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Innovation, Amsterdam and an arena: How KPMG teams excel at transformations and technology

After KPMG highlighted the firm’s relationship with Johan Cruijff Arena in Amsterdam at a recent analyst event, TBR requested a follow-up discussion to better understand how the innovation team at the arena had been excelling at many of the key characteristics TBR has identified in consultancies’ and IT services vendors’ innovation and transformation centers around the world. TBR met with Sander van Stiphout, the arena’s innovation lead, and Wilco Leenslag, the KPMG partner leading his firm’s efforts with the arena.

Framed within the context of TBR’s recently published Innovation and Transformation Centers Market Landscape, three key elements of van Stiphout’s work at the arena stood out

Trust is crucial  

First, the arena’s innovation team works with external clients on a subscription basis, a business model rarely deployed by consultancies and IT services vendors. The arena’s clients, which include startups and enterprises testing new technologies and means of enhancing the customer experience, have to fully trust the arena’s innovation team will deliver value for the investment they are paying in subscriptions. TBR believes this business model may be directly related to the unique nature of an arena but could be replicated by a consulting firm or IT services vendor that is willing to bet on collaboration consistently leading to valuable, and deployable, innovation.   

Make your pitch and test your tech  

A second key element that stood out was how the Johan Cruijff Arena serves as a test bed in multiple ways, benefiting the arena’s clients that are startups and the arena itself. Startups not only test their technology solutions in a real-world environment with continuous access to all the variables found in any sporting or entertainment event, but van Stiphout noted that startups also pitch the solutions to internal operational professionals at the arena. For example, the arena’s marketing department must approve a marketing solution prior to testing, enabling startups to pitch and refine solutions with a real-world client before taking it to other clients.

Innovations, particularly from startups, often stall when they meet real-world requirements and clients making investment decisions beyond prototypes. By creating a stage for startups to test run both their product pitch and their product, the Johan Cruijff Arena innovation team helps these companies overcome that innovation roadblock. Additionally, this prototyping method helps to overcome issues associated with the traditional engagement model of working with clients’ innovation departments on pilot projects. Specifically, TBR often hears of emerging technologies becoming “stuck in pilot mode,” a challenge that we feel is directly related to the sheer number of ecosystem participants that are required to scale a solution after proving its value to a client. With the arena-led engagement model, ecosystem entities must first work together ahead of a live trial in the arena, addressing the issue of scaling before testing, not after. 

Is it time for the Big Four referees to educate the public sector on the benefits of rules changes?

In TBR’s newest blog series, What Do You Think?, we’re sharing questions our subject-matter experts have been asking each other lately, as well as posing the question to our readers. If you’d like to discuss this edition’s topic further, contact Geoff Woollacott at [email protected].

Adoption accelerated as innovation stalled

Last year’s pandemic-induced changes across the technology space and society overall led TBR to consider how the pandemic accelerated existing technology adoption trends. From an emerging technology perspective, we increasingly believe private sector adoption will remain stalled until public sector actors with scale and influence rethink operating practices and enact and enforce regulatory governance. Several years ago, our “wallet versus will” special report argued that the public sector used to lead in technology adoption when funding was the decisive factor but lagged in technology adoption when consensus on common business rules proved elusive. Add in a pandemic, and we’re questioning whether private sector innovation has hit a roadblock that will be resolved only when there is greater public-private partnership and, more importantly, an ability for our political leaders to come to some consensus. Consider the following:

  • Our latest research around blockchain suggests a current period of disillusionment. Reaching the scale technologically feasible to generate business returns requires better automation and regulatory agility or the networks won’t achieve scale through broader ecosystem participation.
  • Globally, poor international cooperation related to the sharing of information and the movement of people between countries contributed to the spread of COVID-19. Imagine a blockchain-enabled universal product code (UPC) on a smartphone functioning as an international system of record regarding vaccination history.  

Early in the pandemic, supply chain disruptions made headlines and every consumer felt the impacts. Blockchain-enabled smart supply chains, tied into ports and international transactions, could have smoothed out some of these disruptions if the distributed ledger technology had been broadly embraced by countries and their import/export hubs. The Republic of Venice once ruled commerce, reaching the pinnacle of its power from 1425 to 1500. It’s no coincidence that general ledger accounting was invented in Italy during that same period.

