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Bcg technology advantage october 2014


BCG TECHNOLOGY ADVANTAGE • Why Community-Driven Companies • Going Back to School: An Will Always Win: An Interview Interview with Vanderbilt with Chris Anderson of 3D University's John Lutz • Orchestrating Value in IT • Enabling Big Data: Building the Capabilities That Really Matter • A Firmer Steer on Sourcing: • Making Big Data Work: Health What IT Can Learn from the Care Payers and Providers Automotive Industry The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep in sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com.


Technology continues to disrupt business models and in- dustries. The vast majority of companies see the need to Why Community-Driven act—to develop their digital agendas, to understand Companies Will Always Win: what big data means for them, and to explore, for exam- An Interview with Chris ple, the implications of 3D printing on their value chains. Anderson of 3D Robotics But while there is broad recognition of the importance of technology in today's business world, many organizations still struggle with the question of how to create value from technology. Cybersecurity Meets IT Risk Management: This issue of BCG Technology Advantage features insights that should provide A Corporate Immune and food for thought for companies that are looking for answers. It features a discussion of a subject that is increasingly critical to businesses: cybersecu-rity. As digitization's role in companies' operations continues to grow, vul- nerability to data theft, leakage of intellectual property, and the like is Enabling Big Data: growing apace. The article discusses how companies should respond. Building the Capabilities That Really Matter Big data, with its many potential opportunities and challenges, remains high on the priority list of many executives. We devote two articles to the topic. INDUSTRY SPOTLIGHT The first argues that, to master big data, businesses will have to put aside Making Big Data Work: much of what they know about working with data and adopt new mind- Health Care Payers and sets, technologies, and capabilities. The second article focuses on specific opportunities that big data presents to health care payers and providers. This issue also features two interviews. One is with Chris Anderson, CEO Going Back to School: of 3D Robotics (and the former editor in chief of Wired and author of An Interview with Vanderbilt two best-selling books on the digital economy), who discusses the role of University's John Lutz communities in driving innovation. The other is with John Lutz, vice chancellor for information technology at Vanderbilt University, who dis- cusses his move to academia after a lengthy career with IBM and the Orchestrating Value in IT transformation effort he has embarked on.
Outsourcing: Building Muscle in the Retained We also present two articles on how companies can improve the value they realize from IT outsourcing. The first discusses how companies can build the necessary capabilities in their retained IT organizations to make IT outsourcing successful. The second discusses lessons the IT sec- A Firmer Steer on Sourcing: tor can learn from carmakers, which delegate as much as 80 percent of What IT Can Learn from their production to suppliers and have had decades to perfect relation- the Automotive Industry ships and practices. I hope you enjoy these articles. Please send any feedback to TechnologyAdvantage@bcg.com.
Ralf DreischmeierGlobal Leader, Technology Advantage Practice The Boston Consulting Group 1


WHY COMMUNITY-DRIVEN COMPANIES WILL ALWAYS AN INTERVIEW WITH CHRIS ANDERSON OF 3D ROBOTICS Chris Anderson has a unique per- Chris, let's just dive straight in
that things get cheaper and easier spective on technology-driven in- and talk a little bit about disrup-
and the barriers to entry fall. As a novation. He was the editor in tive technologies—an issue that
result, you have new entrants: you chief of Wired for more than ten I think you are very familiar
have start-ups, entrepreneurs, and years, and he's written two New with since you've lived through
even amateurs entering markets. I York Times best-selling books on this quite a few times. What
came from the media industry, the digital economy—The Long Tail: would you tell business leaders
which was fundamentally disrupt- Why the Future of Business Is Selling in today's world about how can
ed by the Web since its barriers to Less of More and Free: How Today's they deal with the fundamental
entry are zero. Once that technolo- Smartest Businesses Profit by Giving changes that technology brings
gy trend puts powerful tools in the Something for Nothing. In 2009, he to their business?
hands of regular people, disrup- made the move from keen observ- tion is going to happen regardless er to hands-on player and maker Well, the easiest way to deal with of what you do.
when he cofounded 3D Robotics, a them is to embrace them. The dis- company that makes unmanned ruptive technologies tend to be Tell us a little bit about your
aerial vehicle (UAV) technology— driven more just by Moore's law— company and describe what you
that is, drones. His career change followed the release of his book Makers: The New Industrial Revolu-tion, which describes how technolo-gy is transforming manufacturing.
Chris Anderson cofounded 3D Robotics, a maker Chris sat down with Ralf Dreisch- of drones, in 2009 and has served as its CEO since meier, a senior partner and man- December 2012. Before assuming that role, he was aging director in BCG's London of- the editor-in-chief of Wired from 2001 to 2012 and fice and global leader of the firm's a writer and editor for the Economist from 1994 to Technology Advantage practice, to 2001; he has also held writing positions at Science discuss the role of communities in and Nature. Chris has published widely on business, driving innovation. The two also including two New York Times best-selling books on examine how companies that are the digital economy: The Long Tail: Why the Future of accustomed to operating in tradi- Business Is Selling Less of More and Free: How Today's Smartest Businesses Profit tional ways can harness this dis- by Giving Something for Nothing. He holds a bachelor of science degree in ruptive force. Edited excerpts of physics from George Washington University.
their conversation follow.
2 BCG Technology Advantage are doing differently to really
I guess one could argue that you
You're telling all kinds of people leverage and harness this tech-
started from scratch. You started who have been used to working in
nology disruption that's going on.
DIY Drones as a hobby, and
secret to gain competitive advan- therefore—although building a
tage to stop doing that, and to be- A year and a half ago, I was the community was, I'm sure, not
come transparent and open. It's editor of Wired, and now I run easy—there was a different start-
just really, really hard.
America's largest drone company, ing point. What do industry con-
which has, among other things, a glomerates do? What do large
I think we've seen some examples Tijuana drone factory. It's a very manufacturing companies do if
of companies that have built teams mysterious leap unless you look they clearly see this opportunity
and said, "Your job is to be open into it further. The reason a media and can see that it can create
and community. You're not repre- guy is able to run an aerospace value in a very different way?
senting the company. You're repre- company is that running an senting the community. Go out and aerospace company has gotten a There is a fundamental DNA path prosper." And that has won in lot easier. Our company was not dependency here. Are you primari- some instances—the so-called intended to be a company. It was ly a community or are you primari- skunk works model. In other cases, started as a hobby. Then it ly a company? The reason you companies decide that's just too became a community, something have to ask yourself this is because much. They can't open up the called DIY Drones. Then that sooner or later the two will come whole thing, but they create a lay- community started creating in conflict. We are primarily a er, a platform, as Apple did with its innovations, autopilot software, community. Every day, we make App Store. They're superclosed be- etc. And then that community started growing. People said, "Can we just buy the drones?" and an Our company was not intended to be a opportunity arose to make the things that the community was company. It was started as a hobby.
In the old days, building a factory decisions that disadvantage the low and superclosed above, but was a hard thing. You had to get company to bring advantage to the there's this one layer where any- funding and actually build a facto- community. We did this on the ad- body can do anything, as long as ry. These days, the technology of vice of one of our advisors, Matt it's approved.
manufacturing has gotten to the Mullenweg, the CEO of WordPress. point that it's so automated and He said, "Whenever this moment What is the leadership model in
it's so inexpensive that you can ei- comes up, always bet on the com- a community world?
ther outsource it through cloud munity, because that's the differ- manufacturing, or you can buy the ence between long-term thinking You know, that is the most import- necessary components from eBay, and short-term thinking." ant thing. Everyone thinks that which is what my partner, a communities are emergent and 19-year-old from Tijuana, did. He The company's interests are for self-organizing, and it's nothing of was able to basically buy pick-and- the short term. The community's the sort. The communities need place machines from eBay, down- interests are for the long term. If more leadership, not less. In a load the manual from Google, you get the community right, op- company—with traditional roles, teach himself how to use them, portunities will present themselves responsibilities, chain of com- hire people, and grow organically for the company. If you get the mand, and divisions—it's a lot like, with no funding, to the point that community wrong, the engine of "This is your job, you're paid a sal- we were making tens of thousands innovation will dissolve, and then ary, go do your job." And people of these things.
you won't have a company any- will show up every day because more. Stop running the company they have an obligation to the Then at that point, when we did the way you always have. Instead, company to do so.
raise venture capital, we were able you're telling the lawyers to stand to scale up to a really quite large op- down. You're telling the IP team to With communities, of course, it's eration, again with no traditional stand down. You're telling the li- nothing of the sort. We don't know training in aerospace whatsoever.
censing team to stand down. who these people are. They don't The Boston Consulting Group 3 have jobs. They all have different for companies, for incumbents,
How do you see this evolving?
motivations. None of them have a to create these layers of open in-
Are the community-driven com-
paycheck as a motivation. They all novation, these layers of com-
panies going to win?
have strong opinions, and they've come to the project for their own Community-driven companies will reasons—and, as a result, they I think one of the lessons we're always win. Basically, it's very diffi- want to pursue their own projects.
learning from the smartphone era cult to touch proprietary software is the importance of platforms. All anymore. When I use my phone, What you need in these cases is hardware these days has some my open-source operating system even stronger leadership, even software in it. Increasingly, every- is communicating with an open- clearer lines of roles and responsi- thing has sensors and is connected source Web server and open- bility, demarcations of projects. to the Internet; all these things are source databases going to open- What we end up doing is building talking to one another, and they source content-management a very traditional leadership struc- tend to use common standards. systems to open-source browsers. ture; although there are no employ- What you're finding is that what It's really hard, at least in the digi- ees, people have assignments. They used to be stand-alone hardware is tal world, to not see communi-have milestones. They have respon- now part of the network. The mo- ty-driven companies winning. In- sibilities. They essentially get hired ment something becomes part of a creasingly, the difference between or fired, brought in or not, based network, network effects kick in software and hardware is blurring. on their performance. They're eval- and there's an advantage in having Now you take this to your physical uated constantly, unlike employees a platform and in having a stan- devices. You take it to your home. who might get a performance re- dard that other people can work Increasingly, you take it to your view once a year. Developers in the with—or perhaps in joining an ex- car. My autonomous electric car is open-source community are getting isting standard. What we're finding not quite yet in my garage, but code reviews on a daily basis. If is that any company that tradition- when it is, I think it will look more they're found wanting, that be- ally shipped a product is now ship- like what I describe than my cur- comes very public. What we find is ping part of an ecosystem. Let's rent Toyota does.
that the more open the communi- say you're shipping consumer elec- ty, the more traditional and tronics to the home. These used to I think that it's very hard to find best-practice the leadership model be stand-alone things. Now they're industries in which communi-has to be. At the top of every one all connected things. The question ty-driven companies won't ulti- of these communities is a benevo- is, are you going to set the stan- lent dictator.
dard or are you going to embrace somebody else's standard? One Ralf Dreischmeier is a senior partner Let's come back to our incum-
way or another, being part of a and managing director in the London bents. Clearly there are exam-
platform allows a product to be- office of The Boston Consulting ples like Apple that will build
come a service—and that service Group. You may contact him by open-innovation-type layers
to become an ecosystem, and that e-mail at dreischmeier.ralf@bcg.com. with kind of a community struc-
ecosystem to become a communi- ture. If you translate that type of ty. That single product gets better
world into the world of manu-
every day because the software, facturing and industrial goods,
content, and data that come into it where do you see opportunities
4 BCG Technology Advantage—Q&A CYBERSECURITY MEETS IT A CORPORATE IMMUNE AND DEFENSE SYSTEM by Stefan A. Deutscher, Walter Bohmayr, William Yin, and Massimo Russo For most forms of life, the tage, denial-of-service attacks, and the right amount of defense, at a
threat of attack—from a the like is growing apace. The reasonable cost, and to do so with- predator, changing environmental damage such events can pose to a out significantly compromising the conditions, lower forms of life company's profits, reputation, organization's business practices or (such as bacteria and viruses), or brand, competitive position, and culture. Moreover, the company some other force—is ever present. even viability is potentially vast. must strike this balance while un- Indeed, for many of the natural One technology company, for ex- derstanding and managing the world's inhabitants, the question is ample, sustained material damage risks associated with security-relat- not if but rather when they will be to its business as a result of exten- ed compromises. In our experience, subject to some form of attack— sive hacking of its systems. Anoth- few companies have so far man- and how (or whether) they will er suffered considerable harm to aged to achieve this.
respond and emerge from the its reputation after a breach com- promised the security of its cus-tomers' personal data.
