5 AI Trends to watch for in 2018

Big Data as an Organizational Center of Excellence

Introduction - Managing Data Across Large Enterprise

Today, enterprises are looking for Integrating Data to Support Analytics Based Decision Making and are still facing massive challenges. The biggest challenges they have is that data is located in silos, and yet large volumes of data are being generated are still managed in silos.

Thanks to new technologies such as IoT, there is an abundance of data being generated. Enterprise information systems, Networks, Applications and Devices that churn out huge volumes of information are awash in Big Data.

But enterprises are unable to make best use of this data as their internal organization — the network of people & business process are operating in isolation and many analytics efforts that only take into account information from a single silo - that delivers results in a vacuum - thus prevent them from making better business decisions.

The best way to lower costs of managing big data and leveraging this data for actionable insights - is to have a  pan-enterprise Big Data strategy.  (Also see Getting Your Big Data Strategy Right)

The best way to solve this problem is to create Big Data as an organizational center of excellence. This special group that can cut across silos, take ownership of all data and create new opportunities for operational excellence with Big Data.

Big Data as an Organizational Center of Excellence

Managing all data across the entire organization will improve efficiencies and services while lowering costs of mining this data.

Organizational BU's can now use this centralized data for actionable insights that can help them make better business decisions.

As business leaders recognize a pan-enterprise Big Data effort provides much more meaningful insights because it's based on an integrated view of the business. Yet they are faced with the challenges of siloed information systems. The current IT implementations and business process prevent data sharing and access to data.

In this article, I will present a solution to address the challenges of data silos and data hoarding.  As a enterprise wide solution, I shall present a new CoE for Big Data - a solution for breaking down data silos and discuss the key benefits of the solution.

Big Data CoE will take ownership of all data and present an integrated data for data analysis improves performance across the global enterprise. Big Data CoE can thus deliver long-term return on investment (ROI), enabling business leaders to develop a solid data for making better Analytics Based Decisions.

Understanding Data Silos and the Pitfalls of Data Hoarding 

Before I dive into the details of Big Data CoE, let take a quick look at data silos and dangers of data hoarding.

In large, global enterprises, individual business units (often referred to as BU's) are notorious and pervasive. Data silos are born in this toxic environment - where individual BU budgets procurement processes create data silos.

Group IT resources which are often scarce and are often designated for specific BU functions.   Each individual BU has no financial incentive to share data and IT resources. As a result, data collect by each BU becomes siloed and data is hoarded in each BU's IT systems and is not shared.

This results in organizational deficiencies where the entire organization suffer from redundant systems and inefficient decision-making. Because enterprise information systems remain segregated, data is walled up in departmental databases and applications. With valuable assets trapped in silos, BU's are unable to leverage data to improve processes, workflow or service delivery.

While data silos are created by operational and technical challenges, data hoarding is a result of insular agency cultures that encourage autonomy and self-reliance, as well as stringent compliance mandates for securing data, especially in this era of risks from data leaks/breaches and liability lawsuits.

In this environment, "business data" becomes "OUR DATA." Data hoarding trumps openness and sharing.

The impact of data silos and data hoarding is quite devastating. Without data sharing across BU's, each BU maintains its own view of business and there is no holistic view of a consistent global business. There is no integration of relevant data and this leads to missed opportunities and wrongful expenses and wastage, delays in discovering fraud, waste & misuse of money.

In addition, critical decisions are made with partial data - that leads to unproductive staff and duplicated efforts - which leads to wastage. Budgets are drained by the cost of managing and maintaining complex and redundant information systems, applications and system interfaces.

Finally, data silos and data hoarding weaken security & compliance efforts. It's harder to ensure the security and privacy of information as it moves among computer systems and databases, and can lead to noncompliance with critical regulations. (PCI-DSS, SOX, etc)

A Holistic Model: Big Data CoE 

Envision a pan-enterprise model for managing Big Data as an organizational center of excellence, A competency center whose core focus is to manage Big Data across the organization and provide right set of tools & infrastructure for business analytics.

Big Data CoE is created with a common focus to manage data and develop new technologies and architectures to analyze big data for making better business decisions

When Big DataCoE model is applied to the enterprise, we can instantly see the following benefits:

• Data is treated as an organizational asset.
  Treating data as an organizational asset, CoE develops and fosters a collaborative environment for users across BU's to meet and exchange ideas, discuss new projects and share best practices.
  