Moving from city-states to countries, nations fundamentally seek to protect their citizens through sovereign laws, with many regulations revolving around property, currencies and finances. Cryptocurrency purportedly separates currency from nations. In one potential scenario, China’s newly launched digital yuan topples the U.S. dollar as the de facto international currency trading standard, greatly reducing the impact of economic sanctions from the U.S. foreign policy tool set. Venice’s grip on the Mediterranean loosened for many reasons and while blockchain wasn’t among them — needing another 500 years to be invented — the parallels to the U.S. can be unsettling.

Private sector initiative proved emerging tech-enabled practices are essential; now comes public sector education

Out of necessity, the private sector accelerated emerging technology-enabled use cases to address the pandemic’s impact. This highlighted gaps in how the public sector operates and responds to significant changes in the commercial space. For newly enhanced technological tools to deliver tangible business and social benefit after these proofs of concept, government must accommodate new ways of working while still providing expected regulatory benefits to its citizens against moral hazards. Not surprisingly, advisory firms with the tax and audit knowledge essentially acted as referees within the free-market systems that frantically developed the workarounds to sustain business operations in 2020, exposing the ways in which the public sector decreases, rather than increases, the efficiency and viability of emerging technology-enabled operations.  

So, what do you think? Is it time for the Big Four referees to educate the public sector on the benefits of rules changes?

Innovation and transformation centers: Smart strategies pre-2020 will lead to success in a hybrid future

What the elite vendors have known: It is all about talent, location and network

In meeting with leaders at innovation and transformation centers around the world and discussing their approaches to talent, TBR learned that the most aggressive and successful vendors understood key human resources elements: Talent developed at a center could be dispersed across the globe to help establish new centers; the centers could be a magnet for new talent; and diverse talent on-site as a dedicated part of the center appealed to clients more than flying talent in for each engagement. 

In addition, the earliest successful centers featured a physical location separate from the rest of the company’s facilities to reinforce the idea as new and different while also encouraging clients to think more broadly about the vendor’s capabilities and offerings, getting clients out of their own offices into a more creative space, and providing the vendor with an attractive location for its own professionals to expand their own thinking about what was possible.

While all of these IT services vendors and consultancies have maintained global operations, the elite vendors have combined the talent elements and the benefits of a physical location and understood the importance of creating vibrant virtual networks to facilitate spreading ideas, sharing industry- or technology-specific best practices, and tying together multiple teams and solutions. In contrast, TBR visited vendors whose centers acted as stand-alone silos, with a minimal amount of or leadership emphasis on cross-border cooperation or sharing, limiting the impacts of the centers on clients’ transformations or the innovations within the vendor itself. Overall, the elite vendors understood that these centers catalyzed change throughout their own organizations, accelerating their own transformations even as they worked with clients.

“One additional current operational element stood out during the informal tour: PwC now engages in daily briefs to share success stories and exchange knowledge about solutions and creative approaches to clients’ issues. TBR has pressed every consultancy and IT service vendor on the issue of ensuring new ideas do not stay siloed in one location (diminishing the value of a global firm); to date, TBR believes no firm has developed a comprehensive, robust, and truly global means for sharing innovations and accelerating knowledge dispersion among digital transformation centers, although PwC, EY and Accenture likely have progressed the most.” 

TBR Special Report, Peak PwC or just getting started? PwC’s NYC EC, April 2019

Everyone has a digital transformation center: Over the last 10 years, every vendor in the consulting, IT services and broad technology space has opened a physical center dedicated to working with clients on their digital transformations and collaborating on innovation of products, processes or business models. TBR has visited at least one of nearly every vendor’s centers, from nine-story buildings in India to one-room product showcases in Texas. Among the common themes, three of the most persistent have been around people and clients.

