Megadeals: How data and analytics can dramatically boost success

McKinsey Insights & Publications
Megadeals are tricky and so rare that companies think there’s not enough data to be useful. But the data isn’t as scarce as they think.
Value-based procurement is a reality today. To capture the opportunity in today’s European medtech-public-procurement market fully, winners need to adapt to new realities quickly.
For retailers, the cloud can do much more than reduce the cost of computing and data storage. To maximize value from cloud, retailers need to prioritize workflows that can best benefit from it. We share six opportunities for leveraging the cloud as a catalyst for accelerating delivery of business results.
3 Ways to Make Your Business's Computing Eco-Friendly

On Oct. 8, the members of the U.N.’s Intergovernmental Panel on Climate Change released a report detailing what’s likely to happen to our species if global warming continues at its current rate. The report predicts with a high degree of certainty that in just 20 years, an increasing rate of harmful events like floods and fires will endanger our lives and everything we’ve built.

When, as small businesses, we think of reducing our impact on the environment, we often think of actions that are extraneous to our work. We take care to procure the right recycling bins. We try to limit printing resources. We buy a set of energy-efficient lightbulbs.

In fact, it’s the way we work that actually has the highest potential impact on reducing businesses' carbon footprints. Companies can become more eco-friendly by simply embracing modern technology, especially cloud-based computing.

According to a study on cloud computing by Microsoft earlier this year, cloud-based technology can help companies become more sustainable. Although focused on Microsoft products, the study is relevant across cloud-computing systems. The results suggest that by migrating operational business to the cloud – an act that includes going paperless and cutting down on hardware and equipment – we can become up to 93 percent more energy efficient and reduce our carbon footprint by 98 percent.

The benefits for eco-forward companies

Other than helping to save the planet, businesses that make an effort to reduce their carbon footprint will benefit in many ways. For a start, some green-friendly efforts will simply save companies money. By streamlining processes so that they are less reliant on equipment, paper or other resources, businesses can reduce their operational costs. As a bonus, less reliance on overheads and materials means businesses can be more mobile and adapt quicker to the needs of their industry.

Further savings are also possible when you consider federal and state tax incentives for cutting carbon emissions, as well as possible opportunities from government entities that require eco-friendly products or services.

Becoming more eco-friendly also opens your company to partners, talent and customers with similar values. That includes millennials and Gen Z-ers, the most eco-concerned generations. As numerous studies have shown, younger consumers seek companies that take sustainability seriously. Making your business known as an active participant in curbing climate change could do wonders for your reputation, placing you in an elite class of conscientious companies worldwide. It’s these companies that will put themselves ahead, as consumers’ tolerance for passive eco-friendliness wanes.

Although companies that embrace sustainable practices access these benefits and many others, it can be hard for organizations to make lasting change. Often, the initiatives can either feel too complicated or seem like they will take too much effort for too small a reward. But prioritizing sustainability can be as simple as keeping up-to-date with modern computing and cloud-based technology. Here are three ways to harness the benefits of going green without disrupting your small business's day-to-day operations.

1. Implement cloud-based computing

The cloud is one of the business world’s biggest opportunities to impact climate change. Cloud providers are growing leaders in emission savings, reducing the impact IT has on the environment with efficient data centers and ongoing innovation. Undoubtedly, more and more companies will embrace the cloud as cloud technology continues to advance and green awareness grows among organizations.

Underutilized IT equipment, such as hardware and servers, are a massive contributor to energy consumption and have a negative impact on the environment – not to mention a small business's all-important bottom line. On-site equipment is typically overprovisioned, resulting in an abundance of hardware that is inefficient and underused. Because of this, small businesses have been searching for solutions to reduce their energy costs and consumption while maintaining service levels and responsiveness.

Businesses replacing typical desktop computers with hosted clients dramatically reduce their carbon emissions and power consumption due to a reduction in production, packaging, shipping and the use and incorrect disposal of traditional desktops. By reducing the reliance on costly hardware, cloud providers are poised to make a giant dent in the nation’s carbon emissions.

2. Consider going remote

Remote working and telepresence can reduce carbon emissions in a variety of ways. Studies suggest that fewer work hours can lead to lower greenhouse gas emissions and improved employee happiness and team morale. Not to mention it cuts the need for energy-guzzling, expensive office spaces and carbon-costly commutes and opens up a new world of talent for you to consider. This an efficient solution for many small businesses.