Businesses, of course, face an anal- As a rule, the companies that are ogous situation and must contend In the natural world, a strong im- most at risk of an attack and its with their own potential threats. mune and defense capability is es- consequences are those in which Most companies therefore make sential for survival (much as in hu- information drives a large portion risk identification, assessment, and man society, vaccines and health of value generation and passes mitigation a high priority. Yet there care systems are critical to protect- through many interconnected sys- is a specific type of threat today ing life). For today's companies, the tems. Industries with complex ap- for which many companies, in our ability to safeguard IT systems and plication and system landscapes view, are significantly underpre- information may be equally vital. are also at high risk, as are those pared: the risk associated with IT To properly arm themselves, com- that rely on complex or meshed and information management. As panies must understand the IT and networks. Companies in these cat- digitization's role in companies' information-related risks they face egories include banks, automotive operations continues to grow—ac- and construct sufficiently robust suppliers, and energy companies cording to Ben Hammersley, con- protection systems—and they must (which face a range of vulnerabili- tributing editor at Wired UK maga- do so with an eye toward con- ties along their entire value chain, zine, "Cyberspace is becoming the trolling costs and minimizing any including generation, distribution, dominant platform for life in the negative impact on the business. and infrastructure). 21st century"—companies' vulner- Of course, perfect security is be- ability to data theft, leakage of in- yond any company's reach. The Companies whose business is driv- tellectual property, corporate sabo- trick is to determine and provide en to a large degree by mobile The Boston Consulting Group 5 transactions are also at particular an elevated risk, with small and targets that have much to lose if risk. (In many Asian markets, for medium-size firms especially vul- their IT systems and information instance, mobile online transac- nerable. Many of these smaller are not sufficiently secure. (See tions now exceed the number of businesses lack the budget and The Trust Advantage: How to Win transactions conducted through skills necessary to properly safe- with Big Data, BCG Focus, Novem- the traditional desktop platform.) guard their online or point-of-sales ber 2013.) For such companies, rapidly grow- environments, for instance, making ing mobile transactions can trans- them popular targets. After all, the targets of hackers and late into swelling revenues—as data thieves are often not the sys- well as greater likelihood of a As value creation becomes increas- tems themselves but rather the in- breach and data theft. It can also ingly digitized across the corporate formation they store and process. make them increasingly attractive landscape, however, virtually all And the value of that information targets for hackers and the like as companies are becoming more vul- often lies in the eyes of the (illegit- these companies accumulate larg- nerable—and concerns are rising. imate) beholder. Strategic plans er and more varied types of cus- (See Exhibit 1.) Health care com- and information related to a com- panies, telecommunications busi- pany's market, production, and nesses, media companies, pub- pricing strategies are obviously In general, businesses that process lic-service organizations, and high-value assets that must be large amounts of customer and fi- industrial and consumer goods carefully protected. But other in- nancial information (credit card businesses rich in intellectual formation, which the company details, for example) likewise face property are all increasingly likely might deem far less critical, could Exhibit 1 Companies Are Increasingly Concerned About the Security of Their Digital Assets
As cyberattacks balloon.
+126% 2014
Acknowledged major cyberattacks .IT security is increasingly top of mind Media are reporting Investors are worrying +152% 2014
+83% 2014
Related articles in leading publications References in top broker research Regulators are investigating IT leaders are spending Mentions in key agency reports Worldwide spending on IT security ($billions) Sources: Factiva, "Major News and Business Publications" database; Thomson Financial, Investext database; databases of various agencies,
including Australian Securities and Investments Commission, European Securities and Markets Authority, German Federal Financial Supervisory Authority, UK Centre for the Protection of National Infrastructure, UK Financial Services Authority, UK Office of Communications, U.S. Department of Justice, U.S. Federal Communications Commission, U.S. Federal Trade Commission, and U.S. Securities and Exchange Commission; Gartner, Forecast: Information Security, Worldwide, 2012-2018, 1Q14 Update.
6 BCG Technology Advantage—Viewpoint well be of utmost interest to com- that have been created specifically number of lenses. Three of the petitors, criminals, nation-backed to focus on the problem. most important are technology, third parties, or the public. (A food cost, and the potential negative im- services company, for example, pact of risk and the measures tak- might consider its customer orders Optimizing IT and Infor- en to mitigate it.1 Getting the tech- to be of relatively little value to nology right entails, as a first step, third parties and might not go to A program intended to provide ef- understanding and quantifying the great lengths to protect that infor- fective security for a company's in- value of the risks that the company mation; but if, say, one of the com- formation and the technology used is trying to mitigate. Then the com- pany's customers happens to be a to store and process it must ad- pany should identify the technolo- law enforcement agency, an atypi- dress a number of critical ele- gies that are available for dealing cally large order on a given day ments, including the following: with the risks of greatest concern: could signal to an interested out- the mix of firewalls, intrusion de- sider that the agency is planning a • Confidentiality: the information tection and prevention systems, major operation.) is accessible only to those who and data leakage protection that have either a right or a need to will be most effective. The compa- And the circle of organizations at ny must also work to understand risk continues to widen. IT securi- the use of these technologies in ty is quickly becoming a critical • Integrity: the information is light of industry and national regu- concern for companies that use accurate, valid, and reliable.
lations—in some countries, for ex- computers not just to crunch num- ample, using technology to auto- bers but to monitor, move, and • Availability: information, matically identify and delete spam control critical equipment, ma- resources, and services are may violate constitutionally pro- chines, and production lines. For available when needed.
tected communications. such companies, compromised IT security of their cyberphysical sys- • Accountability: each (trans)action Cost is obviously another key con- tems can have severe operational can be attributed to an account- sideration. Given that a totally se- and health, safety, and environ- able individual.
cure environment is impossible to mental implications. A slightly create, a company must determine maladjusted welding robot, for ex- • Provenance: the origin and the base level of security it needs— ample, could do considerable history of each piece of infor- in other words, what is the maxi- damage to a car's stability—and mation (or each data item) are mum risk (reputational, operation- its manufacturer's reputation. The known and well defined.
al, or financial, including the cost of Stuxnet computer virus is another, remediation) that the company is still top-of-mind example of the Such a program must also provide willing to live with—and then potential risk at hand. So it is no clarity and reasonable assurance gauge the marginal value of any ad- surprise that such companies are regarding the reliability of controls ditional security to be gained focusing more and more on indus- and the validity of the assump- through further spending. The com- trial IT security. In short, the problem now spans A totally secure environment is impossible to businesses of all types. But it does not stop there. Governments are clearly vulnerable to IT and infor-mation security risk, and increasing numbers are taking defensive ac- tions underpinning the effort. The pany can then decide what level of tions. The UK's Centre for the Pro- priority associated with each of spending is optimal given its busi- tection of National Infrastructure, these elements will vary depend- ness strategy, tolerance for brand the U.S. National Cybersecurity and ing on the type of company and and operational risk, and other con- Communications Integration Cen- siderations. While this sounds like a ter, the Australian Signals Director- reasonably straightforward assess- ate, and Germany's National Cyber To ensure that their security cam- ment, it is not an easy one, and we Response Centre and National Cy- paign is sufficiently robust, compa- find that most companies labor ber Security Council are entities nies must view the effort through a with it. The Boston Consulting Group 7 Finally, it is essential to take into the company does not allow visi- communications also has trade- account the potential negative im- tors from satellite offices to bring offs: the company's open culture is pact on the business—including its their company-issued notebook maintained but the potential for culture, flexibility, ability to inno- computers into office headquar- leakage grows, necessitating invest- vate, and speed of innovation—of ters—instead, visitors are given ment in monitoring technology, a both unmanaged risk and any "empty" computers upon arrival. fast detect-and-response capability, risk-mitigation measures that are For employees, this makes the exe- and related staff. put in place. As with cost, this is cution of standard work tasks, such ultimately a question of balance, as accessing presentations and an- These examples illustrate the types and companies will have to identi- swering e-mails, very challenging. of decisions that companies will in- fy their particular sweet spot. We Returning to the metaphor of the creasingly have to make. They also have seen a number of companies human immune system, this is the hint at the many complexities com- struggle with this, including sever- equivalent of an allergic or even an panies will face as they attempt to al resource and engineering com- autoimmune reaction, in which the ensure security across their ecosys- tems—that is, the universe of orga-nizations that they deal with in the course of operations. Note, too, that Protection against leakage of intellectual pro- the trade-offs involved in these de- perty is a growing concern for many companies. cisions are likely to be very different for business IT (where confidentiali-ty is often paramount) and industri- panies that operate international- system attacks perfectly harmless al IT (where availability is often the ly. One of them, in an effort to external or internal elements, com- minimize the risk of data theft and promising the body's overall ability espionage, does not allow its em- to function properly.
Companies should aim, of course, ployees to bring their laptop com- to "do no harm" in their efforts to puters and mobile devices to coun- Protection against leakage of intel- balance the efficacy of security tries it deems high risk. The lectual property is a particular and measures against established logistical challenges that this poli- rapidly growing concern for many norms. In cases where security cy can pose to employees are con- companies and can force many dif- measures do impinge on corporate siderable. What, for example, ficult decisions. Should a company culture and established ways of op- should an employee do when his worried about leakage through erating, companies should ensure or her itinerary for a regional, mul- employees' outbound e-mails, for that the necessary changes are ac- ticountry business trip calls for a example, block all such transmis- visit to a high-risk country at the sions or remove all attachments? midpoint? Leave all this equip- Doing so would solve the immedi- ment home, at the expense of effi- ate problem but could introduce Treating IT Security as a ciency throughout the trip? Or fol- new ones—for example, the risk of Component of Overall low the somewhat questionable losing business when a contract is advice of the IT department and stripped from an e-mail and never There is no ex-ante, readily calcula- take two laptops on the trip but reaches its intended recipient. This ble return on investment for IT se- leave the one containing sensitive approach can also reduce efficien- curity—like homeowner's insur- information at the hotel in the cy and potentially spur employees ance or a car with extra air bags, it high-risk location? to find alternative means of com- is money spent today to mitigate munication that the company can- the risk and potential cost and im- Similarly, a large technology com- not monitor. (Indeed, we have seen pact of events that may never ma- pany takes a very rigorous ap- employees of larger companies re- terialize. Hence, IT security should proach to elevating its IT and infor- sorting to external "freemail" ac- be viewed as a necessary cost of mation security. It does not allow counts to get their work done after doing business. It should also be its employees to store company trying, unsuccessfully, to change viewed as a component of the com- data anywhere except on compa- company e-mail policies that they pany's overall IT risk-management ny-issued computers, and it does considered impractical.) Taking program, which, in turn, should be not enable wireless local-access the opposite approach of allowing considered an integral part of over- networks within its offices. Further, (but monitoring) all outbound all corporate risk management. 8 BCG Technology Advantage—Viewpoint (See Exhibit 2.) Often, however, we stalls for a year because the health care company face if find that companies do neither. underlying IT systems do not hackers make its customers' perform as required? records public? What is the risk To put things in context, there are if human resources data stored six broad categories of IT risk: • The Risk Related to Outsourced IT in the cloud ends up in a Activities. What are the risks to a remote geographic location? • The Risk Related to IT Security in company if a vendor's data the Narrowest Sense. For center is flooded or if the owner Organizations should strive to de- example, what are the risks of of the source code for one of its velop a unified, cohesive plan for an inappropriate or poorly key applications goes out of addressing these risks. The first enforced password policy or business? What are the risks if step is to identify the specific risks out-of-date software and some of the company's hardware that the company faces in each of firmware patches? or software is compromised—or the six categories. The second step if one of a vendor's employees is to determine which of the four • The Risk Related to IT Operations accidentally (or deliberately) strategies for dealing with risk— and Business Continuity. What publishes the company's avoidance, transfer, mitigation, or are the risks to a bank, for customer records on the Inter- absorption—to apply to each spe- example, if its core banking net? Service-level contracts cific risk and risk category and and payment systems do not cannot mitigate such risks.