   
• Data is managed separately from IT in terms of strategy, organization, resources, purchasing and deployment. This frees up enterprise IT from handling the challenges of Big Data. Data can reside in-house systems or on public clouds.
  
   
• Distinct processes are developed for collecting, consolidating, managing, linking, securing, sharing, analyzing, archiving, publishing and governing data.
  
   
• Analytical expertise is shared among individual departments, which relieves them of the burden of independently recruiting their own talent and developing unique solutions.
  
   
• Data is aggregated, shared and analyzed using a single, enterprise-wide data platform. A unified system of enterprise data management and analytics tools ensures seamless integration of data repositories with analytic tools, provides a common user experience with access to all types of enterprise data and builds end user engagement in data-driven decision-making.

Unlike siloed data, an enterprise wide approach to data provides all BU's with a single version of the truth. With this integrated, holistic view, decision-making involves all relevant, consistent data, regardless of data ownership.

Creation of Big Data CoE is Transformative

The biggest benefit of Big Data CoE is that it transforms business operations.

Big Data CoE leads to business transformation:

1. More efficient Enterprise. When used at the enterprise level, Big Data can reduce fraud, waste and misuse of funds, Enhance communication and coordination between BU's, Improve management of Big Data, and Identify key business trends across the entire enterprise.
    
2. Faster & Better Decision Making. A complete view of each BU's data, CoE can offer the most appropriate data management & analytical services by identifying patterns that might otherwise be missed. They can also eliminate data processing errors and duplicative data entry. Provide consistent procedures and processes eliminates waste of valuable time and speed up decision making.
    
3. Stronger compliance efforts. When data management is integrated, it makes it easier to implement data compliance mandates across organization. Entire enterprise data can be made secure and compliant even when it is shared across BU's.
    
4. Cost reduction. More efficient data management, analytics & workflows, compliance, security and  service delivery - all lead to cost reductions. By consolidating data analytics efforts under a single CoE, additional savings can be realized because departments don't have to procure and manage their own systems or hire department-specific data scientists and analysts.

To realize the benefits of an enterprise approach to Big Data, Enterprises must adopt a comprehensive approach that leverages appropriate tools and techniques.

Closing Thoughts  

Big Data can provide tremendous business advantages by for improving business productivity,  business decision making and service delivery. But Big Data can only live up to its true potential only if analytics programs are implemented thoughtfully and skillfully.

The strategic use of Big Data and data analytics technologies and tools requires considerable innovation, creative thinking and leadership.

The "silo mentality" has to be broken up and data needs to be shared across the enterprise as a common asset. Having a CoE manage all of Big Data allows enterprises to holistically manage, share and leverage data for faster decision making and service delivery.

Big Data CoE helps enterprises and its BU's to rethink and retool the way they collect, manage, archive and use data. CoE will enable Bus to work together and share information - this leads to better decision-making, faster service delivery and develop an enterprise wide approach to managing and using Big Data.

Skills Needed to Build Analytical Organization

Global Corporations & Product Positioning

Last week, there were two news articles which caught my eye.

One was in Wall Street Journal on Levi Strauss: “Levi Strauss is retooling its signature button-fly 501 jeans so that they will have the same fit in each of the 110 countries in which the company says they are sold.”

The other was on Business Week on McDonalds: "The brand position is different in different parts of the world," he says. In the U.S., customers tend to eat on the go, and around 70% U.S. sales come from drive-throughs. Europeans prefer to linger. "In Europe it's more about the experience," he says. "It's convenient and a destination place at the same time."

To make the Golden Arches a place where Europeans want to hang out necessitated a major design overhaul. Hennequin, as French country head, refurbished the chain's outlets there, and he was tapped to do the same across the 40-country-strong European operation. He created a McDonald's design studio outside Paris to come up with a range of eight design packages from which franchisees, who account for 68% of European outlets, can choose.

Both companies are global leaders in their fields; both companies cater the general public – with lifestyle products and now both companies are moving in different directions of globalization with their products. McDonalds is becoming more local in Europe – by differentiating from the US operations and localizing the offerings to meet European tastes. While Levi Strauss is moving in the opposite direction – by developing a standardized product across the globe.

Interestingly, the financial results of these two companies are also moving in opposite directions. Levi Strauss is seeing a steady decline in income – from a peak of $7.1 billion in 1997 to $4.4 billion in 2007, while McDonalds is showing a steady increase in revenue in Europe.