One large company has seen sustainability-based success with this strategy. Insurance provider Aetna shrunk its carbon footprint by encouraging employees to work remotely. The company developed this idea over the course of 20 years, and now 43 percent of its workforce has some kind of virtual or remote position. The company credits this strategy with reducing its greenhouse gas emissions by 46,700 metric tons – just in one year. 

3. Cut paper out of your workflow

The elimination of paper is a relatively manageable but transformative action that the business world can collectively take to reduce climate change. Computerized management systems allow offices to scan paper documents, thereby creating a highly navigable and secure library and reducing paper consumption by a substantial margin. Eliminating paper even in smaller businesses could make a difference. In 2016, the U.S. pulp and paper industry generated 37.7 million metric tons of carbon dioxide equivalent. It’s a small percentage of the country’s overall greenhouse gas emissions, but eliminating it would be a great start.

In order to stay competitive, attractive to consumers and contribute to a more sustainable world, businesses must reduce their carbon footprints. By finding technology-based ways to limit greenhouse gas emissions and waste, companies can save money, become more socially responsible and align themselves with motivated consumers.

Hiring Smart: Do's and Don'ts to Find the Best People

Have you ever felt buried as you try to weed through hundreds of employee applications? Whether you're a startup, large enterprise or HR manager, selecting the right people to join your team is one of the biggest and most important challenges. The success or failure of your business is directly affected by the people you select to join your team.

After 24 years of running my own business and hiring many employees, I would like to share a list of do's and don'ts to help you hire smarter and more efficiently.

Do ... Include a task-based exercise.

They can talk the talk, but can they walk the walk? You've had a fantastic interview with an employee and their resume is outstanding, but do they really have the skills you're looking for? Integrating pre-employment tests as part of your interview process is an excellent way to measure a candidate's skills and core competencies. Including tasks as part of the initial application process also helps weed out less motivated or unskilled candidates.

Be personable.

Being professional and to the point is a good mindset to have when conducting an interview, but don't forget to bring your personality too. Interviews are stressful for many candidates, but a sense of humor and friendly personality creates a more relaxed environment, allowing them to give the best interview they can.  

Be organized and prepared.

Nothing turns qualified candidates off more than an unorganized interview and hiring process. According to a study by IBM, people who are satisfied with their candidate experiences are 38 percent more likely to accept a job offer. Once a candidate is selected for an interview, be clear about your processes and timeframe.

There's nothing worse than showing up for an interview while the interviewee is scrambling for paperwork and shuffling through files. Using checklists and keeping all of your onboarding files stored digitally ensures everything is organized, consistent and easily accessible.

Recruit with company culture in mind.

An employee has the skills, but how do they fit in within your company culture? According to, a strong company culture attracts better talent and retains it. You need to define what values, norms, and practices are important to your company and incorporate them into all of your communication with candidates. An employee who has the right skill set but doesn't share your company's values won't be a good fit.

Don't ... Be vague.

You should have a detailed and accurate job description in place before you even start the recruitment process. Define exactly what your company is willing to offer in terms of pay and benefits. Being vague or creating false expectations misleads candidates and prolongs the hiring process.

Ignore the idea of video applications.

One great way to screen employee applications is to require a short video introduction to be sent along with an online application. For many people, spending the time to record and rehearse a video is a daunting task. Videos will most likely dissuade unmotivated or less creative candidates, leaving you with a more interested and committed pool of applicants. Videos also humanize the application process, giving you a better feel for a candidate's personality and creativity.

Wait too long to make a decision.

You should never rush hiring for an open position, but if the process takes too long, you risk losing strong candidates. Once you start the process, you need to move as quickly as possible. You should also communicate a realistic timeline to candidates. In the event the process is taking longer than anticipated, send a follow-up email to prospective employees. Communication goes a long way in the recruitment process.


You might receive hundreds of applications for a single job posting. It's tempting to bring in a substantial selection of 20-30 candidates for interviews, but after a while, you may start to forget important details. It's best to start with a pool of 8-10 candidates and go from there.

The hiring process is certainly not one-size-fits-all. Best practices vary among different industries and positions. However, in my experience, the best way to attract top talent is to create a strong company culture and implement a positive, clear hiring experience. A good hire saves thousands of dollars and dozens of hours – and helps your company succeed.