how best to handle any remaining perform as expected, become risks (for example, by buying insur- unavailable, or simply break • The Risk to a Company's Reputa- ance against the financial impact down and remain unreliable tion. What is the risk to the of a given primary or residual for days or even weeks? reputation of a bank or tele- risk). Then the company must de- communications company from cide how best to incorporate those • The Risk Related to IT Projects a major, IT-driven gaffe in strategies into its way of working.
and Investments. What risks customers' billing statements does a company face if an IT or from repeated website project undertaken to meet a Tipping the Scales in Your regulatory deadline is not delivered on time or if a project • The Risk to Data Protection and In our work on IT and information designed to seize a new market Privacy.2 What risks does a security with companies in a wide Exhibit 2 Cybersecurity Should Be Viewed as a Component of Overall IT Risk Management
Approach to information
• What do we have? • What do we need to have? • What do we no longer need to have? • What value does it have to us? • How do we categorize and classify it? Assessing risk and stakes
and security
• How do we store and archive it? • What is the business value to others of our information? • Who owns and who inherits it? • What is the business impact of • What can be purged? information leaks? • What is the business impact of the unavailability of our information to legitimate users? • What are the other consequences IT delivery
of leaks for financial performance and security
• How likely is risk to materialize? Approach to information processing
• How should we handle risk (avoid, mitigate, transfer, accept)? • Where and how do we process data? • How should we treat accepted • Where and how do we store data? risk (ignore, budget, insure)? • How do we manage data? • Who owns risk (formally, • How do we transmit data? • What metainformation do we keep? Source: BCG analysis.
The Boston Consulting Group 9 range of industries, including bank- staff, and the company's gaps and to design appropriate ing, insurance, defense, aerospace, reputation; and mitigation responses. (See "Rethinking industrial goods, energy, raw mate- efforts. Think about which risks Scenarios: What a Difference a rials, telecommunications, and lo- might be worth absorbing Day Makes," BCG Perspectives, gistics, we have identified a num- rather than mitigating. October 2010.) Tabletop ber of other actions that executives can take to improve their compa- • Make sure that IT personnel exercises are a good way to get nies' chances of success. They in- focused on IT and information started; advanced companies clude the following: security do not act as naysay- don't stop there, however, but ers. Rather, they should strive rather test in vivo. Some • Take a systemic and holistic, to be viewed as advisors to the Internet giants, for example, rather than a compo- business who—in the long have departments tasked with nent-based, view of your IT run—by ensuring that projects bringing down their service in systems and information and meet all security requirements, order to trigger a continually the related risks. If your help the company protect updated immune response, and company is a bank, for exam- critical information and many of our clients commission ple, instead of focusing on systems in an economically "ethical hacking" (also known database, network, or interac- sensible way and, in the short as penetration testing) exercis- tive voice response (IVR) run, help projects go through es, much as car manufacturers uptime, look at the end-to-end without any cost to innovation crash test their vehicles.
availability of your client-facing online banking service (and • Consider having your compa- consider fixing an IVR outage • Acknowledge the fact that, ny's IT risk-management by routing calls to your call despite your best efforts, 100 capability assessed using a percent security is not possible pragmatic, outcome-focused and a security breach of some framework, such as the Innova- • Push to ensure that IT security type is likely inevitable. Then, tion Value Institute's IT and risk management processes prepare accordingly. Test Capability Maturity Frame- and principles are incorporated systems, and their ability to work. (See "Managing IT for into the company's corporate recover, regularly; identify Business Value: The New Gold processes by design rather than vulnerabilities; design emer- Standard," BCG article, Septem- as an afterthought or bolt-on. gency operating procedures Make sure, for example, that IT and response plans and test security becomes an integral them. Ask yourself some tough part of your enterprise-architec- questions, such as: Can we take Immune systems have evolved
ture, coding, testing, and the company offline in a over millions of years and offer contracting practices, and that controlled manner if neces- insights into what an effective cor- compliance with the company's sary? Are we really offline porate cybersecurity program IT-security policies is part of when we take, say, Europe should look like. For example, the project (and the budget offline, or is there some back they identify what is "self" and approval or budget release) channel to our Asia operations what is not, recognizing an intrud- process from the start.
(for example, a disaster-recov- er, determining how to disable it, ery failover network link) that and continuing to learn as the in- • Again, ask yourself how much no one has thought about in truder evolves. They bring the risk your business can afford this context? Are our communi- right resources (for example, an rather than how much security cations and PR departments army of T cells) to the battle. Un- can be gained for a given prepared to manage the doubtedly, there is much more to budget. Attempt to quantify the necessary internal and external learn from these systems—and, financial impact of different communication efforts in the given the increasing risk that com- types of risk and classes of event of a breach? panies face, an ever-greater urgen- incident, including costs related to business downtime; recovery • Use scenario planning and and remediation efforts; war-gaming to help identify No immune system (or cybersecu- potential damage to customers, security threats and process rity effort) is 100 percent effective, 10 BCG Technology Advantage—Viewpoint however. While there are ways to William Yin is a partner and manag- tip the odds in your favor, most of 1. This is often the order in which IT ing director in BCG's Hong Kong of- us will come down with a sore departments address the challenge, even though the more prudent approach is fice. You may contact him by e-mail throat eventually, no matter how generally to focus first on risk itself.
cautious we are. Whether this 2. Strictly speaking, this is part of the risk causes only minor discomfort or related to IT security, but it has received so Massimo Russo is a senior partner much attention lately that it is worth a has more severe consequences de- separate mention.
and managing director in the firm's pends on whether you caught a Boston office. You man contact him cold or a full-blown flu—as well as by e-mail at russo.massimo@bcg.com. on environmental conditions that Stefan A. Deutscher is a principal in you can influence, your degree of the Berlin office of The Boston Con- preparedness, the speed of your sulting Group. You may contact him by reaction, and the depth of your de- e-mail at deutscher.stefan@bcg.com. fenses. To understand where you stand, ask your physician for a Walter Bohmayr is a senior partner health check. And consider having and managing director in the firm's your company's IT security Vienna office. You may contact him by checked at the same time. e-mail at bohmayr.walter@bcg.com. The Boston Consulting Group 11 ENABLING BIG DATA BUILDING THE CAPABILITIES THAT REALLY MATTERby Rashi Agarwal, Elias Baltassis, Jon Brock, and James Platt It's no secret that big data offers
In engagements with clients of The Boston enormous potential for businesses. Every Consulting Group, we've found it helpful to C-suite on the planet understands the break down big data into three core compo- promise. Less understood—much less put nents: data usage, the data engine, and the into practice—are the steps that companies data ecosystem. For each of these areas, two must take in order to realize that potential. key capabilities have proved essential. (See For all their justifiable enthusiasm about big Exhibit 1.) By developing the resulting six ca- data, too many businesses risk leaving its vast pabilities, today's businesses can put in place potential on the table—or, worse, ceding it to a solid framework for enabling—and suc- ceeding with—big data: Big data has brought game-changing shifts to • Data Usage: Identifying Opportunities and the way data is acquired, analyzed, stored, and Building Trust. Companies must create a used. Solutions can be more flexible, more culture that encourages experimentation scalable, and more cost-effective than ever be- and supports a data-driven ideation fore. Instead of building one-off systems de- process. They need to focus on trust, signed to address specific problems for specif- too—not just building it with consumers ic business units, companies can create a but wielding it as a competitive weapon. common platform leveraged in different ways Businesses that use data in transparent by different parts of the business. And all and responsible ways will ultimately have kinds of data—structured and unstructured, more access to more information than internal and external—can be incorporated.
businesses that don't.
Yet big data also requires a great deal of • The Data Engine: Laying the Technical change. Businesses will have to rethink how Foundation and Shaping the Organization. they access and safeguard information, how Technical platforms that are fast, scalable, they interact with consumers holding vital and flexible enough to handle different data, how they leverage new skills and types of applications are critical. So, too, technologies. They'll have to embrace new are the skill sets required to build and partnerships, new organization structures, manage them. In general, these new and even new mind-sets. For many platforms will prove remarkably cost-ef- companies, the challenge of big data will fective, using commodity hardware and seem as outsized as the payoff. But it doesn't leveraging cloud-based and open-source technologies. But their all-purpose nature 12 BCG Technology Advantage Exhibit 1 Six Capabilities Form a Foundation for Enabling Big Data
Build a culture of innovation Establish trust among consumers to enable broad use of their data.
Leverage flexible, scalable, Develop capabilities to implement and efficient data systems.
and leverage relevant data applications.
Identify strategic partners that can Create an open culture to support help unlock new economic opportunities.
partnering and the sharing of data.
Source: BCG analysis.
means that they will often be located 2013.) But the most innovative—and poten- outside individual business units. It's tially most lucrative—opportunities will like- crucial, therefore, to link them back to ly not be readily apparent. Businesses need those businesses and their goals, priori- to create an environment in which novel ap- ties, and expertise. Companies will also plications—ideas that truly differentiate a need to put the insights they gain from big company from its competitors—can be quick-data to use—embedding them in opera- ly identified and developed. A culture where tional processes, in or near real time.
experimentation and outside-the-box solu-tions are encouraged is crucial. So, too, is a • The Data Ecosystem: Participating in a wide range of talents, from data science skills Big-Data Ecosystem and Making Relation- to business expertise. While it may seem a ships Work. Big data is creating opportuni- formidable challenge, creating an effective ties that are often outside a company's data-driven ideation process is not quite as traditional business or markets. Partner- difficult as companies may think.
ships will be increasingly necessary to obtain required data, expertise, capabili- Encourage Nontraditional Ideas
ties, or customers. Businesses must be The exploration of new data applications able to identify the right relationships— should be encouraged at all levels of the or- and successfully maintain them.
ganization, with employees given time and resources to pursue their ideas. Experimenta- In a world where information moves fast, tion should not be boundless: it needs to start businesses that are quick to see, and pursue, with, and center on, a business problem. At the new ways to work with data are the ones one large automobile manufacturer, for ex- that will get ahead and stay ahead. ample, a special group was established to de-velop innovative uses for the data now rou- tinely collected and transmitted by in-car sensors. Such an initiative sends a clear mes- Big data will drive value in a variety of ways. sage to employees that new, creative solu- (See "Opportunity Unlocked: Big Data's Five tions aren't just welcome, they are a company Routes to Value," BCG article, September The Boston Consulting Group 13 Foster Collaboration Between Data
rewarded with five to ten times more access and Business Experts
in most countries. (See The Trust Advantage: The wide range of expertise needed to identi- How to Win with Big Data, BCG Focus, Novem- fy and develop applications—in data science and analytics, new technologies, and busi-ness—will rarely be possessed by a single in- Clearly Communicate How Data Is Used
dividual. Indeed, efforts will often require the Don't get bogged down in boilerplate. The skills of many individuals, located across the language explaining how personal data is company. This makes it vital to create strong used should be clear and concise, easy to fol- links between professionals who likely have low, and even lively in tone. It should be visi- very different backgrounds and very little ex- ble, too—prominently placed, not buried at perience working with one another. Frequent the bottom of a Web page. It is also import-dialogue and ongoing collaboration will help ant to articulate what will not be done with these interdisciplinary teams zero in on and the data (such as sharing it with partners or prioritize the most relevant business prob- social media sites).