This article is not a debate of localization of products Vs Globalization of products. Instead, I will concentrate on the fundamental principles of product positioning in a global economy and talk about the choices product managers have when positioning products for different markets.


Product Positioning

Product Managers have several choices in positioning a product in a global market – by varying two levers: Price & product localization (or product customization), which is illustrated below.

Products can be positioned anywhere in this two by two matrix, but in each market (or geography), there can be only one price-localization point for a particular product. The same product can be positioned differently in different markets. For example, Levi Strauss can position its signature button-fly 501 jeans at different price points in different markets or it can choose to have a standard global price.

Note that Levi Strauss has the option of placing its 501 fly button jeans at different price points – and that translates to different value points in different markets. For example if the Jeans is sold at (say) $40 in the US – it is perceived as Value-for-money, while in Malaysia, the same product may be priced at $30 and be perceived as a premium product.

If one were to opt for a global product, then the product pricing & positioning in different markets will have to be carefully planned – in view of the perceived value the product offers to customers. If the value positioning is wrong in one geographic market, then it has serious implication to other markets – in terms of brand reputation. Similarly, for a global product, if the pricing difference varies greatly between two geographic markets, then customers will choose the bypass the organized supply chain & procure the product from the lowest priced geography; which disturbs channel relationships. To illustrate this, if Levis Strauss prices 501 jeans in the US at $24, and prices the same in India at $2100 ($ 50), then customers in India and/or retailers can choose to buy it from the US rather than in India.

Localization also has its pitfalls

McDonalds for a long time followed a global standardization policy: All its restaurants serve similar food – fast, clean and good food. All the restaurants have a standard ambiance and is value positioned in the value of money segment. McDonald’s also establishes its global standard for developing its supply chain – from procuring raw materials to distribution.

However, in the recent times, McDonalds is becoming more open to experimentations and is localizing its product offerings – not just the menu, but also the ambiance and supply chain.

Successful localization for a global company is often difficult as it runs against the standard established practices, also the knowledge gained in one market cannot be used in other markets, and lastly the success of the local operation becomes tightly tied to the local people who run the local operation.

Implications for Technology Products & Companies

High tech products or engineering products such as Aircrafts, Computers, software, Medical equipment, chemicals etc are often positioned as a global product. The product is sold in only one format all over the world and at a same price.

However, the differences in taxes in various markets cause a price difference – which in turn result in “Grey” markets. Intel microprocessors for example is available at a lower price in the grey market, while the same product is available at a higher price through authorized dealers.

Similarly, Dell Laptop Dell XPS M1350 is available at:

US$999 in the US
US$1234 in UK
US$1140 in India

NOTE: Pricing is for an identical configuration in each of the three countries

This price differential makes people buy the Laptop in the US – and for use in India.

The same story is true for HP laptops as well.

Another downside of having a global standard pricing is that it results in diminished demand in other markets. For example most of the enterprise software – like Oracle 11i, SAP etc are sold at a uniform price – a price based on the US costs and demands. This leads to reduced sales in Asia, where customers prefer to use a lower cost alternative such as MYSQL or RAMSOFT ERP etc. In case there are no alternatives, businesses in Asia will prefer not to use such expensive systems – and may use increased labor instead or use it more judiciously. (or may simply choose to use a pirated version)

The trend is however changing. Asian companies have learnt to bargain harder and thus procure the same product at a huge discount. (See Reliance telecom story). Software companies have started the practice of discounting on the price when selling to Asian/African markets. This results in having a global product priced differently in multiple markets. (Discounting is mainly done in-order to maximize marginal revenues)

Many companies have started (albeit slowly – and half heartedly) to localize their products. Microsoft Vista & Microsoft XP is a good example of localization. Product positioning of Microsoft Vista will approximately look like:

Similarly, product positioning for EMC2 SMARTS will be like:

Closing Thoughts

Product positioning in multiple markets is a challenging task. In the initial phase of globalization, companies typically tend to follow a “global product” strategy. In the next phase, companies try out various localizations to increase sales and market share. As the companies evolve – they develop new set of global products from local products – “Glocal products” which is a mix of localization for the global markets.

Consumer product manufacturers such as Unilever, P&G, Toyota are good examples of such companies – they have few global brand names – but all of them have a localization content.

Product managers can use the two-by-two matrix to plan their product mix and then position their products in multiple markets.