The transformation of health care continues at a rapid pace, bringing opportunities and challenges for health care providers to deliver improved clinical outcomes at lower costs.

Despite the tidal wave of medical knowledge and digital capabilities, widespread unwarranted variations in clinical practice drive higher costs and result in poorer quality. And many health care systems continue to struggle to reliably deliver evidence-based care.

While progress is clearly being made, as an industry, we still have far to go to consistently deliver on the promise of high-value care through technology and innovation.

In a recent report from Harvard Business Review Analytic Services, experts analyzed how expanding precision medicine offers health care providers new opportunities to provide high-value care. Their conclusion: the expansion of precision medicine could have a major impact on outcomes and costs.

Why Medicine Needs to Become More Precise
The precision medicine initiative is widely viewed as a way to improve health care because it focuses on diagnosing and treating each individual patient based on his or her genetic characteristics. Some in the medical community believe that definition should be expanded.

“While precision medicine can be seen by some people as genomics-guided treatment, I think this definition is too limiting,” says Dr. Larry Chu, a Stanford professor who advised President Barack Obama on the Precision Medicine Initiative announced in 2015. “I think precision medicine means precisely diagnosing conditions, then integrating all relevant patient data and insights to guide care to the best outcomes. It is about providing the right treatment to the right patient at the right time.”

In the report, the experts agreed that the practice of precision medicine will grow because the benefits to health care organizations, providers, and patients in the form of better outcomes and reduced costs are simply too great to pass up. Research suggests that eliminating unwarranted variations in medical care can reduce the cost of patient management by at least 35 percent.

But while precision medicine is already extending lives and improving the quality of patients’ lives, the experts believe there is much to be done to expand its use. That will require executives of health care providers and the entire medical community to embrace, at scale, four pillars of care. These can be grouped into two broad categories: precision diagnosis and individualized therapy.

Precision Diagnosis
Pillar 1: Improve Diagnostic Accuracy
Improve the accuracy of each diagnosis by treating diagnosis not as a singular event but rather as a precise and systematic process enabled by integrated imaging and laboratory results. Speed, quantification, and accuracy are critical because the diagnosis determines the subsequent path of care for each patient. Leverage technology to allow diagnoses to be made, in many cases, at the initial point of care.

A crucial first step in expanding precision medicine is to improve diagnostic accuracy. As Harvard Business School professor Clayton M. Christensen and venture capitalist Spencer Nam, a senior research fellow at the Clayton Christensen Institute, wrote in Harvard Health Policy Review, “Precisely understanding the causes and progression of a disease is the fastest and the most economical way to deliver more effective and individualized therapies to each person.”

Pillar 2: Reduce Unwarranted Variations in Diagnoses
Tightly align training, systems, and protocols throughout the medical community to ensure more consistent care and diagnoses, eliminating variations related to the type of imaging or testing performed, who performed it, or who read the results. The goal is to provide consistent medicine, based on evidence, for the patient’s specific medical condition.

Individualized Therapy
Pillar 3: Personalize Care When It Matters
Move beyond treating patients based on which genetic subgroups they fall into, and treat them instead as distinct individuals, taking full advantage of our understanding of each patient’s unique genetic and metabolic makeup—along with the images and lab test results collected over the course of a patient’s treatment. This enables earlier intervention in cases involving patients who do not respond to treatment.

Read More

Pillar 4: Utilize Advanced Therapies
Take advantage of robotics and advanced imaging technology to make greater use of minimally invasive procedures, especially where imaging can be deployed in real time to guide the procedure and thereby optimize its effectiveness, minimize errors, and reduce costs.

By committing to expanding the concept of precision medicine in this fashion, health care providers have a real opportunity to resolve their biggest challenges.

CEOs of health care institutions, who are under increasing pressure to improve patient outcomes and simultaneously reduce costs, have every incentive to embrace these four pillars of care and expand precision medicine not only within their own organizations but also throughout the health care community.

At Siemens Healthineers, we believe health care is on the cusp of realizing the benefits of precision medicine – and this has already been demonstrated by many real-world examples from across the entire health care spectrum.

Download the HBR white paper on the Siemens website.








