticator, watching Twitter and Facebook grow up was a real pleasure.

And Snapchat has changed the game and in ways that I think the community doesn’t even quite understand yet. (If you’re not a Snapchat user and want a taste of what I do there check out: where I save the videos permanently.)

As many of you know, Snapchat started a place to send ephemeral photos with friends and thus was perceived to be only a sexting app for teens in the same was as Twitter was pegged as a place to share what you ate for lunch. Neither caricature of course was correct.

Snapchat’s big innovation was “stories” in which users could post everything from their last 24 hours in one “reel” that would combine videos and photos plus fun (filters, face swaps, emojis, stickers).

There are two reasons that stories was a big leap forward for Snapchat.

First, prior to stories users had to spam every follower by pushing every snap into their inbox. It was annoying as a user to get random snaps and felt spammy as a content creator. Stories allowed people to publish into a stream in which the users could choose to watch the story or not. It was better for consumer and producer for this type of use case and you could still privately message people like an IM platform (or DM in Twitter, PM in Facebook).

Second, there is one big innovation that the market hasn’t talked about. Snapchat stories takes everything that I do in a 24 hour period and builds it into one cohesive story.

Think about that. On Twitter if I post at 7:35am and again at 8:15am there will probably be 150 Tweets in your stream between those meaning there is no cohesion in my successive Tweets and meaning that if you log in at 8:30am your chances of seeing my 7:35am Tweet is slim-to-none. That’s not necessarily good or bad — but it’s different.

On Snapchat when you click on my “story” you see every post of mine sequentially for my entire past 24 hours. This is a big deal. If you don’t want to “complete” my story you simply swipe left and you’re on to the next story.

But here is what I’ve learned about Snapchat.

  1. The story structure allows me to create a more cohesive storyline and when I consume other people’s content (even when it’s just life casting) I feel like I get a better, more cohesive story of what’s going on in their life. Right now I’m getting about 9,000 views at the “top end of my funnel” video on my story. By about the 5th or 6th video I have about 25% of my viewers drop out. If you complete 10 videos of mine the completion rate to the end is like 85% meaning if you like the topic I’m sharing that day and invest in it you’re highly like to complete.
  2. Snapchat has a much longer half life. For a content creator this is BIG. There is no ephemeral stream in which my content is mixed with others. People go to their stories and see whom they follow and decide whether to consume that story. So the consumption of my stories remains very consistent throughout the 24 hours when a story is live. I put a story out once and I’m done and for consumers they know that they don’t have to log in at the same time I’m producing in order to see my story.

Snapchat is biggest innovation in media right now and the biggest innovator in product design from a user perspective. Will that continue? Will new players emerge? Will the titans fight back and recapture share-of-mind and share-of-time?

I have no idea. But as somebody who loves to watch, play with and learn about media and applications it has sure been a pleasure to watch over the past year.


(If you want to learn more Snapchat basics: Snapchat for old folks, why Snapchat is an important media company, why Snapchat can work for business and how & why I do Snapstorms.)

(Cross-posted @ Both Sides of the Table)

Research: Digital creates CIO innovation opportunities but challenges remain

A recent survey of 3,352 CIOs and IT leaders sheds light on important aspects of the CIO role and describes CIO perspectives on areas such as digital disruption and cloud. Most important, the study offers proof points of the conflicting demands that face CIOs and IT during this time of digital transition.

The research is a joint project of recruiting firm, Harvey Nash, and consulting firm, KPMG.

Research summary

CIO operational priorities. The top three CIO priorities are:

  • Increasing operational efficiencies
  • Improving business processes
  • Delivering consistent and stable IT performance to the business

In other words, the CIO is responsible for ensuring that business systems run smoothly and efficiently at low cost. Further down the list, we see points such as improving time to market, enabling change, and other attributes associated with truly innovative CIOs.

These priorities demonstrate the tension between CIO aspirations to innovate and practical realities of running IT and “keeping the lights on,” to use a familiar expression.