China’s Globalization Plans off to a rocky start

“Going global is a must, rather than a choice”

Chinese manufacturers are eager to go global – their gargantuan market share at home, their deep expertise in large scale (contract) manufacturing, and their nascent (but world class) R&D capability has given the Chinese companies the confidence to go global.

Chinese firms feel the urgency to go global – and want to expand rapidly. But their early steps seem to be faltering. In the last 2-3 years, three Chinese firms experimented with acquisitions as a path for globalization – and are struggling.

BenQ’s Loss Making Acquisition

BenQ experimented with the acquisition of Siemens’ cell phone unit. BenQ wanted to piggyback a ride to become a global brand on Siemens brand image via acquisition. The mounting losses in the handset unit forced the company is shut down Siemens cell phone unit – BenQ realized that Siemens unit will not take it global. (see: http://arunkottolli.blogspot.com/2006/10/when-brand-buying-is-not-good-idea.html)

TCL’s Struggle

TCL was hailed as China’s answer for Sony. TCL is a home grown manufacturer of electronic goods, which started out as a contract manufacturer and commands a large market share for Televisions, Audio players, DVD players etc. in China. In 2003 TCL purchased Thompson’s television and DVD player operations – along with the right to use Thompson brand name for four years. In 2004, TCL purchased Alcatel’s cell phone business. With these two acquisitions, TCL became one of the first Chinese manufacturer to go global.

TCL’s problems started immediately after the acquisitions. These loss making brands had to be turned around rapidly else it can drag TCL’s image and cash down the drain. TCL struggled to make its cell phone division profitable, and in 2005 TCL ended its venture with Alcatel. A similar fate now hangs over its Thompson branded television business.

Lenevo Takes a Hit

Lenevo purchased IBM’s personal computer business in 2005 – along with the right to use IBM’s brand name and it’s “Think Pad” brand name. In 2006, Lenevo’s profits were down 85% - and the IBM’s unit (global) is still making losses – which is wiping out the profits Levenvo makes in China.

Globalization Strategy that Went Wrong

In a previous post on why it was a bad idea to buy a global brand. The problems faced by the three biggest Chinese manufacturers are similar. Their rush to go global – by acquisition of well known (but struggling) brands was not a well thought out idea.

Buying a brand – without understanding the cultural issues associated with the brand can be lethal. Companies must understand what they are buying. A brand name is also a promise which the seller makes to customers and that brand promise must be fulfilled to attain brand value. If a company is buying a famous brand name, then the acquiring company must fully understand the brand image and the brand promise – which can vary significantly from cultures to cultures.

Chinese organizations seem to have purchased the brand names – without understanding its cultural significance, without understanding its brand promise. As a result, these acquired brands fell from customer grace very rapidly.

Chinese firms were also buying the operations – these operations were loss makers to begin with. These firms underestimated the challenges of managing a global organization, when they did not have a global operations and supply channel experience to begin with.

Closing Thoughts

In a stark contrast to Chinese experience, Indian companies seem to make rapid progress in their global acquisition strategy. Tata Tea has successfully gone global with the acquisition of Tetley. Tata Motors has successfully acquired Daewoo’s truck division. Tata Motors has successfully expanded into South Africa. Ispat steel (now called Mittal Steel) has been extremely successful in global M&A strategy. Wipro, Videocon, Ranbaxy, Wockart, and others have been making global acquisition – and their profits are soaring.

The key difference I can observe here is that the acquiring company must know the markets, the customer and the consumer in the global context. Marketers must understand the cultural nuances of their global customers. Company managers must fully understand the challenges of running and managing a global supply chain and distribution channels.

Chinese businesses which were built ground-up: Haier, ZTE & Huawei are thriving. While hurried up acquisitions are struggling. This is a good learning example for other Asian firms which are now planning to go global via the acquisitions route.

Also See:

When Brand Buying is not a Good Idea
Brand Management
Developing a Brand Position
Selecting a specific brand position

Global Manager

Recently there was a The Indus Entrepreneurs (TIE) meet in Bangalore. The meeting was an opportunity to meet high tech entrepreneurs and would be entrepreneurs with venture capitalists. The meeting itself was not of great interest for me, but the companies represented (directly or indirectly through employees) at TiE is something worth writing about. Most of the companies were startups and yet global companies: Aarohi Communications, Sonoa Systems, EFI, Tavant, RelQ, Open-Silicon to name a few. These companies are called "Born Global" companies. ( Born Global companies are those companies which have operations in multiple companies within one/two years of their existence)

To be successful these companies need Global Managers. The top management and senior management in these companies need to have a special management skills. I have worked in one such company. I am writing this article on what it takes to be a global manager based on my experience and observations at my current firm and learning at B-School.