lems and opportunities. Formal processes can spur this kind of collaboration, as can a more informal "push from the top." Short cycles, iterative devel- Adopt A "Test and Learn" Approach
opment, and frequent pilots Speed and agility are crucial in creating should be the rule.
big-data applications. Short cycles, iterative development, and frequent pilots should be the rule. Risk taking should be encouraged; mistakes, accepted. Big data is still largely un- Provide Choices and Control
charted ground and even disappointment— Avoid a one-size-fits-all approach to permis- or at least, carefully analyzed disappoint- sions. Instead of a broad opt-in choice that al- ment—can be a good teacher.
lows all uses or a broad opt-out choice that prohibits everything, let individuals choose the specific uses they will allow or prohibit. This gives them greater control over how Access to information—much of it personal in their data is used—which can tip the scales nature—is essential to extracting value from when they are deciding whether or not to big-data applications. Yet individuals are in- share information.
creasingly concerned about how, exactly, their information will be used. As part of its 2013 Articulate the Benefits of the Data Use
Global Consumer Sentiment Survey, BCG The success of sites like Facebook and Google polled nearly 10,000 consumers, from both demonstrates that users will often share per- developed and developing countries, on trust. sonal data if they receive something valuable Just 7 percent of respondents said they were in return. By articulating what there is to comfortable with their data being used be- gain—enhanced features, improved products, yond the purpose for which it was gathered.
useful advertising, and so on—businesses make it clear that this is a two-way street. By By using data responsibly, and being clear sharing their information, individuals will and transparent about those uses, businesses reap compelling benefits.
can go a long way toward reducing consumer worries and skepticism. And they can gain an important competitive edge. The companies Laying the Technical Foundation that do the best job instilling trust will have Businesses and data go way back—but that the most success acquiring and using sensi- history can often work against companies. tive data. They'll get the access that less open Their experience tells them that the IT and less forthcoming companies won't. BCG infrastructure must be massive, rigid, and calls this the "trust advantage" and estimates expensive; made up of complex systems that businesses that manage trust well will be customized for a particular task; and fueled 14 BCG Technology Advantage—Focus by painstakingly cleansed data. Yet big data lay today support the data applications of to- is, in fact, a very different experience, with morrow? Flexibility will be crucial, not just different technologies, requirements, and for speed and efficiency but also for competi- possibilities. If businesses are to fully exploit tive advantage. To gain and keep an edge, the opportunities, quickly and cost-effectively, businesses will need to rapidly deploy new they need to understand how IT has changed. data uses without rapidly running up costs.
And they need to develop their own data platforms accordingly.
In our case work, we've found the following guidance helpful for building the optimal The traditional data infrastructure, which re- platform for big data.
lies on centralized warehouses of highly structured data, is no longer the only option. Use a Scalable, Multipurpose Data
(See Exhibit 2.) Many of the new tools (such as those based on Apache Hadoop, an open- Implementing an enterprise-wide platform source framework that lets applications lever- helps avoid the "data anarchy" problem, age distributed data on commodity hardware) where different business units rely on dupli-are more flexible and far less expensive. Ana- cated or conflicting data sources. When ev- lytical IT can now often be quickly imple- eryone leverages a single "reference source," mented, too. In client engagements, BCG has data consistency is maintained. This platform helped deploy technologies ranging from Ha- should be built from easily scalable technolo- doop to Amazon Web Services to SAP HANA gies, which will make it easier to implement in less than eight weeks. future applications. Here, distributed data tools like Hadoop have an edge over more These new data tools hold extraordinary po- traditional SQL-based tools, because they can tential, but they also raise questions: What work with information in its natural, unstruc- happens to existing investments? How are tured form, wherever it may reside.
the insights gleaned through cutting-edge data analysis put into operation? And per- Don't Scrap Existing Investments—Yet
haps the most important question of all: How While SQL technologies may not offer as can the technical foundation that companies much flexibility as newer tools, they are ma- Exhibit 2 Four Core Big-Data Technologies Offer Different Benefits and Possibilities
• Traditional structured storage platform for systems-of-record data • Relies on a central repository of • Leverages distributed, commodity hardware and open-source soware • Can be implemented internally or externally in the cloud • Extremely high throughput of data • Analyzes data streams in real time • Automatically triggers actions and • Extremely fast processing of data • Low latency if processed internally • Distributed in-memory analytics starting to emerge Source: BCG analysis.
The Boston Consulting Group 15 ture and work well with core business data. Of course, business units need to feel com- So companies that have already invested in fortable with these new dynamics. One ap- these systems should consider a complemen- proach we've found effective is to focus ini- tary approach: keeping their existing systems, tially on specific "pain points." By targeting a for now, but incorporating newer tools where key problem and teaming up to resolve it, appropriate—for example, in leveraging the data specialists and business experts not only unstructured data that is increasingly avail- learn to work together effectively but develop able to them. This approach also lets them the links and trust necessary to create the develop expertise with the new tools, easing most relevant applications. It makes big data a transition to distributed technologies—a "real" for the business unit, and it gets their transition that we expect many companies to attention and their buy-in.
make within the next five years.
Tweak Operational Processes to
Businesses may find that the Leverage Insights Quickly
What sometimes gets lost in the discussion of skills required for big-data
big data is the fact that the technical founda- projects are in short supply.
tion has two parts: the technology that sup-ports the analytics and the technology that puts the results to use. That second part is crucial: although big data can return all man- As companies develop their new datacentric ner of valuable insights, those insights won't organization, they should prioritize three es- mean much if they're not leveraged in a time- sential activities.
ly fashion—increasingly, in real time or near real time. For example, an online retailer Create a Big-Data Center of
might come up with the optimal individual- ized offer for a customer visiting its website, Businesses are likely to find that the skills but to make the most of that insight, it needs required for big-data projects—from to convey the offer while that customer is still designing the analytics algorithms to running on the site. For many companies, "operation- the technical platform—are in short supply. A alizing" big data will mean implementing center of excellence enables expertise to be new and unfamiliar technologies. But the built up quickly, as a core of talent is exposed companies that can create the necessary pro- to a variety of problems and solutions. Just as cesses will be the ones that put their analyt- important, it promotes the cross-fertilization ics to the best and most profitable use.
of ideas. Best practices spread within the organization. Successful approaches are Shaping the Organization replicated by other parts of the company. The risk of duplicative efforts—and the data The most successful big-data platforms will anarchy that too often comes with them—is leverage not only new technologies but also greatly reduced.
new organization structures. Centralizing key resources (data scientists and analysts, for ex- Obtain Senior-Level Sponsorship
ample) in a stand-alone unit will help busi- Big data needs a champion, a dynamic senior nesses attract and retain the talent they need, executive with a reputation for getting things develop and manage applications efficiently, done. Whether this is a newly appointed posi- and spur innovation but not duplication. (See tion (perhaps a chief data officer) or is simply "Two-Speed IT: A Linchpin for Success in a the CIO taking the lead, the role is the same: Digitized World," BCG article, August 2012.) to demonstrate a clear, visible commitment to Yet at the same time, companies need to making big data work and ensuring that all avoid ivory towers. New data-science and da- the capabilities and accountabilities are in ta-mining capabilities must be linked back to, place. This individual will also work to ensure and aligned with, existing businesses. That proper data governance and management. keeps the focus on valuable, real-world use Champions within individual business units cases—not flights of fancy.
are important as well, because they strength- 16 BCG Technology Advantage—Focus en the link back to the business. This is an- sess information of great value to others, other reason we recommend starting with spurring new commerce and new revenue top-of-mind pain points. Doing so helps to streams. Technology providers will play an in- gain the confidence and support of a unit's creasingly visible and influential role, too, giv- en that they will create and control the tech-nical standards. All of these trends make Attract and Retain Key Skills
alliances more a given than an option.
New skill sets will likely be required, and the professionals possessing them may be used to Yet while going it alone may mean leaving working in nontraditional environments. It's opportunities—and value—on the table, part- not just an issue of wearing suits or jeans. nering with others raises more questions that They may have completely different expecta- need to be answered: Should a company be a tions about how the job gets done. Technolo- data giver or a data taker? How can it add gy experts coming from small, entrepreneur- value to nascent data applications in other in- ial start-ups, for instance, may be used to dustries? What external assets and expertise rapid development cycles and working with does it need in order to develop its own ap- great autonomy. Transplanting them into a plications? Identifying where a business fits more bureaucratic, process-driven environ- within a data ecosystem is rarely straightfor- ment, where things move more slowly and ward. But we've found that by taking three there are layers of oversight, can quickly deci- steps, companies will position themselves to mate their morale and effectiveness. home in on and successfully leverage the right data alliances.
Identifying where a business Understand the Economic
fits within a data ecosystem Opportunity and Where Your Company
can Play a Role

is rarely straightforward.
Take a careful look at existing products and services: What data do they generate? What additional data could enhance them? How can they drive new or improved offerings in Avoiding this cultural mismatch isn't easy: other sectors? Insurers, for example, have you don't want to ignore it, but at the same found that information collected by time, you don't want to give your new em- automobile manufacturers, through in-car ployees privileges your veterans don't get devices and sensors, lets them link premiums (something that can create hard feelings and to actual driving habits. The result: a new hinder collaboration). A good starting point is model for calculating rates, one that many to have an ongoing dialogue with the experts drivers (at least the good ones) will prefer, you bring in, making sure they are given chal- given that safe driving will lower insurance lenging problems and working with them to costs. Business need to think broadly and provide the tools they need to solve them. identify where in the "stack" they might add This helps not only to meet expectations but also to manage them.
Identify Strategic Partners
Participating in a Big-Data In a successful data alliance, partners provide complementary resources and expertise: the data, capabilities, and assets that, combined, Big data is transforming not just how compa- make it possible to exploit new business op- nies do business but also the types of people portunities. Beyond the buyers and sellers of and organizations with which they do it. (See data are analytics services providers, which "The Age of Digital Ecosystems: Thriving in a can comb a company's data for insight, and World of Big Data," BCG article, July 2013.) "data enablers," which are companies that New data applications will often blur indus- provide guidance and solutions to help a try boundaries, creating a need for partner- business get its big-data initiatives off the ships. Some companies, meanwhile, will pos- ground. Companies need to examine their The Boston Consulting Group 17 own goals and requirements and identify the Ensure Seamless Integration with the
players that can help to meet them.
Technology
Ecosystem partners will need to share data
Start Small and Scale Quickly
quickly and easily. A company, then, must of- Whether a company is working alone or with ten enable third-party access to its data plat- partners, an iterative, exploratory approach forms. To reduce the technical challenges of to big data beats a detailed three-year strate- providing these links—and the time that is gy. Take small, quick steps to test demand, needed to resolve those challenges—interfaces then learn from results—and mistakes—to should be easy to change and test. To allay adapt offerings. When something works, rap- concerns about security and confidentiality, ac- idly accelerate its deployment.
cess should be tailored to the need, providing neither more nor less than what is necessary.