Vendors have also wrestled with the best approaches to having technology partners on-site, choosing industry focus areas, selecting suitable spaces and/or locations, and managing intellectual property. The most common unknown is how to measure success. While disparities persist on how best to establish, run and monetize these centers, the common themes and challenges present an opportunity for vendors to examine which elements within a partner’s or peer’s center have contributed to what remains the common goal: retaining clients and expanding opportunities.

Economic advantage: Preparing for lift off

Talent poaching within industry first warning of things to come

JPMorgan Chase announced on Jan. 22, 2020, the hiring of Marco Pistoia from IBM. A 24-year IBM employee with numerous patents to his credit, Pistoia most recently led an IBM team responsible for quantum computing algorithms. Algorithm development will be key to developing soundly engineered quantum computing systems that can deliver the business outcomes enterprises seek at a faster and more accurate pace than current classical computing systems.

A senior hire into a flagship enterprise in the financial services industry is the proverbial canary in the coal mine, as TBR believes such actions suggest our prediction of quantum achieving economic advantage by 2021 remains on target. Quantum executives discuss the three pillars of quantum commercialization as being:

  • Ongoing scientific discovery to improve the overall fidelity of quantum computing systems; discovery is not the same as a technology road map. These advancements are not easy to predict given the limited supply of individuals skilled in the topics as well as the challenge of pursuing breakthroughs solving the known unknowns.
  • Great advancements have been made in curating scientific discoveries into system components able to generate sufficient yield quality in manufacturing.
  • Application discovery has early activity, most notably in academic research institutions but also within blue chip establishments in the areas of financial services, healthcare, materials science and native cloud companies.

Scientific and engineering obstacles persist, bottlenecking progress. The fluid nature of IP sharing and innovation through ecosystem participation across the above three pillars means businesses that have a trusted track record around groundbreaking innovations will be first to gain the aforementioned economic advantage. As advantage nears, the early adopters will require senior talent with the vision to look across the landscape of technologies and potential use cases and prioritize efforts to gain advantage. Pistoia’s remit will be as the lead researcher for JPMorgan Chase’s Future Lab for Applied Research and Engineering, which seeks out commercial use cases around emerging technologies such as quantum, edge computing, 5G and IoT to create market distinction.

What lessons can be learned from this strategic hire in a domain with acute skills scarcities?

Losing a valued contributor to scientific innovation can certainly hinder an organization such as IBM and decimate smaller firms more reliant on a few key executives. The movement, however, is neither uncommon in industry nor unexpected. Leading technology companies and the professional services firms that translate their capabilities into business results are in the same situation as JPMorgan. Most companies in the industry have focused more on science and engineering than on translating these technical advancements into business value. As economic advantage nears, TBR expects:

  • Talent poaching between technology companies and the leading-edge enterprises they support will accelerate.
  • Advisory services and road maps will be built out rapidly. Smaller, quantum-specific firms will seek to establish these road maps out of necessity, while the advisory firms will likewise seek to find repeatable frameworks to scale across their existing account base. For example, IBM helps enterprises with early exploration through its QStart program while startup Xanadu has built a services team focused on executive education, early corporate preparations or prioritizations, and then the requisite technical training and technical diagnostic services to partner with first-mover enterprises.
  • The ecosystem will be further developed for the cross-sharing of algorithms and best practices as they pertain to the early use cases where economic advantage will appear first.
  • Industry hype and impatience around expected investment returns from enterprise leadership and venture capitalists will continue to present challenges.

Quantum is not a short-term opportunistic investment. In TBR’s opinion, it remains a necessary long-term investment where diligence coupled with patience situate enterprises to exploit first-mover advantage as well as mitigate the risks of falling victim to an economic extinction event brought about by competitor advancements in determining where, and in what sequence, quantum can yield economic advantage.

TBR’s next Quantum Computing Market Landscape will explore the professional services offerings in place or being established by the key market entrants and is due for publication in June 2020. We welcome input on the topical questions our readership would like to see addressed.

