The Executive’s Guide to Navigating Digital Disruption Wisdom from the iTnews ACS CXO challenge Foreword FROM THE ACS. hat a difference a little over a year ecosystem develops, momentum will grow and can make? ultimately benefit all Australians, both within business When the CXO Challenge kicked and our communities. W off in June 2014, the Australian The CXO Challenge has been an invaluable research dollar was at US94c. Fast forward piece, providing extraordinary insight into technology to August 2015 and our currency is at US74c - yet a leaders from across the ASX 200 and how they have mini-economic boom hasn’t eventuated. embraced digital disruption to enhance their business Most notably, Iron Ore was over $90 USD/tonne models and develop new revenue streams. twelve months ago and now is just over $50 USD/ Highlighting that value creation is an individual tonne. The cycle of capital investment in the resources journey, approaches vary throughout the Challenge sector is drawing to an end, moving to production. such as TabCorp bringing digital back in-house, Telstra’s This is a perfect storm for our technology leaders. focus on ecosystem development, how ANZ considers Necessity is the mother of invention, and Australia analytics and automation will deliver a digital edge has some challenges to overcome in terms of revenue in the provision of advice as a service and tracking generation and tax receipts in order to maintain our systems being deployed by Domino’s to empower their historically high standards of living. customers. Industries were already experiencing digital Some themes are constant however such disruption, however over the last six months the as seeking ways to deliver best of breed digital political and economic landscapes have caught up and user experiences so that customers self-manage, recognised the importance of this disruption. providing content customised for different channels We are seeing a focus on entrepreneurism to so that customers may consume content via create new jobs. New Australian tech companies their preferred channel, and focus on talent and showing promise are stimulated to grow. Technological workforce culture where people do the disrupting and innovation is being encouraged so these new kids on technology is the enabler. the block will compete on the global market. The production of this resource in partnership As the professional body for ICT in Australia, the with iTnews will provide executives with a strong ACS exists to advance professional excellence. We are independent platform to challenge their own teams, to passionate about technology and the ICT profession contest ideas, and consider how best to embrace the being recognised as a driver of productivity, innovation disruptive power of technology to deliver greater value and business – able to deliver real, tangible outcomes. for their customers. With this focus comes a responsibility to showcase I commend to you the Executive’s Guide to excellence and inspire others, believing that as the Navigating Digital Disruption. Andrew Johnson Chief Executive ACS 2 Contents 5 Australia’s record on digital disruption A retrospective report card. 8 Ripe for Disruption Why is one industry more prone to disruption than another? 11 Digital Leadership Translating buzzwords into the real world. 13 Adopting a disruptive culture How to copy the traits that give disruptors an advantage. 16 A place for innovation Incubators and hubs offer ideas a place to grow. 19 Bringing digital in-house Why it’s a winning strategy. 21 Spin it off When your data team becomes its own business. 24 Big data and analytics in media and advertising Take it personally. 26 Why straight-through processing is the holy grail for banks Stripping away human intervention. 29 APIs: rivets for the composable enterprise Expanding a savvy CIO’s toolbox. 33 Radical Responses last resort – cut your costs and duck. This report is not intended to and should not be used or relied upon by anybody else and we accept no duty of care to another person or entity. The report has been prepared for the purpose of analysing digital disruption through the experiences and insights of CXOs employed within businesses across Australia. You should not refer to or use our name of the advice for any other purpose. 