Building the Cognitive Enterprise: Nine Action Areas

Research Insights Building the Cognitive Enterprise: Nine Action Areas

Core Concepts This Core Concepts document is abridged from the in-depth version, “Building the Cognitive Enterprise: Nine Action Areas, Deep Dive” that also contains the full-length case studies. Introduction

We are at one of the tipping points in history where the scale of impact of technology on business is significant enough to transform the whole way that business gets done. Like the mainframe, PC and internet before them, the convergence of new exponential technologies such as AI, automation, IOT, blockchain, and 5G have the power to change business models, reinvent processes, and reimagine the way we all work. We call this the emergence of the Cognitive EnterpriseTM.

At IBM, we see companies placing bets on can straddle industry boundaries. This the creation of business platforms to solidify is not about transformation at the edge competitive advantage and differentiation. of the organization, nor a place just for These platforms must be massively digitally experimentation and proofs of concept. We connected from the outside-in and fully are in a chapter of change that is substantive cognitively enabled from the inside-out. enough that the core of our organizations—the mission-critical processes and the underlying For over a decade we have been embarked legacy infrastructures—need to be reinvented upon the “outside-in” digital transformation by the application of these technologies at journey. We’ve been connecting our scale. This is about “big bets!” organizations ever more deeply to customers and external stakeholders, leveraging The big bets that we see our clients making the power of the internet for pervasive around the globe, and the business platforms connectivity, and driving these “digital” that they are seeking to compete on, leverage capabilities deeper into our cores. This three main elements: trend is now beginning to be matched by the “inside-out” cognitive transformation — the 80 percent of data that still resides journey as we access the power of our data inside the firewalls of incumbent players, through these new exponential technologies. which is often combined with new Organizations are combining these two external data sources,1 forces in a new wave of truly transformational — the capacity to innovate through change and structuring themselves around technology around the core workflows reimagined business platforms. which define their differentiation, and

All companies are becoming technology — the ever-increasing expertise of the companies, and all companies are becoming people who can seize insights from the “platform” companies. They are establishing data and reinvent the way they perform new sources of competitive advantage along the workflows. and exist in new open ecosystems that

1 Introduction

As we construct the picture of the winning Once clear, we can apply the right Cognitive Enterprise, we see three main combinations of exponential technology, building blocks of success (see Figure 1): leverage the power of targeted data, and enable these workflows with next-generation 1. Market-making Business Platforms applications in a reinvented hybrid cloud A “Market-making Business Platform” is IT infrastructure. Then relevant capability the most fundamental component to get layers (see Figure 1) can be architected, right first. It is the new instantiation of the transitioned, and built out in service of the business strategy of the organization and the Intelligent Workflows and Business Platforms. clear North Star for the investment priorities Together they deliver huge potential for cost and change initiatives required to shift to optimization and wider value realization, as the future. We call the platforms “market- well as future-proofing for the enterprise. making” because they need to be focused, critical and impactful, whether they reinforce 3. Enterprise Experience and Humanity competitive position within an industry, shape Perhaps the most essential component of the a new role in an industry context, or open up Cognitive Enterprise is what we have termed cross-industry market opportunities. “Enterprise Experience and Humanity.” Ultimately, for all the technology centricity of Sometimes an internal enabling business this new world, it is the power of the “human platform (for example, talent, finance, or risk wrapper” that envelops and leverages this management) can be strategic enough to set technology that will be the core of lasting the agenda. The choice of platform focus and differentiation. the degree of doubling down on investments that the enterprise makes is, therefore, The concept of “experience” is now extending defining its core intent and narrative for from the customer to the employees that the future. serve the customer, the enterprise itself, and the entire ecosystem to provide a seamless 2. Intelligent Workflows environment of value and purpose. Human- “Intelligent Workflows” are the extended centered design is becoming an ever more end-to-end or front-to-back processes that, important aspect of the business platforms through the application of technology at and workflows, as well as the systems that scale, define the customer experience and underpin them. economic outcomes at the heart of the new business platforms. We need to identify the The Cognitive Enterprise will therefore most important workflows and related value demand a new kind of leadership, pools in front-, middle-, and back-office areas emboldened by deep technology insights, that will differentiate the company or industry. and new skills and culture to embrace this exponential potential. Perhaps the biggest challenge and opportunity will lie in the capacity to make the necessary changes in the pools of expertise, mindsets, and ways of working to bring this vision to life.

2 Figure 1: The capability layers of the Cognitive Enterprise

Market-making Internal strategic Internal enabling Industry Cross-industry An ecosystem Business platforms platforms platforms platforms of business platforms Platforms

activated by Intelligent Customer & Finance and Talent Industry intelligent Innovation Operations workflows workflows Workflows workflows workflows workflows made possible Artificial Blockchain Automation Internet 5G with exponential intelligence of Things technologies

Proprietary Licensed Public that are fueled data data data by data

Custom Legacy API-enabled Cloud native Digital using next- applications applications applications applications applications generation applications

Public cloud Private cloud On-premise Security on an open and secure hybrid multicloud infrastructure

IBM Garage Co-create Co-execute Co-operate delivered through the IBM Garage

The areas that most organizations are We are describing wholesale business and struggling with as they embark on the journey technology change and the reimagining of the to become Cognitive Enterprises are (a) mission-critical components of the company. how to really get started at scale, (b) which Following through on this will require execution and funding vehicles to use, and engaging all parts of our companies in new (c) how to orchestrate the complexity of coalitions of executive sponsors and teams the change. working across departments. This journey calls for strategic partnerships and extended This report sets out our point of view, drawn open ecosystems. from multiple real-life client examples, of the key action areas that we believe all It demands new, more agile approaches for organizations need to engage in to make co-creation, co-execution and co-operation. substantive progress. We are on the cusp of the next period of true technology-enabled business transformation. We look forward to charting this journey together.