CEO priorities. While CIOs focus on stability, creating efficiencies and improving business processes, CEOs seek IT projects that make money. Right here, we have the core CIO paradox: the company wants growth, but the CIOs first job is consistency and systems that work.

The most successful CIOs figure out how to deliver operational stability as the foundation for innovation and growth. In effect, this requires the CIO to run two business models simultaneously: one to maintain stability and the second for growth.


CEO priorities for the CIO

CEO priorities

Budget influencers. Increasingly, stakeholders outside IT are influencing, or even controlling, how the CIO spends his or her budget. This corresponds to the exploding proliferation of technology expertise outside IT.

As marketing, finance, and line of business functions com to rely on specialized technology and applications, they will exert greater control over IT budgets.


Influence on IT budgets

Influence on IT budgets

Cloud adoption. The three top justifications for moving to the cloud are:

  • Agility and responsiveness
  • System availability
  • Innovation

All three are great reasons to adopt the cloud, and they indicate that CIOs know IT must become more responsive partners to the business. This message comes across loud and clear.


Reasons for cloud adoption

Reasons for adopting cloud

According to the survey, the primary inhibitors to cloud adoption are security concerns and challenges around data integration.

The security argument is an issue because only the largest companies in the world have even a chance of protecting their data centers at the same level of top cloud providers. Few organizations possess the security resources and expertise of cloud vendors like Microsoft, SAP, Oracle, or Salesforce, to name a few major providers.

Data integration is a reasonable concern. Whether systems are on-premise or in the cloud, IT must manage data exchange with other applications.


Obstacles to cloud adoption

Obstacles to cloud adoption

Agile dominates. As we can see in the chart below, agile methodologies have become commonplace among IT departments. Certainly, when I talk with innovative CIOs, agile is the preferred approach in almost every case. One CIO recently told me, “Agile forces everyone to participate and help solve problems, rather than be the voice of ‘No’.


Approaches to increase responsiveness

Agile methodologies prevail

IT project failure and success rates. Top performing CIOs talk about “operational excellence,” the need to deliver useful projects on-time and within budget.

This survey shows that only around half of all projects actually succeed. Among IT failure research, the data presented in the chart below is unique, because it breaks out project success by type of project. The overall failure rates reported are consistent with other research.


IT project success and failure rates

IT project failure and success rates

Digital disruption. Of course, we are all interested in attributes and characteristics of digital transformation.

As one might expect, media tops the list of industries facing disruption.


Digital disruption by industry

Digital disruption by industry

Similarly, advertising and media companies are most likely to have an enterprise digital strategy.


Digital strategy by industry

Digital strategy by industry

Importantly, ownership of digital initiatives has become strategic for many organizations. However, this presents a leadership question for CIOs, who must find ways to create their own involvement in these core programs going forward.

Part of the CIO challenge in creating leadership is to recognize that influential, rather hierarchical control, is a crucial part of this equation.


Ownership of digital strategies

Ownership of digital strategies

Advice for the CIO

The research offers a compelling view into important aspects of CIO life. Based on my experience, frequently talking with CIOs and interviewing many on the CXOTALK show, there are three important lessons.

Operational excellence is the foundation. Create an IT organization that delivers the right projects on-time and within budget. As CIO, operational excellence must be your baseline. If your plans are not highly successful, then start a program to figure out why and fix it. Project success leads to credibility and organization support for innovation.

CIOs face a core chronic conflict. The urgent requirements of daily IT deliverables create a focus on inward-facing activities that crowds out innovation. Top CIO priorities include cost savings, efficiency, and improving processes. Although these are worthy goals, CEOs want IT to support core company strategies, particularly revenue. The gap between CIO activities and CEO mandates is a real challenge.

Said differently, ultimate CIO success can only come when IT supports the CEO’s most important business strategies.

Digital creates opportunity. With the rise of digital transformation, CIOs have a golden chance to rethink relationships across the enterprise. Now is the time to clean up IT, establish the essential ability to deliver operational excellence, and put together an innovative IT organization.