3 It really hit me - at that moment - that I was entering a business “ that was facing a generational shift away from the product that it had been built on over the previous 200 years. Ahmed Fahour- Australia Post ” 4 Australia’s record on digital disruption A RETROSPECTIVE REPORT CARD. by Beverley Head he day before Ahmed Fahour took up his Dot-com bust complacency new role as CEO of Australia Post, his eight- year-old daughter asked him; “what do By 2014, the extent of the transformation was brought T postmen do?” into sharp focus when Telstra sold a 70 percent stake It was the moment Fahour grasped the in the Sensis White and Yellow Pages business unit for enormity of digital disruption. $454 million. In 2005, the organisation had been valued “It really hit me - at that moment - that I was entering at $10 billion. a business that was facing a generational shift away Ajay Bhatia, now chief product and information from the product that it had been built on over the officer at Carsales.com, was for five years product and previous 200 years. My “communication world” when I technology director of Fairfax Digital, and a first-hand was growing up was all about stamps, post offices and witness to digital disruption of an entire sector. The media posties. The mail system connected with my world. Her and technology sector was identified in Deloitte’s report world is about Instagram, iMessages, WhatsApp and as facing the greatest quantum of disruption. eBay.” Bhatia looks back and says that; “A lot of people took It’s instructive that an eight-year-old was able to comfort from the dot-com bust. That led to some of the pinpoint the problem long before many leaders of complacency.” enterprise Australia. Ross Dawson, futurist and strategy consultant, agrees, Fahour was appointed CEO of Australia Post in 2009. saying that after the dot-com bust; “The naysayers felt It was nine years after Y2K, seven after dot-bomb, and justified” while the GFC hijacked the focus of senior two years since the start of the Global Financial Crisis. executives. “Australian business was largely not ready. Executives were exercised more by surviving global “Even in 2006/7 Australian businesses weren’t getting economics than exploring technology’s potential. it. There was a slow uptake of blogging, social media or But in March 2009, just a few months before Fahour connectivity,” he says. It was incomprehensible to Dawson moved across to Post, a small business was setting up a self-described “apostle of the networked economy,” in San Francisco that would become a global beacon for given Australia’s geographical isolation which made digital disruptors and software-defined businesses the local businesses an obvious candidate for even more world over; Uber. investment at least in communications technologies. With the benefit of 20:20 hindsight, the portents He says that it wasn’t until the launch of the 3G iPhone of digital disruption are clear. The first web page was in Australia in 2008, when data plans started to become served in 1990, Google was founded in 1998, Facebook in more affordable, that consumer connectivity started to 2004, the first iPhone launched in 2007. Technology was emerge and be recognized as a transforming force. changing the way companies and consumers behaved, Professor Kai Riemer, chair of business information accessed information and communicated. systems at the University of Sydney Business School, It wasn’t however until 2012 that Deloitte released arrived in Australia from Europe in 2006, and was its seminal report Digital Disruption; short fuse, big surprised to find local enterprises five or six years behind bang? The report put enterprise Australia on notice their northern hemisphere peers. that a third of the Australian economy faced “imminent He believes the problem was partly geographical. and substantial disruption by digital technologies and “Australia is a big island at the end of the world,” and business models.” until the mid-2000s did not attract the same level of 5 competition as other developed markets says Riemer. floated in 2009 the market valued the business at $2.2 When the international competition did arrive – either billion. At the time of writing the share price has dropped via the internet or through a physical presence - bristling to $1.25, valuing the retailer at $735 million. with technology and new business models, Enterprise Professor Riemer says that Myer and David Jones Australia was still bent on protecting a previous paradigm. have both been slow to transform compared to Ajay Bhatia enjoyed his first couple of years at Fairfax, international retail peers. but explains that frustration mounted when services began to bubble up from Fairfax Digital which were ] viewed as capable of cannibalizing the media giant’s “Rivers of Gold” classified advertising revenues. Instead But it’s not just retailers and print that has experienced of championing the new, Fairfax redoubled its efforts to the chill wind of disruption. The banks faced the rise prop up print leaving Bhatia; “working with my hands tied of PayPal and emergence of Bitcoin; Flight Centre was behind my back.” challenged by Expedia, by Webjet, even Airbnb; Harvey Fairfax management he says had; “lost sight of the Norman suffered when it was slow to react to online fact that the real competition was out there.” challengers; ABC is being forced to close its loss-making In his view “We weren’t competing with the stores and shift retail online; Blockbuster was Netflixed newspaper business but with RealEstate.com and Seek.” and Cabcharge Ubered.