Making Relationships WorkThe partnerships that big data sparks must To master big data, businesses will have
be managed and maintained. Contract terms to put aside much of what they know should be constructed so that everyone can about working with data. They'll have to prosper—and has an incentive to exchange adopt new mind-sets, new technologies, and complementary information. Technical plat- new capabilities. And they'll have to do so forms should allow partners' data to be quickly, because big data doesn't just present quickly incorporated and leveraged. The goal opportunities. It also presents risks. Tradi- isn't just success but ongoing success, continu- tional companies may fast find themselves ally improving and expanding upon joint ef- vulnerable to new players and market en- forts. The following steps can help ensure trants that excel at these capabilities. Many that relationships stay the course.
of the changes companies must invest in will be unfamiliar—they may, in fact, be radical Build Capabilities to Partner
departures from how companies are accus- Most organizations are used to creating tomed to operating. It's a tall order, to be things on their own and enjoying full control sure. But by building the six capabilities out- of their initiatives. Data ecosystems change lined above, companies can realize the full that, with multiple companies working to- potential of big data—faster than they might gether to bring new products and services to think, and faster than the competition.
customers. This requires much stronger man-agement skills, but it also means that incen- Rashi Agarwal is a principal in the New York tives should be aligned among partners.
office of The Boston Consulting Group. You may contact her by e-mail at agarwal.rashi@bcg.com. Create Mutually Beneficial Contract
Terms

Elias Baltassis is a director in the firm's Paris Impose restrictive contract terms on partners office. You may contact him by e-mail at and some valuable allies may walk. But give up too much—to gain a foothold, perhaps, in a new market—and risk needlessly shrinking Jon Brock is an associate director in BCG's Lon- the potential profit. Understanding the eco- don office. You may contact him by e-mail at nomic opportunities, and where each partner brock.jon@bcg.com.
adds value, can keep contracts fair and all sides satisfied. Implementing performance James Platt is a former partner and managing KPIs can then track which partners are or are director in the firm's London office. not carrying their weight.
18 BCG Technology Advantage—Focus INDUSTRY SPOTLIGHT MAKING BIG DATA WORK HEALTH CARE PAYERS AND PROVIDERS by Karalee Close, Stefan Larsson, John Luijs, Neil Soderlund, and Anna Vichniakova Health care payers and providers Big data and advanced analytics, used intelli-
have access to more data than the vast gently, provide an opportunity to bring together majority of organizations. So why hasn't diverse data sources—including patient records, more been done with that data to slow the clinical trials, insurance claims, government re- rapid climb in health care spending and cords, registries, wearable devices, and even so- begin competing on outcomes rather than cial media—to understand health in a truly val- ue-oriented way. Payers and providers—and, by extension, all health-care consumers—can now The answer is that, despite the promise of discern the extent to which each intervention, electronic medical records, much of the data as well as its associated expenditures, contrib- that reveals what works in health care has utes to better health.
been inadequate and unusable—or is missing altogether. What's more, organizational silos have made it difficult to link together pieces Three High-Potential of information to show health-related pat- terns for any given patient group. Data can transform health care in seemingly endless ways. But are these future scenarios Policy makers and industry leaders in most countries are trying to shift to newer reimbursement and delivery models, such Most areas of health care are in the early as payment by results, episode-based stages of using big data and advanced analyt- payment, and value- and population-based ics; many more sources of data and ways to health care. These models demand much combine and analyze information will more detailed insights into what drives emerge. Still, based on our work with payers outcomes than previous ones did. They also and providers across many countries, we see require significantly different data sources in three particular opportunities among many order to tease out the impact of a current that offer high potential right now. Exploiting treatment and its associated expenditures them could measurably improve outcomes as from other variables, such as treatments well as generate significant additional reve- already performed, genetics, risk factors, nues and profits.
patient behaviors, and the environment. (See Competing on Outcomes: Winning Optimizing Care for Patient Populations. Strategies for Value-Based Health Care, BCG Governments and other integrated payers Focus, January 2014.) and providers often lack a comprehensive The Boston Consulting Group 19 view of complex usage, needs, and outcomes gregating and interpreting it had discouraged trends at the local, regional, or national level. earlier efforts. This is particularly true for chronic diseases, which consume most health-care resources in The health department developed a sev-the developed world. en-step model of the natural progression of chronic diseases in order to organize the To achieve the greatest improvement in out- more than 400 health-related measures gath- comes, payers and providers need to proac- ered. This was done at the city and neighbor- tively allocate resources before patients seek hood levels to pinpoint specific needs while care and then track their impact. But to do still maintaining individual privacy. The de- this well, data needs to be comprehensively partment compiled a picture of health needs, aggregated and analyzed at the level of large service usage, and outcomes across 200 ar- populations. The data can be used to target eas—each with a population of around services more directly to the area of need, re- 25,000—to identify areas of over- and under- duce waste, and redirect spending to effective supply and to assess the effectiveness of the interventions. health services they received. The state learned, for example, that while pri- Payers and providers need to mary-care providers are quite effective in proactively allocate resources managing chronic diseases in more affluent communities, they are relatively ineffective in before patients seek care.
low-income communities, resulting in high costs, hospitalization rates, and mortality lev-els in those areas. The results of the analysis highlighted a number of neighborhoods with Consider the case of the department of particularly poor chronic-disease outcomes, health for the state of Victoria in Australia, despite adequate access to and use of ser- which undertook a major effort to analyze vices, suggesting opportunities for quality im- health care spending on citizens. Federal and provements. (See Exhibit 1.) state governments, along with private insur-ers, each pay for about one-third of third-par- The analysis looked at the rate of hospitaliza- ty health-care spending for every individual tions for ambulatory-care-sensitive condi- in Australia. But they have little visibility— tions—which include illnesses such as diabe- and no control over—one another's expendi- tes, asthma, and chronic obstructive tures, which allows for the possibility of du- pulmonary disease—because hospitalization plication and gaps in services. With serves as an important barometer of patient overlapping responsibilities, governments access to primary care in these cases. The de- and insurers cannot link together the need partment discovered that even a modest re- for services, the level of care being delivered, duction in avoidable hospital admissions and the outcomes of those services. Not sur- through better primary care would save prisingly, no payer or provider is prepared to health care payers an estimated A$60 million be accountable for outcomes, and data for per year. In addition, it found that rates of comparing outcomes among citizens is not screening colonoscopy in areas with high lev- els of private insurance were six to seven times the expected rates given the demo- The health department wanted to create an graphics, and outcomes were no better than integrated picture of health care across the in areas with low rates of screening, suggest- state of Victoria by combining data about ing a significant opportunity to redirect re- health needs from population surveys with sources and improve patients' quality of life information about services paid for by each without adversely affecting population of the responsible payers and with outcomes data from patient, population, and clinical sources. Even though this data had been col- Reducing the Cost of Care. Payers, whether lected for some time, the complexities of ag- governments or private insurers, face a huge 20 BCG Technology Advantage—Industry spotlight Exhibit 1 A Big-Data Analysis Revealed Large Geographic Variations in Avoid-
able Admissions in Victoria, Australia
Unexplained variation in avoidable admissions
Difference from expected rate of avoidable admissions per year (percentage points) Expected rate of avoidable admissions per year (%)1 Northern and Western Metr Barwon South Western 1,000 chronic hospitalizations for ambulatory-care-sensitive conditions Sources: Victorian Admitted Episodes Dataset 2007–2011; integrated Victoria Department of Health dataset; BCG analysis.
1Expected rate after accounting for demographics, risk, morbidity, and utilization of ambulatory care.
hurdle in bending the cost curve downward health-care procurement, the company has to slow the pace of growth in health care identified significant potential for improving expenses. One area ripe for improvement lies quality while producing estimated savings of in reducing the cost of care. Since the cost of more than €500 million by 2016. One target care generally accounts for 90 to 95 percent was prescription drugs, which accounted for of total costs for an efficient payer, every 1 about 15 percent of costs. The company fo- percent reduction in the cost of care has the cused on prescriptions for generic drugs same effect as a 10 to 20 percent reduction in when they first became available off patent operational costs.
as a substitute for brand-name drugs. Often, generics cost less than 10 percent of branded Still, many payers consider the cost of care to medicines. An analysis showed that switching be unchangeable. They routinely enter into almost entirely to generics for just one cho- contracts with hospitals based on historical lesterol-controlling drug, Lipitor, would save budgets plus a small percentage increase for more than €30 million. inflation growth. Frequently, they do not dif-ferentiate their negotiations by hospital. And In most countries, pharmacies are obliged to they conduct only limited benchmarking deliver a generic drug instead of a branded about differences in costs or quality across drug. But prescribers can state that medical hospitals and providers.
necessity requires the patient to receive the expensive branded drug instead. Since the ac- In the area of procuring care alone, we see tive ingredient in generics is the same as in enormous potential to drive down costs branded drugs, prescriptions for a branded through the use of big data. A leader in this drug on the grounds of medical necessity area is VGZ, one of the largest payers in the should be rare—for example, less than 5 per- Netherlands, with about 4 million clients and cent of prescriptions, according to calcula-a cost of care of about €10 billion per year. As tions based on best practices. In practice, a result of major investments in data-driven however, VGZ found that for a number of im- The Boston Consulting Group 21 portant drugs, the expensive branded version with providers and to improve their prescrib-accounted for approximately 30 percent of ing behavior. The focus on costs helped bring prescriptions. In an effort to bring up the rate down the rate of branded-drug prescriptions of generic adoption among doctors much to below 5 percent for nearly all the drugs more quickly, the payer decided to use its studied, saving the payer more than 10 per- own records to pinpoint exactly who ap- cent of total pharmaceutical costs. Similar peared to be overprescribing branded drugs. benchmark analyses are now being used in other areas, such as diagnostics, hospital con- First, VGZ brought order to millions of rows tracting, and claims verification. For instance, of chaotic, raw claims data by using advanced VGZ has developed advanced analytic algo-analytical techniques to unravel the prescrip- rithms to automatically analyze millions of tion patterns of every doctor and specialist lines of data across different areas of care in by drug. The company looked in particular order to highlight suspicious combinations of for anomalies and outliers that indicated treatments and instances in which medical overprescribing behavior by specific doctors specialists seem to choose the most complex and groups and unusual combinations of pre- or expensive treatments.
scribers and prescriptions. The analysis fo-cused on the top 25 medicines with the great- Reducing Hospital Readmissions. Health care est potential for reducing prescription drug organizations frequently struggle to capture, costs. A compelling visualization showed the integrate, and share valuable information prescribing behavior of groups of doctors among internal departments and external and, when required, the prescribing behavior partners. But organizational and technologi- of individual doctors as well. For the first cal barriers often prevent payers and provid- time, the payer could show groups of doctors ers from seeing the big picture, which would how the behavior of their members com- enable them to transform the cost and pared with best practices. Extreme outliers quality of care.
were highly visible. (See Exhibit 2.) Many people hoped that electronic medical This visual tool created an opportunity for records (EMRs) would solve these problems. the payer to have constructive discussions But traditional EMR systems do not provide Exhibit 2 A Big-Data Analysis Showed Which Doctors Were Overprescribing Expensive
The top five drugs with the highest savings The individual doctors who tended to potential in one regional group of doctors overprescribe one branded drug1 Savings potential (%) Prescriptions for generic (%) Esomeprazole Omeprazole Number of patients using Esomeprazole per doctor Doctors at the national best-practice level Doctors above the regional-group average Doctors below the regional-group average Source: BCG analysis.
1Each data point represents an individual doctor.