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Africa shows every sign of being the world’s next big growth market. It is home to more fast-growing economies than any other region, hundreds of successful big companies, and an urbanizing consumer market whose spending outstrips that of India. In an aging world, Africa is the exception: half of its people are under 20, and its population is projected to double to 2.5 billion by 2050. Fueling this dynamism, Africa is adopting technology at a furious pace: it will soon have double the number of smartphone connections than North America.

Yet Africa remains a challenging place to do business. Infrastructure is patchy, markets are fragmented, and regulations are complex — and although incomes are rising, poverty remains widespread. For some Western firms, those obstacles are just too daunting.

How can companies navigate Africa’s many challenges and translate its growth trends into profitable, sustainable enterprises? Our research into firms that have succeeded in Africa highlights two essential requirements: the imagination to see the continent’s unmet needs as opportunities for growth, and the long-term commitment to build businesses of meaningful scale.

Further Reading
Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market
Strategy & Execution BOOK Acha Leke, Mutsa Chironga, and Georges Desvaux
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One compelling case study is that of SABMiller. The beer maker started as South Africa’s national champion, snapped up global brands such as Pilsner Urquell, Miller Lite, and Peroni, and ended up on the London Stock Exchange’s FTSE 100 list before being acquired by rival Anheuser-Busch InBev for $103 billion in late 2016. In large part it was SABMiller’s success across the African continent that made it such a growth star and justified the eye-watering price tag for its takeover. From 2007 to 2016, the brewer saw its African sales outside of South Africa climb from $280 million to $1 billion. By 2016, SABMiller had brewing operations in around forty of Africa’s fifty-four countries.

Mark Bowman was the managing director of SABMiller’s Africa region during that decade. He told us, “We spotted a huge opportunity in Africa’s beer market, and we seized it at the right moment. In the early part of this century, most global firms saw Africa as unattractive, so we had limited competition.” SABMiller knew otherwise. The continent’s young population was expanding much faster than most other regions and its economies were growing — bullish signs for beer consumption. SABMiller’s insight was simple yet powerful: like consumers the world over, Africans like beer. When they can start spending a portion of earnings on nonessentials, one of the first luxuries they turn to is an upgrade from home brews to commercial brands.

To capitalize on that opportunity, SABMiller adopted a bold long-term strategy for Africa. One element was an aggressive program of brewery building across the continent. With its equipment-supplier partners, SABMiller developed a standardized “brewery in a box” that it could quickly assemble. A second element was to hone its marketing insights: using the brand-positioning approach it had developed globally, SABMiller created a diverse portfolio of African brands tailored to local markets.

In Nigeria, for example, SABMiller developed a new brand, Hero. SABMiller wanted the new beer to come across as local, not the product of a multinational. It designed the label with a rising sun, a favorite symbol of the Igbo people, an ethnic group native to Nigeria. And in a country where it can take up to six hours to earn enough to buy a half-liter of beer, SABMiller priced the brew 25 percent below its main competitor. Hero turned out to be one of the company’s most successful brands ever.

That is just one of the success stories we feature in our new book, Africa’s Business Revolution: How to Succeed in the World’s Next Big Growth Market. In it, we distill the insights from over 3,000 McKinsey consulting engagements across Africa, and hone case studies from interviews with dozens of successful CEOs, entrepreneurs, and development leaders.

Many of those successful firms have created new products and services — and sometimes whole categorie— that are targeted at African needs, tastes, and spending power. They have also innovated to solve the problem of last-mile delivery: Africa is a vast continent with generally poor transport infrastructure and big gaps in communications, where many millions of people lack formal postal addresses or even a street name.

As one example of such innovations, consider the story of Indomie noodles — one of Nigeria’s most successful consumer products. Sold in single-serving packets for less than 20 US cents, the noodles can be cooked in under three minutes and combined with an egg to produce a nutritious, convenient, low-cost meal. Dufil Prima Foods introduced them to Nigeria in 1988. As Deepak Singhal, the company’s CEO, told us: “We created a food that was relevant for Nigeria. And in ten to fifteen years, we became a household name.”

In part that is thanks to Dufil’s innovation of getting Indomie noodles to consumers throughout Nigeria. It has a vast “feet on the street” distribution network of more than 1,000 vehicles including motorcycles, trucks and three-wheelers. When distributors can’t go any further by vehicle, they continue by foot —making sure the noodles are available in the thousands of small, informal outlets that dominate retail in Nigeria.