3 Suncor

Building the layers of a Cognitive Enterprise Results

Suncor Energy, Canada’s leading integrated Created a Transformation energy company embarked on “Suncor 4.0” in Management Office—a control May 2019, a people focused, data informed and tower—to accelerate Suncor’s technology enabled, transformation to accelerate and digitize Suncor’s strategy2 targeting USD enterprise-wide transformation $1.5 billion of free cash flow by 2023.3 Site Wide Lead (SWL) Advisor Suncor established a Transformation analyzes data from 87,000 Management office—control tower to accelerate sensors across 35 plants, tracking operations and started to build AI-powered solutions to help streamline complex operational more than 900 key metrics analysis. These solutions became a key part of intelligent production management workflow 100 AI models were used to for Suncor, generating production plans within develop a SWL Advisor to analyze minutes that previously took hours. complex operations To drive a step change in performance and transform culture, Suncor put AI to work by building solutions and intelligent workflows.

4 Charting the journey to the Cognitive Enterprise

There is no fixed recipe or definitive roadmap for the journey to the Cognitive Enterprise, A coordinated set of nine action and organizations are at very different starting areas helps move organizations from points and stages. That said, we can see patterns of successful activity that begin today into the cognitive future. to frame the key action areas we think are important. The sequence of initial programs will differ from organization to organization as business imperatives, context, and other change factors play out. We do, however, think that whatever the starting point, having a perspective on, and plan for, the Nine Action Areas we have outlined in the blueprint that follows will reinforce the likelihood and pace of success (see Figure 2).

Figure 2: Nine action areas

Action Area Market-making Double down Create a Orchestrate Business on “Big Bets” New Business Compelling Platforms Blueprint Change

Action Area Intelligent Embed Drive Value Deploy Through Workflows Exponential from Data Hybrid Multicloud Technologies

Action Area Enterprise Elevate Cultivate Smart Perform with Experience Human-Technology Leadership, Skills, Purposeful and Humanity Partnerships and Culture Agility 5

5 Clarity about which market-making business The success of the market-making platform(s) an organization is selecting as the platforms will depend upon the quality and core of its future competitiveness is clearly differentiation of the Intelligent Workflows an important prerequisite. That said, some that underpin them. It is also possible for companies may find themselves backing into Cognitive Enterprise journeys to begin with these choices as they see specific activities the targeting of opportunity in a specific driving superior impact. There will also be workflow that opens up the potential for emergent strategies that evolve from the a platform play. exploration of the potential of data and differentiated applications of technology. We do see that the choice of which value pools to go after, and the related workflows However, once the choice is made, doubling to tackle, is critically important. These down on the big bet will be vital. It will workflows need to appropriately leverage also be necessary to address the business exponential technologies at scale. Then architecture and operating model implications the data strategy to underpin the workflow of the selection and put in place an overall redesign can be appropriately targeted, as transformation and governance approach to well as the right application and hybrid cloud steer and coordinate the many moving parts architectural choices. We see situations that will result. where organizations may start their journey with an enabling, broad-based data fabric or a definitive journey-to-cloud strategy. Soon, though, the need to define what the data and cloud is going to be used for becomes key. The success of the market-making The human-technology partnership and use of platforms will depend upon the new skills and culture must underpin platform quality and differentiation of the and workflow transformation, and cannot Intelligent Workflows that underpin be started too soon. At the same time, these aspects are some of the hardest to durably them. change.

6 Figure 3: Enterprise transition from legacy to new

New platforms Garage

Hybrid Open container technology cloud

Microservices and APIs

Legacy

A sense of direction and a North Star for the required shifts is essential. As the A sense of direction and a North Star platform and workflow priorities become clearer—and the scale of the human, team for the required shifts is essential. and leadership step changes evolve—more and more focus can be brought to the very difficult and complex interventions. Once we understand where the critical interfaces between human and machine will be, we can orchestrate our leadership and skills-building activities accordingly. Agility, too, can both be developed as a general “foundational” capability in teams and ecosystems and find focus and purpose in light of the other building blocks of the Cognitive Enterprise (see Figure 3).

97 Action Areas to build Market-making Business Platforms

1. Double down on “Big Bets” new directions and making substantive investments to support their plays. The choices that organizations are making Frequently, merger and acquisition activity about which market-making business reinforces the bets they are making, as platforms to major on are existential in does the overall allocation of capital. nature—they are the means through which organizations shape markets to their Most importantly, the external narrative advantage. They are not experimental, nor of the company needs to reflect the new are they peripheral plays that reside at areas of focus and the value proposition of the edge of the company. We are seeing their business platforms to create the right organizations commit their future to these multiyear focus for sustained activity and new markets and to exploiting them by development. For platforms that extend applying data, technology, and new expertise beyond the organization, credibility in the at scale. The focus of these new platforms is eyes of ecosystem members and buy-in from anchored in the core of the company. They them are make-or-break conditions (see take advantage of traditional sources of Figure 4). differentiation and channels, as well as the organization’s unique access to data, then evolve and scale those capabilities over time. The CEO, Board, and leadership As such, any bet made on platforms needs to become the holistic and explicit strategic need to espouse the North Star that intent of the organization. The CEO, Board, represents the fresh direction and and leadership need to espouse the North draws upon the organization’s legacy Star that the fresh direction represents and draws upon the organization’s legacy values. values to create a compelling mission and vision. We see leaders setting out on these

8 Double down on “Big Bets”

Figure 4: Double down on big bets to build out competitive advantage

Strategic and Financial Value Cross-industry Value Extension

Industry New Value Capture

Internal Strategic Differentiation

Internal Enabling Efficiency

Complexity and Investment Focus

As every company becomes a platform and technology company, the relationship between technology competence and The focus on new platforms is business strategy changes, reinforcing the anchored in the core of the company. need for the talent and capability agenda to be reimagined, too. This means that the whole ecosystem of partners and joint venture collaboration is on the table. It is rare that a new market-making business platform will be created entirely from existing internal componentry.