22 BCG Technology Advantage—Industry spotlight much of the data required to assess outcomes ed system that was easy to understand so the and behaviors, such as socioeconomic status staff could quickly set in motion the right ap- and health patterns within populations— proaches upon admission. obesity and smoking rates, for example. An-other problem is that 80 percent of hospital The trust also identified four groups of pa- data is unstructured, often taking the form of tients with high numbers of avoidable read- patient interviews and paper-based records, missions and devised tailored interventions which may be stored in incompatible systems to address their needs. For example, when by different organizations. Claims data may the trust found that 50 percent of urology re- be readily available but is typically poorly admissions occurred within one day of dis- structured and inconsistent. Privacy regula- charge, it established a program for educating tions also limit how data is combined and patients on proper catheter use, supported by rapid-response community nursing. Integrating disparate data sources, as is done with big data, can overcome these hurdles. A Small steps can have more large government-run hospital trust in the UK, for example, achieved powerful results with immediate impact than big- this approach. The trust wanted to decrease bang solutions.
readmissions by 5 percent within a year and thereby reduce the length of hospital stays, the number of preventable deaths, and the in-cidence of hospital-acquired infections. The As a result of the hospital trust's use of these move would also help hospitals avoid the sig- tactics and others, preventable readmissions nificant financial penalties imposed by regu- have fallen, and the approach is now being lators for high rates of readmission.
rolled out across the trust.
The hospital trust first combined existing in-ternal data about patients and locations with publicly available data. This enabled the trust As payers and providers explore the opportu-to identify factors—such as specific diagno- nities enabled by big data, they should take ses, wards, and times of discharge—that were the following initial steps.
associated with higher-than-expected read-mission rates. • Start where there is tangible value. Small steps combining existing data in new ways Next, the trust developed a predictive algo- to solve specific issues can have more rithm that could identify—at the time of ad- immediate impact than big-bang solutions mission—the groups of patients who were that try to do everything. EMR systems most at risk of readmission. Identifying those and data warehouses are not always the patients at such an early stage meant that best places to start, either because they do providers could do the most to lower the not have the most relevant information odds of readmission by adjusting staffing lev- about outcomes or because a more els, planning for medical reviews on dis- iterative and agile approach could capture charge, and arranging training for patients value more quickly. Some of the most about their drug regimens after discharge. interesting initial insights can be gleaned For instance, the provider learned that infor- from creating segmentations and popula- mation such as the age of the patient, the tion-level analyses of existing information, length of any previous stays, the time of ad- such as the age of patients and referral mission, the reason for the hospital visit (such as an elective procedure or an emergency), and whether there were any previous emer- • Focus on the patient—not on the institution. gency admissions could be combined to cre- Care delivery is a complex, multidimen- ate a highly predictive profile of patient risk. sional process involving many providers. The profile was then converted to a color-cod- For chronic diseases, it can span a lifetime. The Boston Consulting Group 23 Providers spend considerable time and Big data and advanced analytics offer
energy reducing budgets and optimizing tremendous potential to solve some of processes. The patient perspective is often health care's thorniest problems—if the in-missing, however. To generate new dustry can overcome significant barriers to insights, organizations need to understand improving its efficiency and effectiveness. To-the novel sources of data that offer day's data-rich world offers vast new poten- insights into groups of patients. Often that tial. The key to success lies in focusing on data lies beyond the four walls of the pragmatic steps that drive real value instead hospital, such as with patients themselves.
of chasing the latest fads.
Ensure trust. Health information is often Karalee Close is a partner and managing direc- quite sensitive and involves important tor in the London office of The Boston Consult- legal and regulatory constraints about its ing Group and the global topic leader for digital, management and use. Health care big data, and advanced analytics in the firm's providers cannot afford to lose the trust of Health Care practice. You may contact her by regulators and patients. To earn trust and e-mail at close.karalee@bcg.com. gain access to even greater amounts of personal data for big-data applications, Stefan Larsson is a senior partner and managing payers and providers must communicate director in the firm's Stockholm office, the global transparently how they use and secure leader of the payer and provider sector in BCG's confidential data across multiple organiza- Health Care practice, and the leader of its tions and demonstrate the important efforts in value-based health care. You may con- benefits to patients from emerging tact him by e-mail at larsson.stefan@bcg.com. big-data approaches. (See The Trust Advantage: How to Win with Big Data, BCG John Luijs is a principal in BCG's Amsterdam of- Focus, November 2013.) fice and an expert in payer analytics. You may contact him by e-mail at luijs.john@bcg.com.Develop analytic capabilities to improve costs, value, and the coordination of care. Neil Soderlund is a senior advisor in the firm's Most payers and providers have pockets of Sydney office. You may contact him by e-mail at expertise in clinical processes and IT but require additional capabilities to generate integrated insight and improvements in Anna Vichniakova is a principal in BCG's practice. They must bring together a London office and a core member of the combination of skills in order to find firm's Health Care and Technology Advantage related internal and external sources of practices. You may contact her by e-mail at population-level data and to work with emerging tools. They may need to create new partnerships or work within new ecosystems to source, combine, and explore data across multiple organizations and locations. 24 BCG Technology Advantage—Industry spotlight


GOING BACK TO SCHOOL AN INTERVIEW WITH VANDERBILT UNIVERSITY'S JOHN LUTZ John Lutz is the vice chancellor for perfect. I'm particularly impressed dealing with a reasonably transfer- information technology at Vander- by our chancellor, Nick Zeppos. He's able set of perspectives and skills. bilt University. He recently spoke a very talented leader and I'm just What I have found to be a bit of a with Devesh Raj, a BCG senior delighted to be a part of his team.
challenge, perhaps, is finding the partner and managing director right way to calibrate some of the and the leader of the firm's Tech- What is it like to be buying tech-
decision making. I had been told nology, Media & Telecommunica- nology rather than selling it,
by a number of people that I tions practice in North America, and to be part of an academic
should expect a very different pace about his move to academia after institution rather than a large
and decision-making processes in a lengthy career with IBM and the crossing over to academia. And transformation effort he has em- I've found that both higher educa- barked on at Vanderbilt. Edited ex- I really haven't found the switch tion and health care do have their cerpts of the discussion follow.
from selling to buying to be that nuances in terms of how things get difficult, frankly, as I think we're done. But ultimately, I think I was John, you had a very successful
career with one of the premier

technology companies in the
world. What prompted your
move to Vanderbilt?

John Lutz is the vice chancellor for information tech- In part, it was a planned move; it nology at Vanderbilt University, overseeing informa- was also a bit of serendipity. In the tion technology for the university and medical cen- course of my career at IBM, I had ter. He joined Vanderbilt in April 2013. Previously, often thought about what it would he had a three-decade-long career at IBM, where he be like to be on the other side of held a variety of national and global positions. Most the desk. I had also given some recently, he served as president of IBM Canada.
thought to possibly getting into something a bit more academic in John graduated from Harvard University in 1984 nature or consulting-oriented, or with a bachelor's degree in linguistics and computer science. He is a into something that would give me member of the board of directors of the Conference Board of Canada, a chance to do some speaking. But I a member of the Council of Canadian Chief Executives, and a member had never found an opportunity of the advisory board of the Center for Talented Youth at Johns Hopkins that exactly fit. The position that presented itself at Vanderbilt was The Boston Consulting Group 25 expecting the difference to be infrastructure necessary to support meant that we had a little less pre- much greater than it actually is. Vanderbilt's missions in education cision in some of what we were There is a very businesslike culture and research and health care.
trying to do, it allowed us to quick- here. There is also a sense of cre- ly put some of our biggest chal- ativity, collaboration, and collegial- One of the key things we're trying lenges in the rearview mirror. It's ity that I really enjoy.
to do, as we transform our team in probably the main reason that this process, is make sure that we we're currently a little ahead of Tell us a bit more about your
have a really strong customer fo- where I thought we'd be.
role and Vanderbilt's IT
cus. I'm also looking to ensure that we have more-defined career paths We still have plenty to do. In partic-and better opportunities for our ular, we have a list of technical My group oversees virtually all of professional staff. This is much things to work on. One of the big- Vanderbilt's IT, spanning both the easier to do now than it would gest challenges on that front is driv- education and health care sides. So have been previously, when IT ing standardization. We need to clearly determine what we can do in a common way and what we need to do uniquely. It's easy for A key thing we're trying to do is make sure that people to view things through the we have a really strong customer focus.
lens of just how special the require-ments of a given school, depart-ment, or research area are. But I we have responsibility for all of staff were scattered and the func- think that we have to be very mind- the normal layers of infrastructure, tions essentially existed as islands.
ful of the potential leverage we can from data centers, networks, and create by combining things, and I'm servers up through databases and How do you think about
trying to ensure that everything service availability. This is a new measuring the success of the IT
that can be done in a common way role at Vanderbilt, as previously IT organization?
is done in a common way. And I'm had been distributed among differ- putting the burden of proof on the ent pockets spread across the insti- We use some classic hard measure- folks who want to do it uniquely.
tution. The one thing my group ments, such as budget, service doesn't cover is the next-genera- availability, and service levels. In What are some of the major
tion clinical-app development tak- order to drive the change we're challenges you've encountered
ing place in the medical center's seeking, though, we are also keep- as the transformation has
informatics group.
ing our eye on some metrics that feel a little softer but are, I think, You joined Vanderbilt in April
at least as important for us right We have the technical challenges 2013.Shortly after, you initiated
now. So we're looking at things to address, as mentioned. But we a significant transformation ef-
like how well we're serving the also have to keep our eye on the fort. What were its objectives?
customer, how well we're driving change management and cultural team development, and where we aspects of what we're trying to do, We wanted to be able to better sup- are in establishing the right levels especially the need to maintain the port and drive more transinstitu- of governance and transparency.
appropriate service mentality. Mak- tional kinds of activities and allow ing sure that we keep equal focus the various parts of Vanderbilt to How would you characterize the on all of these things as we move
really work together. That's the transformation's progress to
ahead is an ongoing challenge.
overarching objective. We're trying to do some important things along How have you motivated your
with that, too. We're looking for op- We've made some real headway. team to participate in the trans-
portunities to simplify things and One of the best things we did, in formation, and how have you en-
leverage scale, for example, so that retrospect, and the first big step gaged other stakeholders at Van-
we can create savings and invest in we took, was simply to bring folks areas where we have opportunities together. We assembled our teams to innovate. But the core task is very shortly after the transforma- One of our major objectives, in ad- what you'd expect—to provide the tion's launch. While that probably dition to improving our customer 26 BCG Technology Advantage—Q&A focus and team development, has and can help us address them. ly, we're going to properly steward been to really raise our game in Having this relationship function our obligations and do the right communicating. I think it's easy for as a professional group within our things with regard to compliance, technical folks to get in a mode team has been an important asset security, privacy, and so forth. But where they sort of quietly deliver beyond that, our role is to serve service and adopt a "no news is and support what the faculty, staff, good news" mentality. But we're That's interesting—it sounds
and clinicians are trying to do, and trying to fundamentally change IT like a customer support type of
I think we should be very transpar- at Vanderbilt. We're trying to de- model. Is that how you think
ent about that.
liver a better level of service and about it?
become a more integral part of the How do you see the role of tech-
institution, and I believe it's im- I want us to approach this in a way nology in higher education de-
portant that we communicate that probably looks a little like veloping over the next few
those things all along the way. So consultative business develop- years, and how is Vanderbilt re-
we've been pretty careful to use ment. In other words, let's get in many different means to reach our early. Let's understand the client's many different audiences. We have challenges and objectives and give Technology has long been import-a complicated constituency and them advice early, even before we ant to Vanderbilt's offering. But it this is a complex challenge, as we get into what you would define as has the potential to bring really have one set of considerations on a project. I think that doing it this dramatic change to higher educa- the humanities side and a com- way is just better business, since tion over the next several years, pletely different one on the health we have higher odds of serving the and Vanderbilt has to be prepared. care side. But it's important for us client's real requirements. It also, As our chancellor takes us through to make the effort.
on some level, helps us as IT be- the strategic-planning process, we are thinking hard about both en-hancing the residential experience and how we should be leveraging Technology could bring really dramatic change the opportunities presented by digi- to higher education over the next several years. tal learning, including online cours- es. Vanderbilt's Institute for Digital Learning is studying this and trying A critical step we've taken, and cause we're involved earlier and to find the right balance between one that has helped our have a better chance to respond in experimentation with new technol- communication effort materially, is a way that's going to fit within our ogies and ensuring that we inte- to put a customer relationship other plans. We've got a long way grate them in a very direct way into team in place. Historically, in the to go on this, but it has been a suc- our students' experience.