Western multinationals would do well to learn from the strategies of African champions such as SABMiller and Dufil. US food company Kellogg has done just that — and put its money where its mouth is by investing heavily in Dufil. In 2015 Kellogg ponied up $450 million to acquire a 50 percent stake in the West African sales and distribution arm of Dufil’s parent company, Tolaram Africa. In 2018 it invested a further $420 million for a stake in Tolaram’s food-manufacturing business.

To turn the African growth opportunity into gold, companies must be ready to shape and execute targeted strategies that reinvent products, services, markets, and business models for local needs. Companies like Dufil and SABMiller provide examples that can be an inspiration to others: they have found ways to overcome persistent challenges that limited markets, hampered business growth, and made life harder for ordinary people. Their innovations and investments also create real social impact by providing products that were previously unavailable, boosting productivity and growth, and creating large numbers of jobs.

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We are living in an age of acceleration. All manner of goods can be ordered online and delivered within hours. The next date is a swipe away. Even exercise and meditation are now accessed via apps and completed in minutes. This constantly increasing rate of technological advancement and social change is speeding up the pace of business and life itself, leaving most of us feeling time-poor.

How are people coping? Increasingly, by seeking out opportunities to slow down. Witness the rising popularity of yoga and wellness retreats (one of fastest growing sectors of the tourism industry), the slow food movement, and the spreading popularity of digital detoxes: time away from tech devices. The former director of BBC News recently launched Tortoise Media, which defines itself as slow news and offers the tagline “slow down, wise up.” And, in South Korea, a decidedly fast-paced, high-tech society, vacations in which burnt out workers spend time in a jail cell, treated like a prisoner, so that they can disconnect and decelerate, have become popular in the past year. This desire to decelerate is a major trend with implications for companies, organizations and society.

To explore why and how people can achieve deceleration, we studied another extreme version of it: we immersed ourselves with people walking the Camino de Santiago in Spain, an ancient pilgrimage route that has been drawing ever larger crowds, of varied ages, religious backgrounds and countries of origin, in the past two decades. Through this research, we identified three key dimensions to slowing down:

Embodied deceleration, which is the physical slowing down of the body. In our research, this was achieved via walking on a daily basis rather than using faster forms of transportation. Technological deceleration, which is not giving up technology, but carefully controlling its use and instead focusing on face-to-face communication. This often stems from the surroundings not allowing for constant connection rather than from self-control. In our study, some respondents left their work phones at home, or they connected to Wi-Fi only in the evenings. Episodic deceleration, which is engaging in only a few activities per day — in our data, walking, eating, sleeping — and, crucially, reducing the amount of consumption choices to be made.

In general, all three dimensions speak to ideas such as simplicity, de-materialization, and authenticity.

How do these findings translate into business insights? Companies are beginning to provide spaces where consumers can decelerate on all three dimensions. In the retail sector, for example, “slow shopping” the creation of calming, relaxed, private yet interactive experiences that encourage customers to stay (and spend) — has become a long-awaited response to e-commerce and high-tech self-checkouts. As reported here, Origins, a skin-care and make-up brand, redesigned its stores to provide more places for shoppers to sit down, encouraging embodied deceleration. Similarly, in 2013, Selfridges, the high-end British department store, built a quiet room where consumers can relax and engage in both embodied and technological deceleration.

In the tourism sector, while embodied and episodic deceleration has long been encouraged as part of luxury hotels’ wellness focus, we are beginning to see the absence of Wi-Fi marketed as an amenity, for example at Villa Stephanie in Baden-Baden, so guests aren’t posting experiences on Instagram but rather focusing on their holiday.

In fashion, brands such as Patagonia encourage customers toward investment purchases: a few, key sustainable clothing and accessory items kept over longer periods of time, reflecting an emphasis on authenticity and de-materialization via episodic deceleration.

We see the facilitation of deceleration — especially that which factors in all three dimensions — as beneficial for individual well-being, the environment and businesses alike. And we expect interest in such experiences to rise exponentially in coming years. Recognizing our existential need to occasionally slow down can be the basis for winning consumer strategies.