9 Action Areas to build Market-making Business Platforms

2. Create a new business blueprint The business architecture needs to be defined and must also set the tone for Market-making business platforms straddle the other architectures that will underpin the heart of the organization. They represent it—including process, technology, and data. a wholesale change to both the nature The business platforms need to be extremely of work and relationships with business visible and drive the architectures. These functions and partners. As such, they must architectures will provide the guide-bars drive a fresh look at the target operating within which innovation and agile co-creation model of the company. The business needs can thrive. to be aligned and synchronized along the platform architecture to drive the outcomes A further key principle here is the need for that are thus desired. This applies to the core “openness” in the architectural thinking. All differentiation of business platforms on the business platforms and workflows must be front lines, as well as the interaction with designed for seamless external connectivity. enabling platforms that support the vision. As organizations embark upon building Existing functional roles will be redistributed; platforms, whether inside their four walls or where and how decisions are made will also at an industry level, they cannot know what shift. the final potential for extension or new modular capability might be. This new business blueprint addresses the target operating model, decision framework, Organizations need a set of “big rules,” culture and skills, roles and responsibilities, guiding principles that define the core as well as how humans and AI work together accountabilities across the matrices that in a business platform context. The blueprint inevitably exist. Ideas such as “freedom helps organizations identify and execute within a framework” need to have clear strategic priorities, anticipate how each definitions on two dimensions: what decisions change will ripple across the organization, and participants are free to make on their own relocate resources accordingly (see Figure 5). and what is constrained by a framework set elsewhere.4 The exponential technologies, together with greater reliance on data-led decision-making and automation, will need to have these rules embedded in their business logic and algorithms.

10 Create a new business blueprint

Figure 5: Business architecture sets the frame for the Cognitive Enterprise blueprint

t operating m rge ode Ta l

External Platforms

Human AI i

Big s i

e n

l Rules

s o

Internal Platforms

Cu s lture and skill

The new business platforms will also be subject to continuous improvement and Organizations need a set of “big learning from the feedback loops that are rules,” guiding principles that define embedded in intelligent workflows. Traditional hierarchical decision-making and information the core accountabilities across the flows—up and down the organization chart— matrices that inevitably exist. will therefore be disrupted. Governance processes and meeting architectures that determine where, how, and by whom decisions are made, as well as delegated accountabilities, need to be adapted to this new world as part of a wider shift in management culture and systems.

11 Action Areas to build Market-making Business Platforms

3. Orchestrate compelling change enabled and leverages automated data feeds and analytics. A control tower monitors We are describing wholesale change at environmental conditions in real time, multiple levels from business strategy increasing visibility and communications, and through core platform execution, intelligent allows for speedy and intelligent responses. workflow build-out, and massive technology It provides alerts and tracks the moving parts enablement. This demands “change of change initiatives, as well as the underlying management on steroids.” For many, the business performance and outcomes. disciplines in this space have atrophied over It recognizes the dynamic and fast-changing the years. In any case, historic techniques are nature of the transformation we are not fit-for-purpose in the environment of the describing. As a fundamental part of the Cognitive Enterprise. instantiation of the Cognitive Enterprise, it effectively becomes the “brain” of the The speed of change, exponential learning, company (see Figure 6). complexity, and the fragmentation of solution components, together with the underpinning We see the control tower operating across concepts of agile ways of working (such as multiple levels of the organization from squads, scrums, and sprints), raises the bar overall enterprise performance to key for the level of orchestration required. A business platforms, critical intelligent world of countless sensors, bots, algorithms, workflows, and major enabling technology microservices, and APIs—underpinned by platforms. It encompasses people, process, new workflow and sub-workflow reinventions and systems activities. at enterprise scale—massively heightens the challenge to understand the status of Control towers are just one aspect of change at all times. The same goes for a the heightened level of the new change solid understanding of the organization’s management that we expect to see. As performance and its ability to predict new capability is continually fed into the challenges and future opportunities in organization, continuous learning becomes real-time. a prerequisite to leverage this evolving collection of capabilities. We have developed the “Control Tower” concept as a vehicle to lift the historic disciplines of “program management” and “dashboards” to a new level. This fresh approach is massively technologically

12 Orchestrate compelling change

Figure 6: The Control Tower provides new levels of insight and coordination

Control Tower

Building Market-making Business Platforms

Crafting Intelligent Workflows

Elevating Enterprise Experience and Humanity

Data, AI, APIs, microservices, clouds, containers

A set of approaches that mirrors the world of DevSecOps in IT will need to be transferred We see the control tower operating into the wider business. Agile and “Garage” across multiple levels of the techniques, which have been employed to drive fast cross-functional innovation, will organization from overall enterprise need to be scaled and repurposed to deal performance to key business with an ever-changing business-as-usual platforms, critical intelligent picture. Connecting all of this to the evolution of the skills, culture, leadership, and mindset workflows, and major enabling of the organization will be critical. technology platforms.

13 Yara

Cultivating a high-yielding platform for growth Results

Yara, one of the world’s leading fertilizer The platform aims to cover companies and a provider of environmental 7 percent of all arable land solutions, have created an industry-wide and provides two initial services: business platform to connect and empower independent farmers.5 It will use IoT sensors weather data and crop yield and AI and TWC to provide hyperlocal weather forecasting, crop damage prediction and real-time recommendations.6 It also paves the way for other advanced technology, such as Already downloaded by over 1,300,000 farmers, this platform is transforming existing blockchain, to provide full visibility supplier relationships and expanding its value. of the provenance of produce to consumers purchasing it Yara built a digital farming platform that connects and empowers independent farmers, expanding its business model as a first-of-a-kind, competitive differentiator in the industry.