various predecessor organizations cess so far and I think it's some- at Vanderbilt, there were lots of thing that will remain key to our And Vanderbilt already has consid- people doing customer service as erable experience here. Our nurs- part of their job. But there weren't ing school, for example, has been really folks who had it as their You've shared some of your
offering online education for ten main focus. For me, coming from a group's internal discussions ex-
years. The nursing school has a supplier perspective, I was sort of ternally, including posting meet-
number of very advanced pro- looking for the analogue to the ings on YouTube. Will open com-
grams where students operate in reps—you know, the folks who munication remain part of the
hybrid mode, doing a fair amount represent our capability, take the of their learning at home and com- time to understand the client ing to campus intermittently but issues, and then find the right Part of what we're trying to do is for extended periods to supple- matches between our capabilities have a high degree of transparen- ment that learning.
and those issues. So we've formed cy. The clearer we can be about a small but talented team that what we're trying to get done, the So we think that these technolo- understands the different better. It's very easy, I think, for IT gies are ultimately a real opportu- constituencies in some detail, to drift into a control mode. But nity. Some people in higher educa- understands their requirements, we're not here to control. Obvious- tion see them as a threat. But we The Boston Consulting Group 27 believe that, if we find the right velopment, communication, and so fact that my new situation was balance, they provide Vanderbilt forth—and we've driven that pret- much less different from my old an exciting chance to take a step ty aggressively. And we try to one than I expected, and that a lot forward. Our role as IT is to sup- spend as much time driving the of the muscle memory of solving port that. Obviously, there are a lot change agenda as we do the daily challenges on behalf of clients in of technological implications for agenda. There's enormous tempta- other industries or within high us. We need to make sure that tion to get pulled down the rabbit tech was highly reusable and rele- we're keeping pace with what our hole with day-to-day operational vant here. I was also surprised by partners and the faculties are try- or technology concerns, but we've just how much I like the environ- been careful to try to strike the ments of Vanderbilt and Nashville. right balance.
I had high hopes for both, of Based on your experience here
course, but both have exceeded my so far, what advice would you
I also think it's important to have expectations. The collegiality, ca- give to a CIO who is taking on a
good, transparent, frequent com- maraderie, and collaboration at new role?
munication with clients. In our Vanderbilt are terrific, and I love case, this has paid off again and the way the institution is posi- Well, I've only been at this for nine again. Finally, I think you need to tioned relative to the things it's months, so I think you have to take develop the right customer-rela- trying to get done. And Nashville is my ideas with a grain of salt. But I tionship mentality among your a great city. It feels very dynamic can give some personal perspec- people. You might not necessarily and has a very strong technology tive. I think it's important to find need to create a dedicated team. and health-care base, one that con- the right balance between good But you need to be sure that cus- tinues to grow. So yes, there were and careful planning and a bias to- tomer service is something that is early surprises but they were very ward action. I think there's a temp- front and center in everyone's tation sometimes to overplan; I re- ally tried to hit the ground running and make sure that we keep the Looking back at your first
change agenda front and center.
month or two at Vanderbilt, is
Devesh Raj is a senior partner and there anything that really sur-
managing director in the New York I also think it's important to estab- prised you?
office of The Boston Consulting lish some principles and stick with Group and the leader of the firm's them. We've been very consistent Any time you go to a new industry Technology, Media & Telecommunica- in articulating the agenda we're or institution, you're going to come tions practice in North America. You trying to push—the emphasis on upon a few surprises. But probably may contact him by e-mail at customer service, professional de- the biggest surprise for me was the raj.davesh@bcg.com. 28 BCG Technology Advantage—Q&A ORCHESTRATING VALUE IN BUILDING MUSCLE IN THE RETAINED ORGANIZATION by Hrishi Hrishikesh, Peter Burggraaff, and Heiner Himmelreich It outsourcing has the potential to creasing the Odds of Success in IT Outsourc-
add considerable business value—in the ing," BCG article, December 2013.) form of greater IT cost-effectiveness, improved quality of delivered IT services, and greater Righting the ship entails taking a close look IT-driven agility—for companies that deploy it at the retained IT organization's skills and successfully. Yet the real-world track record of capabilities, and identifying and filling holes IT outsourcing is, on balance, underwhelming. where they exist. It also demands effective In fact, in a recent study on outsourcing by orchestration—that is, managing in a tightly BCG, only a bit more than half of the large IT coordinated fashion the different internal IT outsourcing deals in the sample were deemed functions, external providers, and interactions at least moderately successful by the compa- with the business. nies that initiated them. The real-world track record of Today, virtually every large company out- IT outsourcing is, on balance, sources elements of IT service delivery to a degree, with some companies seeking to out- source as much as possible. But there is al-ways a part of the IT function that remains in-house: the retained IT organization. Reasons for IT outsourcing's frequent failure Retained IT organizations have a broad man- to deliver full value vary. They include such date and must routinely wrestle with deci- factors as inadequate transparency of con- sions about their scope and setup. Questions tract pricing and a lack of agreement on in- they must answer include the following: centives and objectives between a company and its vendors. But a particularly critical fac- • How can we ensure that we have a strong tor is a lack of necessary capabilities in the understanding of the business and that we retained IT organization. Simply put, the use that understanding to deliver IT streamlined IT organizations that many com- products and services that improve the panies retain as they embrace outsourcing of- business's performance? ten lack the skills, knowledge, leadership, and management capabilities vital to making • How can we ensure that IT services those very outsourcing efforts work. (See "In- delivered to the business—whether by The Boston Consulting Group 29 vendors or by internal staff—are of IT organizations must essentially do two sufficient quality? How can we make sure things. One, they must manage their various that they are delivered at sufficiently low responsibilities, capabilities, and personnel in a highly coordinated fashion. The analogy to an orchestra conductor is apt. The re- • How can we work with the business to tained IT organization must ensure a coordi- control demand for IT services? What role nated performance from the entire "orches- should vendors play in managing demand? tra"—meaning both vendors and internal delivery groups. It must design a "reper- • How can we maintain the right set of toire" (that is, a portfolio of IT services) that in-house skills and competencies, even as meets the desires of the audience (that is, our talent base shrinks as a result of the business). And it must execute that repertoire at a caliber that satisfies the audience.
• What governance model will allow us to manage external service providers Two, retained IT organizations must confirm effectively without having to shadow or that they have the necessary capabilities in micromanage them? five principal areas: strategy and governance, supplier management, talent management, Retained IT organizations have a lot on their demand management, and delivery manage- plate. And many, our experience shows, are ment. (See Exhibit 1.) not up to the task. Strategy and Governance. Retained IT Orchestrating Value organizations must define a mix of services, provided by external or internal suppliers, To ensure that they can execute their vital that support the company's strategy and role with regard to IT outsourcing, retained objectives and are consistent with IT's Exhibit 1 Orchestrating Value Requires Managing Five Critical Capabilities
Designing the overall IT strategy; planning, developing, and enforcing policies, architec- tural standards, and decision-making processes; reinforcing accountabilities Strategy and
Managing (through contract management, performance Managing the correspondence monitoring, and other activities) of skills with roles; performance Supplier
the development and execution of evaluation; and recruiting and the outsourcing strategy and model career development Managing IT's relationship with Managing the day-to-day the business, and controlling and activities (including resource adjusting to demand (including deployment, change manage- consumption and service levels) ment, and cost allocation) necessary to deliver IT services Audience = the business
Source: BCG analysis.
30 BCG Technology Advantage—Focus overall strategy and capabilities. The mix talent without giving any thought to whether will obviously vary by company: an IT those individuals have the required skills for organization focused on operational their assigned roles—slotting an engineer effectiveness will have different goals when who has limited customer-service skills or defining its required services and sourcing knowledge of the business into a demand strategy than an IT organization focused management role, for example. on agility and innovation, for example. Retained IT organizations must also have Retained IT organizations must find creative strong enterprise- and solution-architecture ways to recruit top talent and ensure that capabilities. And they should have a skill sets correspond to roles. (See the sidebar, governance model that spans all relevant "Optimizing Talent Management.") To retain parties and ensures effective management such talent, IT organizations should also cre- of external providers at the delivery, ate sufficient flexibility within the organiza- commercial, and relationship levels. tion to permit career development and growth. Supplier Management. Retained IT organiza-tions must be adept at managing outsourcing Demand Management. The retained IT contracts. This is no easy feat. A common organization is expected to adjust to changes problem is that contracts are typically negoti- in the nature and volume of business de- ated by a dedicated deal team but managed mand for IT services. Simultaneously, it must on a day-to-day basis by a separate group of attempt to steer demand in a manner that individuals, few if any of whom were in- limits non-value-added complexity. Tackling volved in the negotiation. It is critical, there- these challenges successfully requires a deep fore, to form a strong linkage among the deal understanding of the business. The use of team, the contract management team, and external service providers only magnifies the the delivery management team when design- ing and negotiating contracts. This can be facilitated by including people on the deal team who will later manage the contract or Maintaining critical in-house its delivery.
skills and competencies Retained IT organizations must also move is essential.
away from traditional models of managing suppliers. In a multivendor sourcing model, for example, managing each supplier with a discrete, individualized set of service level To manage demand effectively, the retained agreements or KPIs, as is customary, will not IT organization must do three things. It must necessarily guarantee high-quality end-to-end give external providers a seat at the table in service delivery. In the case of a multivendor discussions with the business about demand model, the better practice is to incorporate management. It must ensure, through the KPIs that span multiple suppliers. (See creation of architectural standards and "Shared KPIs in Multivendor IT Outsourcing: governance forums, that external providers Turning ‘I' to ‘We,'" BCG article, February strive to meet demand by using standardized, rather than customized, solutions. And the retained IT organization must develop Talent Management. Maintaining critical explicit service-level metrics and targets, as in-house skills and competencies, especially well as financial incentives, that encourage when the company employs a highly out- vendors to proactively control and manage sourced delivery model, is essential. Often, heavily outsourced IT organizations have a limited pool of internal talent to draw upon, Delivery Management. Many retained IT and working for these organizations is seen organizations struggle to ensure that IT by internal prospects as career limiting. services are consistently of sufficient quality Further, such organizations often deploy and are delivered on a timely basis and at The Boston Consulting Group 31 OPTIMIZING TALENT MANAGEMENT An Achilles' heel for many retained IT Vendors are often a ripe source of specific organizations is talent management. talent, and some companies have struc- Many treat the topic far too narrowly, tured formal agreements with their vendors focusing disproportionately on the organi- to acquire it. Some companies, for exam- zation's top talent. They also pay insuffi- ple, have agreed to preplanned rotations of cient attention to matching skills with talent between the parties. One took it a roles and other considerations. This can step further, specifying in the contract that come at a high cost, given that the it would have the right to draw talent, on a retained IT organization's internal needs full-time basis, from the vendor's ranks. can change significantly as it adjusts its Internal staff is also obviously fertile balance between internal and external ground for filling specific positions. The recruitment and retention of top internal talent can be facilitated through the To derive maximum value from internal establishment of career development staff, a retained IT organization must have guidelines and incentives. A company a comprehensive scheme for talent could, for example, encourage internal management. The organization should talent to spend a specified period working clearly define all necessary internal roles in the retained IT organization as a and their respective skill requirements, and stepping-stone for moving to other attrac-distinguish between generalist and special- tive and advanced roles in the company. ist roles. It should then catalog existing internal skills and determine where Optimized talent management also entails training and the acquisition of new skills identifying critical individuals and roles, are required in order to fill gaps. and defining retention strategies and contingency plans. The list of individuals Decisions about specific roles and whether and roles should be dynamic, changing they can be filled by internal staff should with the organization's strategic priorities. be based on pragmatism rather than on The retained IT organization should also familiarity with individuals or their tenure invest in employee development through in the organization. Some companies, for training and by rotating people through example, will try to move purely technical different roles and responsibilities. Finally, types, such as engineers or technologists, it should ensure that rigorous performance into roles (such as vendor management) management is in place, particularly to that require substantially greater custom- develop and handle poor performers and er-facing or management skills than those employees whose skills don't match the individuals possess. The results usually demands of their roles.
