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Digital disruption drives CIOs to double down on innovation

Digital disruption drives CIOs to double down on innovation

From reverse pitching to crowdsourcing, CIOs are embracing an array of approaches to innovation to facilitate digital transformations.

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Digital disruption across a wide array of industries is forcing companies to double down on innovation. Painfully aware that competitors are racing toward the same goals, companies are taking new risks as they pursue digital transformations, experimenting with new digital services and capabilities to augment existing offerings or to slide into adjacent markets.

And few CIOs claim they are moving fast enough, as two-thirds of business leaders surveyed by Gartner believe their companies must pick up the pace of digitalization to remain competitive. With the onus of digitalization falling on IT, the CIO role is transforming from order-taking techie to business executive focused on harnessing data and other tools to grow revenue.

That is a big reason why 84 percent of 3,160 CIO respondents in 98 countries surveyed indicate they are key drivers of innovation and transformation at their companies. Of course, how each CIO tackles innovation and transformation will differ based on the unique challenges of their industry, but talk to enough CIOs and common strategic threads appear. Here’s a look at what several leading CIOs are doing to spur innovation at their organizations.

Data-driven dining delivery

Casual dining restaurants are struggling to adjust in a world where consumers increasingly prefer to order in and watch Netflix. The disruption has sent many chains scrambling to partner with Uber Eats, GrubHub, DoorDash and other food delivery services. But not Bloomin' Brands, which is building its own delivery network, according to Donagh Herlihy, executive vice president of digital and CIO of Bloomin' Brands, owner of Outback Steakhouse, Carrabba's Italian Grill, Flemings Steakhouse and Bonefish Grill.

Why launch a delivery serivce? First, Herlihy says, delivery partners eat as much as 25 percent of a guest’s ticket, canceling out the potential profits. Moreover, delivery partners own the data generated by an order, leaving the restaurant partner in the dark. "I don’t know if you have a good or bad experience and I can’t market to you," Herlihy told CIO.com at the Forbes Next CIO conference in New York City last month. The latter issue is key as Bloomin', which currently sends bulk email promotions to consumers, is upgrading its marketing attack to more personalized, targeted marketing. That's a big reason why Herlihy is cultivating a data lake, using Microsoft's Azure machine learning technology to refine the personal messaging. "We have to be very data-driven," he says.

To groom regular customers, Bloomin' is also ramping up its guest loyalty program, which currently includes 4.6 million consumers. The service, available via the Bloomin' mobile app, checks guests in when they enter the parking lot and allows patrons to pay for meals from their phone without waiting for their server to bring the bill. Bloomin' is also adding a feature to its mobile app to allow guests to track their delivery drivers en route to their home. "You can never be convenient enough," Herlihy says.

Tapping the crowd to jump-start revenue

Allstate is recruiting helping hands to maintain its "good hands" brand image. The insurer offers roadside assistance to troubled drivers but it has struggled to get tow trucks on the scene quickly, with drivers waiting 60 to 75 minutes for help. That's a long time, especially when you’ve just run out of gas or need a jumpstart. "It's a pain point," said Suren Gupta, executive vice president of technology and strategic ventures at Allstate, speaking on an innovation panel at the Forbes event. Gupta says: "Why do we need a tow truck to come in and help out with gas or a jumpstart? It's expensive and takes time."

Gupta decided Allstate could crowdsource that help. The $40 billion insurance giant last year launched the Good Hands Rescue Network, available to drivers who have downloaded the Good Hands mobile app to their phones. When customers break down they can launch the app, talk, tap or text a chatbot to request help and any one of 1,000 rescuers, including cab drivers and lay drivers looking for extra cash, will come fill up their tank or give them a jumpstart. The move has helped reduce wait time to 37 minutes on average, Gupta says.

Such innovation is part of Gupta's mandate to diversify revenue at Allstate, which he says depends on an automotive industry that is on the verge of severe disruption, thanks to autonomous driving. On that score, Allstate last year acquired Squaretrade, which sells warranties to consumers buying cellphones and other electronic devices at big-box stores like Costco and Target. "It is a way of looking at our market adjacencies," Gupta says.

Pitching entrepreneurs on your problems

Since joining Northwestern Mutual in 2006, Karl Gouverneur has made what he calls the "Silicon Valley safaris" in search of innovation. The vice president of digital innovation and CTO has "speed-dated" with startups, hosted by venture capitalists. He's hosted hackathons and demo days and worked with the company's internal VC firm and business incubator to cultivate new technologies. Now Gouverneur is pursuing a relatively new mode of innovation that he says is a strong fit for boosting digital capabilities.

This month Northwestern Mutual conducted a "reverse pitch" event, inviting entrepreneurs to learn about specific business challenges that aren't currently addressed by existing vendors. Challenges include automating the procurement contract process, reducing referral friction and automating ways to identify prospects based on a financial representative's social media contacts. Teams that accept the challenge can earn a seed investment of up to $85,000, access to corporate mentors and networks, and working space at Northwestern Mutual’s downtown Milwaukee, Wis., headquarters. The deadline for teams to "pitch back" to Northwestern Mutual is Dec. 10.

Ideally, the pitch would percolate into series A funding for the entrepreneur. "The outcome is for them to become a viable company that can grow and become a 10x play," Gouveneur says. "We want a product that has breadth and depth, product market fit and they see a path to the future."

Optimizing crops with data science

Farming and high-tech might be an odd match, but Monsanto is out to break that perception. CIO James Swanson has rolled out an analytics platform designed to pinpoint the best conditions for growing corn and other crops. Dubbed science@scale, the system runs simulations against millions of data points for characteristics such as seed genetics, climate, water, soil and nutrients, Swanson told an audience of his peers at the Forbes Next event.

Science@scale leverages technologies such as Amazon Web Services and Google's TensorFlow machine learning application to crunch in minutes simulations that formerly took months to process, boosting sales revenue by $17 million. Swanson likened Monsanto's approach to "personalized medicine," with the company helping individual customers identify the optimal seeds, conditions and soil to grow their crops. Monsanto can currently pinpoint the optimal growing conditions down to a 10-meter grid on a farmer's land. "And that's really just the start, as we pull more and more info we will get more effective over time," Swanson says.

Ideally, Swanson says Monsanto aims to help corn growers improve output from 185 bushels of corn per acre to closer to 500 bushels. "The oldest industry on the planet is being transformed through technology and data science," Swanson says.

Entrepreneurial engine

Like Monsanto’s Swanson, Lynden Tennison, CIO of Union Pacific, is tasked with digitalizing an old industry. Unable to find commercial applications to support the railroad giant, Tennison had his team build applications UP sorely needed. But it soon became clear to UP that the software and hardware it built had commercial applicability, says Tennison, who also spoke on the innovation panel at the Forbes event.

Under Tennison's guidance, UP launched PS Technology, a commercial entity that sells railroad tech solutions to the company's rivals and partners. Thanks to PS, UP is now one of the largest providers of locomotive simulation systems. To keep this flywheel going, the wholly-owned subsidiary reinvests 8 percent of its revenue into research and development.

Building on that entrepreneurial spirit, Tennison also launched Breeze Broadband Communications, which harnesses the communications towers and other infrastructure supporting the railroad to deliver wireless broadband to underserved rural markets. PS and Breeze, which was conceptualized within the IT department, have helped boost UP revenue by $50 million, says Tennison.

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