14 Embed exponential technologies

Action Areas to create Intelligent Workflows

1. Embed exponential technologies the workflow. They are bigger than traditional processes—which often have been left The key building blocks of the new market- independent of one another, limiting their making business platforms and the efficacy—and straddle existing functional Cognitive Enterprise itself are intelligent siloes. They are driven by customer (internal workflows. When augmented by exponential or external) demands and deliver economic technologies, such workflows radically and experiential outcomes. change how work gets done and how new value is realized (see Figure 7). We live in an age where exponential technologies such as AI, IoT, automation, These workflows need to be identified and blockchain, and 5G can be leveraged at scale prioritized based upon the business platform and in combination to truly change the nature intent and the workflows’ potential for of workflows and deliver vastly superior differentiation. Intelligent workflows will be effectiveness and efficiency. This means that defined as widely as possible to exploit the the critical requirement is to work out how full end-to-end and front-to-back potential of and where these technologies can have the most impact and drive the biggest returns.

Figure 7: Exponential technologies embed intelligence into workflows

Workforce and Skills

Blockchain 5G

Customers Outcomes Intelligent Workflow

IoT Automation AI

Internal data External data

15 Embed exponential technologies

Having a critical workflow in mind is a vital Another major facet of embedding starting point for experimenting with multiple exponential technologies is the relative approaches to identify new value pools impact they have on the workforces and skills and uncover sensitive pain points. Using that sit along the workflows. In some cases, targeted agile approaches, such as the IBM correcting the imbalance in these aspects Garage approach, we can experiment at will, in fact, be the value pool to be exploited pace with the application of technologies or bottleneck to be removed. to exploit opportunities and solve issues. Tapping into different pools of expertise on Organizations need to understand the effects the business and the technology sides of the that a combination of technologies will have organization—as well as into those of partner on the scale and complexity of the human organizations—will surface new answers from tasks that are not “automated.” At that point, best practices, reusable assets, and the latest they can devise the agenda for the upskilling research insights. and reskilling that full-scale implementation requires. IBM’s analysis of over 200 intelligent The value pools and pain points provide workflow implementations suggests that, vital direction and focus to the data science compared to strong traditional execution, tasks involved. In a world where exponential strong execution with AI and exponential technologies depend upon the raw material technologies typically yields three times more of data, data availability and quality are key benefits. to the design of intelligent workflows. The difference between “hunting” for the right data to meet a workflow need and “fishing” for it in hope of finding some insight is an important distinction. Recognizing this can We live in an age where exponential vastly reduce the wasted effort of collating and cleansing non-value-added data sources. technologies such as AI, IoT, automation, blockchain, and 5G can be leveraged at scale and in combination to truly change the nature of workflows, and deliver vastly superior effectiveness and efficiency.

16 Embed exponential technologies

Figure 8: An Intelligent Workflow blueprint defines key areas to build the Cognitive Enterprise

Workforce Workforce and Skills and Skills Customer Enterprise value AI IoT Blockchain value

– Impact/value – Impact/value – Impact/value – Sequence – Sequence – Sequence – Architecture – Architecture – Architecture – Data – Data – Data requirements requirements requirements

Value pools Pain points

All of this activity results in the creation of an Then, the building blocks can be deployed to a intelligent workflow blueprint (see Figure 8). wide variety of environments and on the cloud The blueprint acts as a business case, defines without modification. The business cases for prioritization, and is used as a planning tool next-generation enterprise applications, such to go after the opportunities in a particular as SAP S/4HANA, Salesforce, and Workday workflow. It can be used to sequence the will be enhanced by intelligent workflow building blocks of value, and the “modules” thinking, which adds color, differentiation, and of intelligent workflow build-out so that they higher value to the core process functionality are open, extensible, scalable, and portable. of these software solutions.

17 Action Areas to create Intelligent Workflows

2. Drive value from data A key attribute of the Cognitive Enterprise is creating a culture of data trust. Recent Data is the raw material of the Cognitive research we have completed has highlighted Enterprise. It helps define the market- that organizations that have truly learned making business platform focus and enables to trust their data drive better business the mission-critical intelligent workflows. outcomes.8 Clearly, when important The data that lies within the four walls processes, decisions, and customer and of the enterprise is a valuable source of stakeholder interactions rely on automation differentiation. This is especially true when and algorithms, the requirement for trust combined with targeted external or partner is heightened. We see a growing focus, data sources that can have a dramatic impact therefore, on finding and reducing as on business models and value. much bias as possible from data sources, algorithms, and human decision-making in Not all data, however, is created equal—nor order to move ahead with these technologies is it of equal value. Having the right data for at scale. the right purpose is critical. There is a clear reciprocal relationship, therefore, between The use of externally accessed data— the choices made in terms of market-making especially data from customers—is also business platforms and intelligent workflows, under scrutiny, as many business platform and the data needed to bring them to life. and intelligent workflow improvement ideas This relationship helps target the data focus, rely on such data. Our research shows that as well as surface opportunities to exploit the principles of transparency, reciprocity the data at hand. Organizations need an (that is, receiving value back for data that is information architecture to underpin their shared), and accountability are essential in business and workflow architectures. the creation of the new business platform business models. Data readiness is a pre-condition for value—and readiness includes attributes like In our Global C-suite Study, 82 percent of accuracy, cleanliness, standards, openness, leading organizations—those that excel at and permission. These are hard things to extracting value from data—have a singular certify across all of the data in an organization focus on how they use and safeguard data and even harder given the proliferation in to strengthen customer trust.9 Organizations quantity and granularity of available data. that abuse the trust of stakeholders in their While tools such as AI can help organizations use of data will increasingly risk coming under see patterns and the forest from the trees, regulatory scrutiny. Ultimately, they could it remains important to know where to focus even lose their “license to operate.” vital data curation efforts. It’s estimated that 80 percent of the effort in deploying AI is getting data ready for use (see Figure 9).7

18 Drive value from data

Figure 9: The value of exponential technologies rests on the accessibility and quality of the underlying data

Data Value

Data use cases Intelligent workflow

Data activators AI | IoT | Blockchain

Data governance Trust | Access | Relevance

Data types Proprietary | Licensed | Public

Openness, a key principle of the Cognitive Enterprise, also applies to data strategy. Not all data, however, is created Many business platform and intelligent equal—nor is it of equal value. workflow opportunities will derive greater benefits from sharing data with ecosystem Having the right data for the right partners than in keeping it for their own purpose is critical. use. This sharing can enhance the value of incumbents’ data and have a multiplier effect. As a source of value, however, organizations need to exercise care to prevent control points in a value chain from inadvertently being ceded. In addition, data sourced from others must match the quality and trust levels of their internal sources.