MIT Sloan Management Review

Digital customer service agents — also known as virtual assistants, chatbots, or softbots — are poised to transform customer service over the next decade. Essentially software algorithms capable of interacting with humans, these agents use big data analytics and technologies like natural language processing and machine learning to develop accurate profiles of users and interact with them.1 According to a report by Grand View Research, about 45% of consumers worldwide, across all industries, now prefer digital agents as the primary point of communication with organizations. This translates into an estimated global market worth $1.25 billion by 2025.2

At most companies, the general strategy is to use digital agents to sift through incoming customer requests (via call centers, websites, and smartphone apps) and then process the most straightforward issues, such as requests for basic information like an account balance — the bulk of customer inquiries at many organizations. More complex issues get passed along to human agents. In that way, digital agents reduce the humans’ workload and associated costs (despite implementation costs, which can be high).3

There is a perception at many companies that these tools can handle only basic inquiries, and that anything else must be handled by human reps. But that is not true. We have studied both public and private sector applications of digital agents in our home market, Australia, over the past four years.4 Through that research, we have found that public sector agencies are already using these technologies to handle complex inquiries from citizens regarding services.

The public sector implementation itself runs counter to the conventional wisdom. In most countries, government entities are slower than businesses to adopt new technologies. They don’t have the budget to make such investments, they struggle with institutional inertia, and they tend to be risk averse, in part due to reputational risk if they get something wrong. Yet since 2015, some public service organizations in Australia, particularly providers of public welfare services, have invested heavily in digital agents. These entities deal with extremely high volumes of interactions and need to increase productivity by facilitating self-service among citizens. In 2017 in Australia, 700 million online social welfare claims were processed, 52 million calls were made to call centers, and service centers received 19 million visits from customers.5 In addition, most social welfare programs require documented evidence of details such as applicants’ partners, dependents, work income, assets, and medical problems, and benefits decisions are made through complex business rules for calculating eligibility, payment levels, and other factors. Digital agents are helping with all those efforts.

In some cases where public entities have pioneered the use of digital agents, companies have later followed their example. For instance, the Australian Taxation Office (ATO) successfully incorporated an advanced digital agent called Alex into its service processes. Alex was developed by an American company called Nuance and has been in use since 2016 at ATO, where it can resolve 80% of customer issues during the initial contact.6 The technology is now being used by private organizations such as Jetstar Airways, which operates in Australia, New Zealand, and some Asian countries.

Our analysis suggests companies worldwide stand to learn valuable lessons from Australian public service agencies that have improved customer service through digital agents. Broadly, those lessons fall into the categories of applications, challenges, and key recommendations.

Applications for Digital Agents

Digital agents can provide three types of customer assistance, along a spectrum of sophistication.

Basic triage. The first application involves identifying appropriate services for customers. In this situation, a customer contacts a service center with a straightforward inquiry. She already knows what she wants, because she has a specific issue that can be addressed with a new service or a change to an existing service. To provide this type of assistance, public organizations in Australia have implemented digital agents that use natural language processing (either for speech over the phone or text through a customer chat session) and machine learning capabilities to identify the right services for people, by incorporating past customer service data as well as real-time information from the current inquiry. More important, the agents continually learn from customer interactions, so they become more accurate over time.7

Roxy, for example, is a digital agent that uses these back-end technologies to help citizens make sense of Australia’s complex social welfare programs and to recommend services that are most relevant to them.8 A similar digital agent, Amelia, is a more conversationally adept agent in use by the New South Wales government for both internal and citizen-facing inquiries. Amelia can even change her tone depending on the service interaction.9

Targeted assistance. The second application is more targeted assistance, such as prefilling forms for customers or helping them solve problems in a personalized way. For example, to apply for unemployment benefits in Australia, an applicant needs to respond to about 150 questions. Oliver, a digital agent at a public welfare organization, can auto-fill many of the answers based on customer profiles, reducing the number of responses that need human input to just 10 to 15.10

Proactive assistance. The third application — and the most sophisticated — is proactive assistance to customers. Public welfare departments can use digital agents empowered by predictive analytics to send personalized recommendations to customers about matters that the customers may not even be aware of, such as an upcoming event or future steps that are required to apply for a specific service. Examples include recommendations related to life events, such as getting married, having a first child, moving, or transitioning into retirement. Digital agents can then build decision trees to help people connect with and navigate relevant services across agencies.