Successful managers need to have global vision
To be successful, global companies need to develop unique set of capabilities which allows them to:

• Take advantage of resources available to it on worldwide basis - regardless of where these resources are located. These resources may be company owned or may belong to other independent firms. For example, my current company has the ability to use (third party) factories in Taiwan, Israel, China & Korea.
  
  
• Enter any country it chooses and sell products in any country based on business opportunities. These companies are constantly in the lookout for new opportunities - and are not limited by geographic/national boundaries. My company, for example, has customers in USA, Canada, Israel, Portugal - and is/was negotiating with firms in Thailand, India, Korea, France, Ireland and Japan.

To succeed in a global market place, managers need to have a global vision and a complementing strategy which enables managers to develop a global vision which helps in breaking down existing geographic and competitive boundaries.

The manager’s global vision is shaped by several factors. One of the biggest driving factor is having a global mindset - i.e., ability to look at the global markets as a whole. This can be summarized by the slogan "Think Local Act Global".

Global managers work with the assumption that global markets are best served by adaptation to local conditions - and have local initiatives in different markets around the world. Diversity - ethnic, consumer, geographic, & economic diversity is looked as sources of opportunity. Global strategy focuses on optimal global sourcing, selling standard products and the ability to react globally to competitors’ moves.

External forces which drive global mindset

Company may have a global vision and a global strategy, but manager’s mindset is crafted by several forces internal to the company. In my opinion, there are four influences on the manager:

Leadership View of the world

One of the leading forces is the leadership view of the world. This is often driven by the CEO. A visionary leader can drive the global strategy - but he also shapes the managers’ view and his actions. Often times, top leaders in global companies have worked in many countries. Top leadership team in global companies often consists of members from a diverse set of countries. - See Leadership & Diversity
Top leadership in our firm consists of members from Pakistan, India, USA & Egypt.

Administrative Heritage

Administration style of the company can either be centralized or decentralized. In a global company, administration is often highly centralized. All decisions on use of tangible and intangible assets are centrally controlled. Local business units do not have control over local assets.

Organizational Structure

Manager’s mindset is also influenced by the organization structure. Global companies are structured around products & functional roles Global companies are not structured according regional offices.

Industry forces

No firm can work in isolation. It has to deal with vendors, suppliers, customers and competitors. The need to achieve economies of scale and scope have forced vendors and customers to globalize. For example, my company has to open an office in Taiwan so that we could deal with our vendors better.

Global Manager’s thought process

Managers have to retrain their thinking process to become global managers. This is a difficult task as their thoughts are often crafted by ‘traditional’ practices: Home country practices, ethnocentric views, preference to local/home country candidates/process/procedures etc. These ‘traditional’ thoughts has to be replaced by global thinking. A global manager’s thought process is characterized by:

• Multicultural approach to reflect global operations
• Shift of focus on "soft tools" - Vision, process and people to achieve objectives
• Collaboration with a network of vendors, partners & customers
• Recruitment from global talent pool - to get best set of people
• Global transfer of human resources - global learning/training process
• Creating a learning Organization
• Focus on big picture - respond rapidly to global business environment changes.

Closing thoughts

In a global economy, high tech companies need to go successfully global. Such companies can then maximize the sales potential from existing customers and attract new customers without stepping into new product ranges, focus on innovation and offer improved and new products,
services and reshape the industry through a network of partnerships. For a strong global performance, the organization needs a group of global managers . Only then the global strategies can be implemented successful - thus making the company successful.

Born global companies which must develop a global mindset from scratch. The primary motivation in these companies are either ‘growth hungry’ or "deliver the best for the lowest price’. Depending on their primary motivation the companies develop a global strategy - which has to be successfully implemented by global managers.

As companies continue to expand globally they need managers who understand global business, operate effectively across cultural boundaries and balance strategic integration with adaptation to local markets. The opportunities the company pursues, and how it deals with the many challenges of a global business approach, depends critically on how good its managers are at interpreting and responding to the dynamic and diverse challenges facing the organization.

Also read:

Diversity & Leadership
Developing a global mindset
Value of International Experience
Why have International work experience?
Leadership for a Global Enterprise
Building a Company of Leaders
The Global Dimension of Project Management