19 Action Areas to create Intelligent Workflows

3. Deploy through hybrid multicloud Business platforms will evolve their scope to include new partners, and intelligent Cognitive Enterprises, with their business workflows will extend platform reach. As platforms and intelligent workflows, will be such, the principles of openness and flexibility fundamentally enabled by hybrid multicloud are vital in the enabling application and applications and infrastructure. At heart, infrastructure architectures. Open source these new business models are what the solutions and container technologies (such as cloud is for. This differs from the purely Red Hat OpenShift) will allow for the ongoing technology architecture-based thinking that connectivity of future modules of capability we see in some organizations hellbent on and new ecosystem components. What’s “going to the cloud.” more, architectural choices can be de-risked through “build once, deploy anywhere” Hybrid cloud architectures straddle the approaches. worlds of on-premise systems (such as mainframes), private clouds, and public One of the biggest impediments to the clouds. Many organizations already have creation of Cognitive Enterprises is legacy multiple environments in play as individual systems and their complexity. Hybrid cloud components of their legacy are renewed (see architectures can release the value of trapped Figure 10). To date, this has often happened data and functionality, along with handling the in a relatively piecemeal and limited way. transition between old and new applications. Part of the solution will be the creation of The enablement of intelligent workflows abstraction layers that can help to insulate at scale is the primary driver to a more the reinvented workflows from the “spaghetti wholesale architectural change. A hybrid code” of the past. Inevitably, however, strategy, by our estimates, adds up to 2.5 organizations are moving into a world times more value than a public-cloud-only where the wholesale rewriting of selected strategy.10 That value runs the gamut from core systems will be necessary to enable migrating more applications to removing intelligent workflows. duplicative processes, enhancing cyber security, and reducing regulatory risks. As all companies become technology companies, the concept of enabling IT and Intelligent workflows will have an assortment the role of the IT department is changing. of underpinning enterprise applications, At a very basic level, IT and the business varying implementations of embedded are coming together through more agile and exponential technologies, and evolving extended teaming models, while new centers data architecture needs. Each of these has of excellence supporting evolving exponential the potential to be enabled by different technologies are arising inside and outside of components of a hybrid cloud environment. IT groups. Applying a fit-for-purpose cloud architecture that meets workflow technology demands defines mission-critical enterprise change.

20 Deploy through hybrid multicloud

Figure 10: Dynamic orchestration with hybrid multicloud drives flexibility and speed

Workflow

Next generation applications Legacy | API enabled | Microservices | Cloud native | SaaS

Enabled by a hybrid, multicloud architecture

Multicloud management Network architecture Automation | Consumption | DevSecOps | AI Ops | Governance

Open hybrid multicloud platform

Service models IaaS | PaaS | CaaS | FaaS | SaaS Security and compliance

The business platform and intelligent workflow framework can be helpful in One of the biggest impediments to organizing these new alignments and in establishing more fit-for-purpose governance the creation of Cognitive Enterprises models. We already see new coalitions of will be legacy systems and their the C-suite coming together to drive these complexity. initiatives. However, as both “enabling IT” and “technology as the business” merge, whole new constructs will need to be invented, led from the top of the organization.

21 Crédit Mutuel

AI helping smarter agents make happier customers Results

Crédit Mutuel, one of France’s leading banks, Crédit Mutuel launched set a bold strategy to infuse AI across all lines of 15 cognitive assistants business, positioning itself as the benchmark for across various businesses, relational banking in a digital world.11 including one able to provide Crédit Mutuel has over 5,000 branches that 15,000 different answers receive more than 350,000 online inquiries a day. To consolidate its position as number one A cognitive email solution in customer relations for the banking sector, it allows the bank to reassign continued to reinvent the role of client advisor by empowering them with AI to free up time.12 200,000 working days annually toward training Crédit Mutuel launched several AI projects, including an email analyzer to manage high email volumes and a virtual assistant to decrease The company is aiming to customer advisor response time. Crédit Mutuel expand cognitive solutions also established a cognitive factory that provides to 100 percent of the an environment for identifying, building, and business line of the company deploying new AI solutions.

22 Elevate human-technology partnerships

Action Areas to advance Enterprise Experience and Humanity

1. Elevate human-technology For this, incumbents can leverage their partnerships deep legacy expertise while also multiplying and adapting that expertise to make new The Cognitive Enterprise, with its smart markets. Workflows already encompass large business platforms and intelligent workflows, numbers of skilled people—who are infused is massively technology enabled. But for all with an organization’s culture—and ever- the value created by technology, it is apparent evolving workforces of different scales and that the most successful organizations will competencies. As exponential technologies be the ones that are able to fuse the power are applied to create intelligent workflows, of technology with an enhanced human roles and jobs will change, but also much performance and enterprise experience (see of this capability will be critical to the next Figure 11). instantiation of an organization’s end-to-end and front-to-back processes. Expertise is a critical driver of the market- making business platforms that organizations choose for competitive advantage.