A digital agent might, for example, read the profile of a customer — say, a mining engineer in Australia — and determine through his age and other demographic information that he is reaching a milestone year in his current position and could soon transition to a less-intense job in a related industry. The agent could then identify alternative, high-demand sectors and provide information about and links to specific positions. The agent might also bundle services such as training, connections to job agencies that support those industries, and analysis of any potential financial impact due to salary differences.

Challenges in Implementing Digital Agents

In our analysis of public sector entities, we have observed that organizations wishing to implement digital agents face a few key challenges.

Cost. The initial cost of implementing digital agents can be high, especially when they involve sophisticated back-end technologies that are not plug and play. Companies that have already invested significant sums in their current customer service initiatives might not be inclined to spend more. Over time, however, investing in digital agents will generally pay off, because direct customer interactions with front-office staff cost more.11

Data management. Empowering digital agents via big data requires the ability to store data while also making it accessible in real time.12 Both public and private sector organizations wrestle with huge amounts of customer data — often scattered across different channels and systems — which complicates the challenge of developing a single, integrated view of a given customer. An efficient data management strategy is essential, particularly for satisfactory targeted assistance and proactive assistance, where digital agents need access to current and past customer service interaction data.

A related challenge is ensuring compliance with privacy regulations, particularly if an organization wants to collect highly personal data from multiple sales channels or companies in a service ecosystem (for example, suppliers, distributors, or corporate partners).

Service management. Even the digital agents that feature the most advanced back-end technologies need a significant amount of training to incorporate customer-specific terminology and service processes and to learn the most appropriate responses. Machine learning algorithms are extremely powerful, enabling digital agents to review millions of service interactions and then tailor appropriate responses, but digital agents cannot train themselves.13 They need to learn through real customer interactions in a dynamic process, which means they must be carefully incorporated into an organization’s operating model. Unless companies conduct robust testing using realistic scenarios before going live with services, potential early stumbles with user experience or the handling of data could hurt their reputation or brand.

Key Recommendations

Despite these challenges, digital agents are going to become more common over time; they are not a passing fad that companies can simply wait out. In fact, organizations need to start engaging with them sooner rather than later so that their own capabilities will evolve in tandem with the rapid advances in technology. We recommend the following steps:

Start small and safe. Digital agents need to be road-tested — exposed to a wide range of potential scenarios — so that their recommendations can be validated by experienced staff before going out to customers. Once they are reasonably accurate, agents can start handling extremely simple customer-facing processes — for example, pointing customers to self-help resources like how-to manuals and video instructions. Some companies roll out early-stage bots internally (in areas such as HR services) to build up capabilities in a way that doesn’t put customer relationships at risk.14

Integrate data and service management. Next, companies need to address the data aspects of their service strategy. Data is like oxygen to digital agents. Organizations must capture historical data from all service touch points (such as websites, mobile apps, call centers, and social media pages) along with information from users’ connected devices (everything from web browsers on mobile phones to virtual assistants like Alexa and Siri). And they need to manage data streaming in real time during service interactions, to create a unified view of the customer.

Concentrate on the customer experience, not the technology. Some organizations make the mistake of thinking digital agents are, by themselves, enough to transform their customer service. Agents are only part of the solution, and there is a real risk of trying to digitize flawed processes. To capitalize on the technology, organizations need to redesign service interactions and processes around the customer experience, regardless of whether that customer gets support from a digital agent or a human service agent. And good design requires human insight. No matter how sophisticated digital agents become, technology alone can never deliver excellent service for all types of interactions.

That is why organizations should believe neither the hype nor the naysayers when it comes to using digital agents. They are powerful tools, but in the end they are just that — tools.

Leading an organization through digital transformation is an uncharted journey for most of us. Moving away from legacy systems, processes, and operations to a digital model requires a steady strategic hand. Too many companies approach this transformation as a technology issue when it’s really a people and processes issue.

Please join Gerald C. Kane and Anh Nguyen Phillips, coauthors of MIT SMR’s report, “Coming of Age Digitally,” for a discussion on the steps leaders can take to prepare for and execute digital transformation of the organization.

In this webinar, you’ll learn:

Which functional areas have the greatest success in leading digital progress. Why technology shouldn’t be the key focus of your digital transformation effort. How to align digital and overall strategy for smoother transitioning off legacy systems. Why the C-suite’s digital leadership is essential (to a point).

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