Other recent quantum-related publications:

Quick quantum quips: Cloud players are now looking for a piece of the quantum pie

Quantum Computing Market Landscape 4Q19 company rankings

Translating quantum science into business value: Tradeoffs between precision, speed and cost

Quick quantum quips: Hardware entrances gain VC funds while established innovators partner across architectures to secure a place in the broader quantum ecosystem

Traditional ports and quantum computing: The now and the future

Quick quantum quips: A call for quantum supremacy sends ripples through the market

Separating the tricks from the treats in the emerging technology sector

An overview of ICT trends, business models and best practices

As TBR separates which emerging technologies are tricks from those that are business strategy and financial performance treats, we will also provide insights on how to be the house with the best candy in town.

Technology disruption and innovation are constants across all segments of the ICT industry, and the pace of change is always accelerating. Established vendors are racing to launch new business segments and portfolio offerings to capitalize on emerging trends, as well as jumping into markets they previously had avoided or not considered addressable. “Born digital” players are sprouting up across all markets and threatening to take the share of established players.

In this environment, there is more customer choice than ever before, and more confusion about which technology trends have translated into currently viable business models, offerings and customer solutions, and which trends are purely marketing talk, backed by slick PowerPoint collateral, that promise outcomes that will only be delivered to customers years in the future. It is critical that vendors help customers separate the talk from the reality, as well as articulate where they have business models and solutions capable of addressing tangible current customer needs.

Don’t miss:

  • TBR’s views on the current business model and financial realities of emerging technology trends such as IoT, digital transformation, edge computing, quantum computing and others
  • Best practices that leading vendors are utilizing in commercial model, portfolio and go-to-market execution to establish real business models around each of these trends
  • TBR’s recommendations for how vendors can best message business models and offerings tied to emerging technologies to customers

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

Technology Business Research, Inc. announces 4Q19 webinar schedule

HAMPTON, N.H. — Technology Business Research, Inc. (TBR) announces the schedule for its 4Q19 webinar series.

Oct. 16         India-centric vendors defy gravity and all sensible expectations        

Oct. 30         Separating the tricks from the treats in the emerging technology sector

Nov. 13        Enterprise adoption of private cellular networks poses opportunities and threats for telecom industry

Nov. 20        Digital transformation in 2020: How hype gets scale and substance

Dec. 4           Device market disruptors

Dec. 11        Year in review: Shifting from a monocloud to a multicloud and hybrid cloud landscape

Dec. 18        Will ‘new’ management consulting models support digital transformation?

TBR webinars are held typically each Wednesday at 1 p.m. EDT/EST and include a 15-minute Q&A following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

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The Big Six, the 150, and the future of Accenture’s alliances

Like nearly every IT services vendor TBR covers, Accenture professes to follow a technology-vendor-agnostic approach to making client recommendations, but we have noticed how the company — in addition to managing over 150 tech vendor partnerships — forms strategic business groups with core partners, such as SAP, Oracle, Amazon Web Services (AWS), Cisco, Pivotal and Google, not to mention the joint venture with Microsoft (Avanade). Given the initial structure of the Accenture-Apple partnership, we expect this may formalize as a Business Solutions Group as well. Augmenting its large partner ecosystem capabilities often requires Accenture to team up with regional firms (e.g., Sompo Japan Nipponkoa Insurance and Daiichi Kotsu Sangyo) to demonstrate how Accenture partners at the local level to gather insights and test technologies in specific industries. The alliance strategy makes sense for such a large firm with a diverse set of offerings and capabilities, but in today’s market, which is flooded with emerging technologies, we have to ask what market and competitor changes will alter Accenture’s strategy.

What’s changing?

As the market evolves, Accenture’s do digital, be digital approach has impacted the way the company forges and manages its alliance relationships. The influx of startups presents a great opportunity for Accenture to expand its reach into new areas such as artificial intelligence (AI), blockchain and the rest of the alphabet of new technologies. Part of the Accenture Innovation Architecture, Accenture Ventures has played a critical role in this evolution as it has taken Accenture’s alliance strategy to the next level, creating a bridge between acquisitions and strategic partnerships mainly through minority investments in vendors such as Ripjar. The additional commitment and risk sharing demonstrated through minority investments is a step in the right direction as new buyers can be skeptical when nontraditional vendors pitch new capabilities. But Accenture is an almost $40 billion organization with a predominant focus on Global 2000 clients, leading the company to heavily rely on its Big Six partners — SAP, Oracle, Microsoft, AWS, Salesforce, Google, plus the emergence of Workday on Accenture’s radar. TBR notes that recently Accenture’s leadership has recognized the importance of these partners, as platform-based services enabled by the soon-to-be Big Seven by these Big Seven are now generating over 25% of Accenture’s sales. So, is anything really changing? At the macro level, maybe not, but the “as a Service” economy has enabled Accenture to pursue opportunities within the midsegment market, which in our view is an even bigger strategic shift than bringing in Accenture Ventures. This move into the midsegment market creates opportunities for the small technology players to play in the same sandbox as the 800-pound gorilla.