Figure 11: The human-technology partnership will “up the human game”

Capability Human Human-technology partnership Creativity Personalization

Empathy Foresight

High Touch Acceleration

Technology

IoT

Blockchain

Scalability 23 Elevate human-technology partnerships

Automation will take over repetitive tasks. Experience in the Cognitive Enterprise will AI will undertake instant analysis. IoT be delivered by humans and technology in and 5G will allow organizations to gather partnership. As humans adopt better tools, information remotely. Blockchain will alleviate they will “up their game;” as the technology administrative burdens and the need to becomes even more intuitive, they will manually check processes. increase their adoption of it. New technology solutions and their application to platforms All of this will change the roles and and workflows will set a higher and higher bar activities in organizations. New platforms for professionals who work with them, driving and workflows will surface new spaces for upskilling and reskilling. In turn, people will insight, create new areas for humans to add demand ever better design and functionality value, and continue to require empathy, from their tools. relationships, and other soft skills to differentiate them. Design thinking, experiential learning, co- creational models that incorporate agile The concept of enterprise experience is feedback loops, and continuous learning rising just as quickly as the evolution of the and improvement will all need to become “hard”—or technological—components of the embedded in the Cognitive Enterprise. These Cognitive Enterprise. Customer experiences will drive the ongoing evolution of business remain a fundamental driver of change. They platforms and intelligent workflows. Human- are increasingly linked to the experiences of centered design approaches—that engage the employees who serve customers. wide bodies of stakeholders to understand and evolve needs and expectations—will Whole enterprises are realizing that the way become the default for such transformations. stakeholders experience the enterprise every day is at the heart of what we traditionally call values and behaviors. Also, in a world of ecosystems and networks, organizations see the need for this consistency of experience to As humans adopt better tools, they extend beyond enterprise boundaries. will “up their game” and as the technology becomes more intuitive, their adoption of it will increase.

24 Elevate human-technology partnerships

Figure 12: Customer experience: built upon underlying experiences, defined by purpose, and driven by values.

Purpose and intent

Customer Employee Enterprise Ecosystem experience experience experience experience

Values, skills and ways of working

An organization’s purpose and intent will also be important drivers of the human-technology partnership in the Cognitive Enterprise (see Figure 12). The ethical application of technology to do good and the transparency of an organization’s positive impact on a wide range of stakeholders are becoming more and more important. Issues such as sustainability, inclusion, and trust demand attention. How people align behind the technology potential of the new models and approaches will be as important as, if not more important than, the technology’s robustness.

25 Action Areas to advance Enterprise Experience and Humanity

2. Cultivate smart leadership, skills, and communicate unambiguously about and culture the organization’s intent and the journey underway is more critical than ever. It is vital Leading in the world of the Cognitive for leaders to set guide-bars for the wider Enterprise is very different, in terms of organization and reinforce prioritization of the demands it places both on leaders’ platform and workflow choices. skills and approach to leadership. As more companies become technology companies Alongside clarity and frameworks, however, and exponential technologies scale to open organizations need to “let go” more as the up more strategic opportunities—as well as innovation around platforms and workflows threats—all business leaders will need to moves to the edge of the organization. This is move beyond being merely tech-savvy. when empowered and agile teams can come together to exploit data, find ways to apply If leaders are going to bet their business on technology, and innovate key experiences. new massively technology-enabled business platforms, then they need to understand the It is also important to recognize that new range of technologies involved, along with coalitions of leaders will need to be brought their likely future potential and development together across the executive team to make path. This involves deeper awareness of substantive progress in these new areas. an extended ecosystem of fast-evolving Functional leads, CIOs, Chief Digital Officers, concepts and solutions, and the ability to Chief Transformation Officers, and the line apply that knowledge both offensively to need to be synchronized with the platform seize opportunity and defensively to manage and workflow transformation intent—including disruption. appropriate shared metrics and incentives.

As business platforms straddle industry Culture change is complex in the Cognitive boundaries, leaders will need to look outside Enterprise and needs to be accelerated in a traditional industry networks to seek insights, way that takes traditional approaches off the build relationships in diverse sectors, and table. Exposing the wider organization to the learn new ways to monetize ideas. This ideas and potential of new technologies and includes participating in the worlds of ideas is part of the answer. So is encouraging technology organizations and start-ups and learning by doing. finding ways to incubate fresh co-creational environments in the organization. Ultimately, though, culture change requires a more proactive skills agenda. And as Courage, purpose, and clarity of intent more and more employees gain confidence continue to be the hallmarks of leadership. in understanding and applying new But as the nature of big bets stretches technologies, they become change advocates. away from traditional areas and into new In turn, upskilling and reskilling at scale territory, the ability to set a North Star becomes critical.

26 Cultivate smart leadership, skills, and culture

Figure 13: An empowered workforce is driven by inspired leadership and a culture of continuous learning

High Value

Inspired leadership Empowered Workforce

Legacy Skills New Skills

Baseline Value

Near Term Long Term

As new business platforms are built and are less in demand. We have learned that intelligent workflows are developed, the employees are more concerned about clear need for the workforce skills transformation plans with deliberate, proactive actions to will become more evident. Companies can address the impact of these technologies, get ahead of the curve by making deliberate than they are with the technologies’ potential moves to support affected populations. More consequences. than 120 million workers in the world’s 12 largest economies may need to be retrained/ The lifecycle of many skills and their relevance reskilled in the next three years as a result is diminishing all the time. The Cognitive of intelligent workflows and AI-enabled Enterprise needs to create a continuous automation.13 learning culture and set of approaches: a culture that values the propensity to learn and It is almost as if every company needs embraces soft skills (such as collaboration) to apply the “practice” disciplines of a more than specific technical or business professional services company on their pools capabilities. As part of a wider push to enhance of expertise. These disciplines enable the the employee experience, it is becoming more ability to accelerate the growth of certain common to leverage AI and other tools to help bodies of skills, upskill target populations, direct and support continuous learning across and over time, sunset capabilities that the human resource lifecycle (see Figure 13).

27 CEMEX A Digital Academy for the next generation of disruptors Results CEMEX, based in Mexico, is one of the world’s CEMEX pioneered a robust leading heavy building materials providers. and Over the past three years, it has invested in an development program enterprise transformation to better compete learning environment with its top and differentiate its proposition for its B2B 80 executives customers and ecosystem partners.

