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It's time for IT teams to digitize like the startups do

William Heitman | Dec. 21, 2015
Many IT leaders are desperately seeking digitization as a way to transform their companies, but century-old, nontechnology improvements can produce results that can impact operations across all lines of business.

transformation

Review any survey of senior business executives’ IT priorities conducted in the last few years and you’ll find digitization hovering at the top of each list. Executives see it as essential for growing their businesses, improving customer experience and upgrading their business models. Yet they admit they aren’t sure how to do it, as Gartner found when it surveyed CEOs. All the while in the same industries, thousands of venture-funded technology startups are discovering digitization opportunities. While business executives and their IT teams search fruitlessly, startups furiously launch pre-emptive digital offerings. 

This contradiction results from two vastly different approaches. Business execs search for opportunities to digitally automate their existing operations. But startups search for existing operations that are cumbersome and annoying for customers. They search first for nontechnology improvement opportunities. Once found, the startups simplify and standardize. Finally, they digitally automate. 

Back to the future 

For two decades, our company has analyzed hundreds of thousands of diverse job positions, from plant floor workers to hedge fund operations and marketing campaign organizations. The companies have included the largest Fortune 500 firms as well as businesses with as few as 2,000 employees. We have analyzed operations in more than 30 major countries throughout the Americas, Asia and Europe. We have documented our research in a standardized, comparative database. Our work demonstrates that 75 percent of all operational improvements available to businesses are nontechnology-dependent: work simplification and standardization. These improvements are overwhelmingly concentrated among organizations’ “knowledge workers.” 

Once known as white-collar, or office, workers, knowledge workers toil with their minds in sales, accounting, customer service, human resources, order management and innumerable other areas. Knowledge workers make up about half of the work force, with estimates ranging from 44 percent to 60 percent, depending on how the counting is done. 

As a conservative estimate based on our direct experience, at least 35 percent of employees in Fortune 500 businesses are knowledge workers – excluding service workers, such as retail and food service employees. By this definition, knowledge workers are businesses’ costliest, best-educated employees. Despite generations of heavy investment in office technology, however, close scrutiny reveals that knowledge work operations remain needlessly complex and overwhelmingly manual. 

Consequently, knowledge workers unintentionally squander 40 percent of their time on avoidable, repetitive tasks: error correction, customer over-service, sales downtime, duplication and similarly wasted efforts. The non-technology improvements to avoid these tasks are the digitization opportunities that executives in the surveys are struggling to find. Knowledge work is an overlooked diamond field of non-technology improvement and digitization opportunity. 

The cost of avoidable, repetitive knowledge work is staggering. We estimate from our research and public information that this cost reduced earnings for the Fortune 500 by at least 12 percent, or $212 billion, in 2014. This translates into roughly $4 trillion in shareholder value. That’s more than five times the market value of Apple Inc., the world’s most valuable company – and one that routinely steals valuable digitization opportunities from Fortune 500 peers. This potential market value fuels the outsiders’ insatiable search for digitization opportunities. 

 

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