Digital is shaking up established relationships between technologists and business functions. For CIOs, these changes open the door to new positions of influence. However, taking advantage of the opportunities requires IT to possess a profound understanding of the business, the ability to listen accurately and respond with precision, and excellent communication skills.

Therefore, start by making a dispassionate assessment of your IT organization (and yourself), to be sure that these skills and capabilities are present on your team.

(Cross-posted @ ZDNet | Beyond IT Failure Blog)

How I Invest

vc-chest-300x201I was speaking recently to the team at NuOrder, an LA-based company we’re an investor in about “realism in startups” — an impromptu talk I have given to any of our portfolio companies who ask.

During the Q&A I was asked about how I make investment decisions in early-stage businesses. I was asked again in an LP meeting later in the week and then again at a founder breakfast gathering we hosted yesterday. I answered in the same way I always do so I thought I’d just write it publicly.

“I fall in love.”

Yes. I know that sounds trite but it’s the best way I can describe my early-stage investments.

I fall in love with both the founders and the concept. If I don’t do both then it’s highly unlikely I will invest. I know now that investments will consume many hours including late nights / early mornings and weekends. I know there will be good times and bad. I know there will be victories, set-backs and even some fights.

How else can I begin this multi-year journey if I’m not in love?

Maybe some people can be dispassionate financial investors. I cannot. I spend hours thinking about the products, competitors, market opportunities, recruiting and financing of these businesses. I feel personally committed and engaged. I often form very close friendships with the teams — even if I know that I still have a fiduciary responsibility and at times could even be at odds with the economic interests of a team. But frankly, if you’re honest, that’s the same exact situation every CEO/Founder often has with all of their team members, too.

For the most part I think life is too short to work with people you don’t deeply respect, admire and like or on concepts you aren’t deeply passionate about.

As a starting point I have to believe the founder has the attributes of an entrepreneur that matter most to me: Tenacity, resiliency, inspiration, perspiration, attention-to-detail, competitiveness, decisiveness, risk tolerance and integrity.

I have to believe the founder is cost-focused, mission-driven and aligned on cultural values to me, which mostly relates to integrity and how to treat other people. I like over communicators who err on the side of transparency and candor. I need to know when we’re in tough times that we’re in it together, with mutual respect and trust in each other to be good actors.

Of course I also have to the concept. It’s not enough to love the founding team. I don’t pretend to have all the answers about what is the best type of investor or the best type of investments so please don’t take this as my saying this is how everybody should invest. But I have a strong preference for:

  • Non obvious ideas. Often as I describe to people privately why I invested the first reaction is not to immediately get it.
  • Reasonably technical concepts. At heart I’m still a tech nerd from childhood and I love to see how technology is changing business and society. I am much more attracted to technical product teams than to new business concepts or commerce types.
  • Innovator’s Dilemma. I love businesses that aim to massively reduce the costs of products or services in a way that makes a product or service vastly more accessibility and in which incumbents would have a hard time competing. I prefer to compete more with other startups than with giants.
  • Mission driven, commercially focused. I tend to love concepts where the founder is driven by a larger mission but understand the need to earn financial results to have an impact. I work with two companies that aim to change education but both are indirectly aiming to do so. When you talk with the founders privately the list this as their motivator. I work with a few computer vision companies. One believes it can predict certain diseases through observation even though this has nothing to do with the core mission of the company. The other is driven by the need to increase privacy in providing its service relative to competitors using cameras.
  • Early stage. I think I’m better at the product stage of a business and helping with strategy, marketing, pricing, feature sets and so forth than I am at evaluating later-stage businesses based on financial results and business metrics and priced accordingly. I know investors who are great at this (including several of my partners) — but that’s not me.

I have fallen in love several times in the past 2 years and in a strange set of circumstances most companies prefer to stay below the radar screen for much longer these days so most of them have not been announced. That’s hard, too, because when you’re passionate about companies and teams it’s hard to conceal it! But obviously I respect the wishes of those teams.

Anyway, since I’ve now been asked three times in the past week I thought I’d just write publicly what I often say privately. No magic. But hope it helps you think about how one investor approaches his job.

(Cross-posted @ Both Sides of the Table)