With Accenture augmenting its strategy, how do the small guys get Accenture’s attention? TBR asks this $100 million question of the startups, but more importantly of Accenture too. Many rival IT service vendors have ramped up similar strategies and will now drop prices to meet clients’ demands for nimble, off-the-shelf solutions that may not require premium consulting expertise as much as strong back-end support (hello, India-centric vendors). So is Accenture ready for the next chapter of its alliance strategy? Possibly. Will data interoperability reduce the need for multiple large platforms and be the panacea for the small tech guys to fill in the blanks? Can Agile methodologies infect Accenture’s alliance strategy? Maybe. With Accenture, let’s recall that it’s all about process. To paraphrase the late Johnnie Cochran, if it doesn’t fit, you must quit. And if you’re one of 150, you’d better be better rather than good.

Specialized industry expertise and agile service delivery position NIIT Technologies to disrupt incumbents

The rising tide of digital transformation demand continues to lift all boats, particularly small, intensely industry-focused IT services players, such as NIIT Technologies, that aggressively and tactically align their portfolio offerings and go-to-market strategies with the evolving needs of their clients and target markets. Though the long-term sustainability of NIIT Technologies’ rapid revenue growth and margin expansion remains to be seen, its strong performance in a services arena nearing saturation deserves the attention of global technology and IT services peers.

Strong financial performance highlights the success of NIIT Technologies’ pivot toward digital

CEO Sudhir Singh kicked off the event with a summary of NIIT Technologies’ recently reported FY2Q19 earnings results:

  • Revenue for the quarter ending Sept. 30, 2018, grew 23.1% year-to-year and 10% sequentially, in local currency, to Rs. 907.4 crores ($129.5 million U.S. dollars [USD]).
  • Operating margin expanded 186 basis points year-to-year to 18%.
  • Fresh order intake increased for the sixth consecutive quarter to $160 million USD, including 10 new logos.
  • Digital revenue reached 28% of total revenue, expanding 11.6% sequentially in local currency.
  • Headcount crossed the 10,000 mark, with 261 additions during the quarter. During 2018 NIIT Technologies has added 1,000 employees, with 499 in digital areas. Despite double-digit headcount expansion, utilization has also increased (80.4% in FY2Q19) while attrition has stayed well below that of Tier 1 India-centric peers, hovering between 10% and 11%.

Though relatively smaller in scale compared to Tier 1 India-centric peers, NIIT Technologies prided itself on its relatively balanced geographical mix for a company its size (e.g., only about 49% of revenue comes from the U.S., about 34% from Europe and the remainder from Rest of World), on par with Tata Consultancy Services [TCS]). The company also touted its culture, built upon a heritage of learning and research, that empowers employees with both technology skills and design thinking expertise to create business-relevant solutions for clients.

 

 

TBR attended NIIT Technologies’ U.S. Analyst & Advisor Forum in Boston, where the company’s executive leadership team presented on the company’s recent financial performance, strategy and portfolio offerings with an overarching theme of “Engage with the Emerging.” The event’s agenda was organized in line with NIIT Technologies’ recent restructuring around three core verticals ― travel and transportation (T&T), banking and financial services (BFS), and insurance ― and five service lines ― Intelligent Automation, Digital, Data and Analytics, Cloud, and Cybersecurity ― which the company brings together in matrixed offerings. Leaders from each of the three industry verticals and several of the service lines presented individual sessions on their areas, in some cases with clients. TBR also interacted one-on-one with executives throughout the event.