The company realized its enterprise The company launched the transformation must begin with its leaders, Monterrey Digital Hub, an so it started with 80 of its top executives innovation ecosystem to create a robust development program connecting CEMEX with launching new digital approaches under the campaign “Being Digital.” CEMEX established entrepreneurs a Digital Academy and learning and development platform to provide common It introduces its leaders to new vocabulary, assets, and delivery channels. concepts and skills, including In 2019, CEMEX expanded the platform with business model innovation and “Digital Foundations Program” to target senior emerging technologies leaders, managers, and the front-line to learn how to grow, lead, and work effectively.14

28 Perform with purposeful agility

Action Areas to advance Enterprise Experience and Humanity

3. Perform with purposeful agility By pulling teams together from inside and outside the organization and aligning The world is embracing the concept of “agile,” them to the core platform or workflow and most organizations are somewhere on the intent, organizations help reduce the risk of journey to create agile squads and embrace Brownian motion and concentrate the energy sprints, scrums, and standups. This has of these groups around clearer outcomes. been valuable in opening up organizational As team sprints put in place the building siloes, breaking down barriers, unfreezing blocks of the platforms or deliver modules organizations, and spurring bottom-up of workflow enhancement, it is possible to innovation. The challenge with many of these direct the backlog of innovation ideas in a activities, however, has often been identifying way that optimizes both returns and strategic a clear outcome or impact. In some cases, alignment. “agile chaos” has resulted. The Cognitive Enterprise therefore provides Agile ways of working can have huge value, “grown-up” governance for agile activities. It but they need to be made more purposeful can more readily connect those activities to for greater effectiveness and efficiency. The major capital allocation and business case Cognitive Enterprise framework, with its decision-making while still driving near-term focus on business platforms and intelligent progress and value. workflows, provides a clear context and delivers the guide-bars within which all this innovation can take place and scale.

Agile ways of working can have huge value, but they need to be made more purposeful by aligning teams with the business platforms and intelligent workflow intent.

29 Perform with purposeful agility

Figure 14: Purposeful agility drives orchestrated teams through clearly defined outcomes

Agile chaos Purposeful agility Outcome

Intelligent Workflow or Platform Intent

In addition, this approach—purposeful This approach is also very important for agility— helps define the business bridging the divide between the business and architecture and other underpinning IT in the evolution of solutions. It jumpstarts architectural choices. This means that if an the process of blurring the lines between idea that has been incubated is deemed these groups as technology becomes the “ready for prime time,” then it should be more business. Done in the right way, it can also be readily scalable. One of the biggest challenges a huge accelerator of the reskilling, upskilling, we see with agile innovation is how to bridge and culture change agenda as players the chasm from pilot to scale-up. Purposeful are exposed to the potential of the new agility de-risks this activity (see Figure 14). technologies and learn by doing.

30 New way of building: Garage

In becoming a Cognitive Enterprise, how a company transforms its business platforms and reengineers its workflows can make the difference between coherence and chaos. The IBM Garage approach is the perfect vehicle to initiate, execute and reinforce the journey.

Organizational agility is essential, but Such thinking helps to bound the breadth of implementing “agile” is not enough, and participants and focus the identification of rapidly multiplying decentralized iterations pain points, value pools, and data sources. can spiral out of control. To help mitigate the This will also help ensure that any building risks of rapid change, organizations need blocks of enhanced capability that emerge the right methods, mindset and technology from Garage sprints can be part of a clear to convene and unlock the power of teams bigger picture by linking each sprint or phase across an organization. of activity directly to the strategic imperatives through a structured frame. This, coupled The Garage approach is just that: a bold, with the core tenets of user-centricity and the in-depth approach to innovation and human experience, enables both speed and transformation through collaboration and value realization and is the key to meaningful, execution. It enables companies to co-create, lasting, success. co-execute, and co-operate the business platforms and intelligent workflows of the Garages provide an opportunity to access future (see Figure 15). the full ecosystem of a business to help co-create the future: customers, citizens, The Garage approach is fundamentally designers, developers, architects, partners, purposeful. We believe that, to harness the suppliers, resellers, regulators, and all other creativity and agility of an organization, it relevant stakeholders innovate together. The needs to have a clear, measurable intent. As Garage straddles organizational boundaries, such, we recommend that a Garage is focused combining business and technology and on either helping to build a specific business internal and external sources of insight. Open platform or that is aligned with the reinvention collaboration with agile squads accelerates of a targeted workflow. delivery, learning and engagement. The Garage experience helps companies move faster, work smarter, access the right talent, and reconceive the way they build, innovate, and grow—and all of that in measurable, iterative ways.

31 Frito-Lay

Delivering snackable innovation Results

Frito-Lay must get the right product to the Frito-Lay reduced the average right place at the right time. With 25,000 duration of a request-in- Frontline employees, 300,000 customers, and market from 240 weeks to 2,500 SKUs, it needed to manage its complex value chain including logistics, distribution, less than 30 days and sales challenges. New features IBM and Frito-Lay employees completed hundreds of hours of user research, interviews can now be pushed and field visits. By co-creating the backlog weekly with value as the key factor, executives were able to make decisions more quickly. Customer-facing workflows The teams built and delivered proofs-of- are increasing concept focused on select verticals into pilot 15 markets and now Frito-Lay has more than and driving adoption eight garage tracks and is focused on scaling its solutions to its Frontline employees.

32 Figure 15: Creativity and practicality come together in the Garage journey

Co-create Co-execute Co-operate

Market Market response response Hypothesis testing Design Scale Envision MVP Build Build Validated MVP n Discover MVP 1 business Measure initiative & learn Measure & learn Measure & learn

Validated product market fit

The Garage does need to be situated at the Scale-up is a core concept of the Garage center of the organization if it is to assist approach. We believe that by targeting with the transformation of mission-critical big problems, engaging a breadth of workflows. It needs to be visible, enabled stakeholders, and having Garages operate with a clear mandate from leadership inside a company’s architectural “big rules,” and connected to the macro governance the company can operate at the speed of a and capital allocation disciplines of the start-up and the scale of the enterprise. This organization. This focuses the output of thinking avoids organizations dying the death innovation cycles on the most significant of a thousand Proofs of Concepts (POCs) or value realization and, if successful, can be Minimum Viable Products (MVP’s). rapidly and meaningfully scaled. The Garage does not just access the right The Garage can utilize unique physical teams of people. It also draws in the full “space” in client or dedicated facilities, where breadth of exponential technologies and design-thinking and collaborative building solution components. It is designed to take place. It can act as a visible signal of enable the combinational power of multiple culture change in the Cognitive Enterprise. technologies, reusable architectural It can also have a virtual instantiation and components, and Research and Development leverage Garage virtual tools, method and to accelerate impact and progress. As such, practices to draw upon wider expertise and this approach can bring deep innovation to straddle geographic boundaries. programs such as Digital Reinvention®, ERP replacement, shared services reengineering and outsourcing transformation. 33 The Garage has a durable position in the full The Garage therefore provides the perfect lifecycle of business change from Co-creation, vehicle for the building of the Cognitive through Co-execution and into Co-operation.16 Enterprise. It can help to define and build the market-making business platforms, reinvent Co-create to envision the future and re-engineer the Intelligent Workflows, Uncover a new business opportunity or drive and create the Enterprise Experience where critical new insights into an existing situation. the Humanity of the company is able to Ideate with your entire ecosystem, or with fully take advantage of the power of the relevant smaller squads, to co-create a exponential technologies at its heart. visionary, compelling, and energizing solution that fits within clear architectural guide-bars.

Co-execute to build out and scale up Expand and create additional squads to build out the team that will realize the future vision. Develop the MVP prototype into a first production-ready release and launch the solution into full production. At the same time, be ready to improve your solution based on what we learn from users and scale up rapidly with robust architectures.

Co-operate to iterate and continuously improve Keep sharpening and hardening your tools, architecture, and reliability, while monitoring and testing for continuous improvement. This leads to continuous delivery that is crucial to deeply transform your culture. Much of the work can be done with distributed squads throughout the enterprise.

34 Notes and sources

1 Rometty, Ginni. “We need a new era of 5 Yara. “Yara acquires leading crop nutrition data responsibility.” World Economic recommendation platform to strengthen Forum. January 21, 2018. https:// Digital Farming offering.” November 6, www.weforum.org/agenda/2018/01/ 2017. https://www.yara.com/corporate- new-era-data-responsibility releases/yara-acquires-leading-crop- nutrition-recommendation-platform-to- 2 Best Practices for Oil & Gas. “Suncor strengthen-digital-farming-offering 4.0: Driving a People-Focused, Data- Informed, Technology-Enabled Business 6 IBM. “Yara and IBM.” https://www.ibm. Transformation.” https://oilgas. com/services/client-stories/yara bestpracticeconferences.com/event/ suncor-4-0-driving-a-people-focused- 7 Bowne-Anderson, Hugo. “What Data data-informed-technology-enabled- Scientists Really Do, According to 35 business-transformation Data Scientists.” Harvard Business Review. August 15, 2018. https://hbr. 3 Suncor. “Suncor Energy First Quarter org/2018/08/what-data-scientists-really- 2019 Financial Results Call.” May 2, 2019. do-according-to-35-data-scientists https://www.suncor.com/-/media/Files/ PDF/Investor-Centre/Presentations-and- 8 IBM Institute for Business Value. “Build Key-Dates/Webcast-transcripts/Q1-2019- Your Trust Advantage: Leadership in financial-results-transcript-EN.pdf?modifi the era of data and AI everywhere.” ed=00010101000000&la=en-CA&hash= November 2019. https://www.ibm.com/ 2CD1FF19AD2E0C6FAD0C9A5AF54796C downloads/cas/K1OGEMA9 09F492DD45 9 IBM Institute for Business Value. “Build 4 Kossler, Michael E. “Give Your Employees Your Trust Advantage: Leadership in Freedom Within a Framework.” The Iclif the era of data and AI everywhere.” Leadership and Governance Centre. November 2019. https://www.ibm.com/ https://iclif.org/articles/give-employees- downloads/cas/K1OGEMA9 freedom-within-framework

35 10 Jim Freeman in an interview with The right partner for computer weekly. https://www. computerweekly.com/news/252479165/ a changing world How-tech-suppliers-are-easing-barriers- At IBM, we collaborate with our clients, to-hybrid-cloud-adoption bringing together business insight, advanced research, and technology to give 11 1 IBM. “How a French bank built upon them a distinct advantage in today’s rapidly its strength—quality customer service.” changing environment. https://www.ibm.com/watson/stories/ creditmutuel IBM Institute for Business Value 12 IBM press release. “Crédit Mutuel and IBM Watson put technology at the service The IBM Institute for Business Value, part of of people.” https://newsroom.ibm. IBM Services, develops fact-based, com/2017-04-19-Credit-Mutuel-and-IBM- strategic insights for senior business Watson-put-technology-at-the-service-of- executives on critical public and private sector issues. people

13 2018 IBM Institute for Business Value For more information Global Country Survey; “Labor force, total To learn more about this study or the IBM by country.” The World Bank. 2017; IBM Institute for Business Value, please contact Institute for Business Value analysis and us at [email protected]. Follow @IBMIBV on calculations. 2019. Twitter, and, for a full catalog of our research or to subscribe to our monthly 14 Based on IBM client engagements. newsletter, visit: ibm.com/ibv.

15 Based on IBM client engagements.

16 IBM Garage ibm.com/garage

36 © Copyright IBM Corporation 2020 IBM Corporation New Orchard Road Armonk, NY 10504 Produced in the United States of America May 2020 IBM, the IBM logo, and ibm.com are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “Copyright and trademark information” at www.ibm.com/legal/ copytrade.shtml. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON- INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. This report is intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. IBM shall not be responsible for any loss whatsoever sustained by any organization or person who relies on this publication. The data used in this report may be derived from third-party sources and IBM does not independently verify, validate or audit such data. The results from the use of such data are provided on an “as is” basis and IBM makes no representations or warranties, express or implied.

88030788USEN-02