suggest that it would have been wiser to recruit the necessary skills from the outside than to try to fit the proverbial square peg into a round hole. reasonable cost. The challenge can intensify must seamlessly integrate delivery from ex- when the company uses multiple vendors for ternal and internal service providers by clari- service delivery.
fying roles, ensuring that the parties work to-gether effectively, and creating transparency Effective management of service delivery de- regarding service problems and requests. mands several things of the retained IT orga- Three, the retained IT organization must fos- nization. One, the organization must commit ter the right internal mind-set, placing greater to managing service delivery outcomes inter- emphasis on the ability to detect and under- nally rather than outsourcing the task. Two, it stand problems—and negotiate and track 32 BCG Technology Advantage—Focus solutions (potentially involving multiple sup- Further, internal IT staff was focusing too pliers)—than on operational capabilities, for much on shadowing vendors and performing tactical delivery activities, and too little on managing the overall delivery of services. The situation was exacerbated by significant gaps in technical and execution capabilities in the The experience of a large transportation and retained IT organization. construction company illustrates the value a retained IT organization can bring to an The retained IT organization also determined outsourcing program. The retained that it was not structured to interact effec- organization supported a number of different tively with the business. There were multiple geographically dispersed businesses, each points of contact between IT and the busi- with its own IT needs. Outsourcing played a ness in some divisions and none in others. significant role in its strategy, accounting for This was compounded by the absence of ap- about 40 percent of total IT spending. Service propriate joint-governance forums. delivery was divided between two vendors; the organization used a third vendor for To remedy these ills, the retained IT organi- service integration. zation redesigned its organization model and redefined a number of roles. Previously, it The retained IT organization found itself had organized itself according to a traditional facing a number of problems in service de- plan-build-run model, with groupings for livery. Benchmarking revealed that it was strategy, project management, solution deliv- spending 15 to 35 percent more than compa- ery, operations, and customer relations. (See rable organizations—and IT managers did Exhibit 2.) Highlights of the effort included not understand why, especially since the ser- the institution of three functions: a vendor vices delivered were subpar. High frustration management function focused on thoroughly among business users had spawned consid- understanding and effectively managing ven- erable use of "shadow IT" in various busi- dor contracts; a business-technology-enable- ness units and field offices. And the retained ment function aimed at facilitating both the IT organization believed it was vulnerable to tailoring of solutions to the business's needs too-high levels of business-continuity and di- and the use of standardization where appro- saster-recovery risk. priate; and a solution-delivery and opera-tions-management function focused on estab-lishing clear ownership of each service and High frustration among busi- managing service delivery by both out- ness users had spawned con- sourcers and in-house staff. siderable use of "shadow IT." To match newly defined roles with the appro- priate skills, the retained IT organization thoroughly evaluated its talent pool. It re-tained top talent, inculcated new skills into Upon analysis, the retained IT organization existing talent where necessary and possible, identified some reasons for the problems. and hired from the outside to fill critical roles Having an external service integrator respon- when the required skills did not exist in- sible for coordinating the efforts of the ven- house. Those efforts, combined with the new dors and managing their contracts had led to organization model and the actions described service quality issues, including delays in ser- above, put things back on track and gave the vice provisioning and problem resolution. institution what it needed to orchestrate the The retained IT organization had not put in delivery of high-quality services.
place incentives to encourage the service inte-grator and vendors to improve service quality. And no one within the retained IT organiza- A fit-for-purpose retained IT organi-
tion was familiar with their contracts or had zation, one that is sufficiently skilled any vendor-management experience. and an effective orchestrator of capabilities, The Boston Consulting Group 33 Exhibit 2 From a Plan-Build-Run Model to an Orchestrator Model
Original Plan-Build-Run Model
• Business analysis • Infrastructure • Business case • Security monitoring • Coordination with the business • IT solutions Orchestrator Model
Talent management
• Management of skills and capabilities, performance, and career progress of Strategy and governance
Strategy, architecture, Solution delivery • Business technol- • Enterprise architecture • Service managers manager and analysts • Finance and reporting • Focused on day-to-day • Business analysts manager and analysts management of project • Project managers • Risk and security and service delivery • The primary face of strategy manager and IT to the business— • Focused on setting the overall organizational and service strategy managing business • Responsible for planning, demand (including developing, and enforcing • IT category managers policies, architectural • Contract administrators standards, and decision- making processes, and • Focused on relationship, for reinforcing account- contract, performance, and financial management Source: BCG analysis.
is an essential pillar for the maximization of Peter Burggraaff is a principal in the firm's Am- value from IT outsourcing efforts. Getting sterdam office. You may contact him by e-mail at there can require time and investment. But the payback can be substantial.
Heiner Himmelreich is a partner and managing Hrishi Hrishikesh is an associate director in director in BCG's Amsterdam office. You may the Singapore office of The Boston Consulting contact him by e-mail at himmelreich.heiner@ Group. You may contact him by e-mail at 34 BCG Technology Advantage—Focus WHAT IT CAN LEARN FROM THE AUTOMOTIVE INDUSTRY by Andreas Dinger, Heiner Himmelreich, and Wouter Pomp To their surprise and
Little wonder, then, that looking for tion, and new efficiencies from dismay, many companies lessons in failed engagements has their external partners even after discover that IT outsourcing become a virtual pastime for the IT the contract is signed. Automakers doesn't always go as planned. sector. Yet the disappointments have created—and leveraged—an Indeed, disappointments abound, continue. So perhaps it is time to environment in which suppliers are with engagement after engagement draw insight from how another sec- continually challenged to deliver failing to deliver the expected tor sources work—and does a bet- better products and processes. And savings, improved service quality, ter job of it. An ideal candidate is they deliver them without supersiz- and greater business agility. (See the automotive industry.
ing the tab: profit margins for the "IT Outsourcing: Expectations ten largest automotive suppliers Versus Facts," BCG article, March Carmakers delegate as much as 80 averaged 4.1 percent between 2010 2013.) Relationships with providers percent of their production to sup- and 2013. (See the exhibit.) Com- can be frayed or outright dysfunc- pliers, and they've had decades to pare that to IT, where during the tional, with disputes and bickering perfect relationships and practices. same period, the top ten providers continuing until the agreement They've been remarkably success- enjoyed more than double the net runs its course.
ful, spurring innovation, cost reduc- profit—8.4 percent—yet didn't The Ten Largest IT Suppliers Have Double the Profit Margin of the Ten Largest Automotive
Average annual profitability of the global top ten Average annual profitability of the global top ten IT-service suppliers automobile suppliers Annual net profit margin (%) Annual net profit margin (%) Sources: HfS Research; Automotive News, June 17, 2013 supplement; S&P Capital IQ.
Note: IT service-provider profits include profits on software and hardware.
The Boston Consulting Group 35 necessarily see their customers rav- how it fits with your business needs. To put it simply, customers ing about the value they added. goals, and what it should cost, you just don't know how, or even if, make better decisions about what they could do better.
To be sure, not even automakers to buy, whom to buy it from, and have a silver bullet for optimizing what to pay. They realize, too, that Rebuilding expertise won't happen sourcing. Approaches can vary, it's important to see the big pic- overnight. But there are steps com- from long-term collaborative rela- ture—how different parts and sys- panies can take to get on their way. tionships with suppliers to a more tems should be integrated. Accord- They can look at their roster of "transactional" model emphasiz- ingly, carmakers have been very outsourced services and see which ing price. From among these ap- careful to retain their expertise— could be taken back in-house. proaches, we have identified four no easy feat when more and more That's an approach GM has taken key strategies that have particular tasks are delegated to others.
with its IT processes, re-insourcing relevance for the IT sector: a significant amount of work. How do they do it? One way is by Meanwhile, whenever new tasks • Retain expertise.
keeping the production of certain are flagged for possible outsourc- parts, or even just a portion of pro- ing, the company should consider • Pay special attention to pro- duction, in-house. BMW, for exam- the knowledge to be gained or re- cesses that can give the compa- ple, produces some car seats, as tained by leaving it—in whole or ny a competitive edge. well as some parts for the drive- in part—in-house. For example, train and other systems, internally. companies that have outsourced • Continually challenge suppliers to deliver improvements.
Technical experts can be put on procurement • Ensure transparency on costs and performance.
teams to better analyze provider offerings.
Using these strategies, companies will find themselves far better able Another approach is to produce testing to a third party need to in- to foster innovation and efficiency new technologies in-house initial- tegrate this activity into their in their IT-sourcing engagements. ly—before sourcing them later Scrum teams when moving from Just as important, it will spur them on—in order to better understand waterfall to agile software develop- to manage IT as a core component them. Either way, the knowledge ment. Technical experts can also of their business—and a key ingre- that carmakers gain lets them chal- be put on procurement teams in dient of its success. Because in a lenge partners on processes, quali- order to better analyze provider wide range of sectors, from bank- ty, and pricing. It also lets them capabilities and offerings.
ing to insurance to logistics, that is home in on new trends and suppli- increasingly what IT is. You ers that might prove valuable A particularly helpful step is to pri- wouldn't know it, however, from down the road.
oritize emerging key technologies, the way many companies treat gradually building skills in areas their IT sourcing, which is often No doubt, it can often be more like virtualization and the cloud— still seen as a supporting player. cost efficient to source this work whether by hiring talent from the Even automakers don't always give than to do it internally, but for au- outside or dedicating resources to IT sourcing the attention they give tomakers, the added cost is an in- develop it within. Companies to the procurement of vehicle vestment. The experience of IT or- should take note, though, that new parts. This second-string status ganizations proves their point. A skills often need to be managed in may have sufficed in the old days, lot of companies have outsourced new ways. Employees coming from when IT wasn't "what the business so many core IT capabilities that entrepreneurial environments, for is about," but not anymore. their expertise in—and ability to example, may be accustomed to assess—the services that they buy rapid development cycles, continu- Retain Expertise is limited. This information imbal- al challenges, and a career track ance between buyer and seller of- based on skills and ability instead Automobile manufacturers under- ten gives providers leeway to boost of seniority. Similarly, IT sourcing stand that when you know what a prices or sell services that may not and vendor management must be- component does (or should do), be the best fit for a company's come an integrated part of an IT 36 BCG Technology Advantage—Outlook career path and not treated as an ing should be flagged for special assignment, the enhancements it end station, as is sometimes the treatment, which can take the made to its products and processes form of more hands-on involve- better position it to win work else- ment, more collaboration or joint where. Bottom line: it's now in the Pay Attention to development with the software supplier's best interest to advance vendor, and more supervision.
the automaker's best interest.
Processes That Can By contrast, IT sourcing rarely sees Automakers are also careful to Challenge Suppliers such an alignment of incentives. In avoid a one-size-fits-all approach Perhaps the most crucial strategy many engagements, hands-off to sourcing. For parts that are used automakers employ is to continual- management and poorly written with little or no differentiation ly challenge suppliers to improve or ambiguous contracts give pro- across carmakers, the emphasis is performance and lower costs. They viders little reason to make im- usually on getting the best price. do this in a surprisingly simple yet provements once the ink on the But for components that can help extremely effective way: by ensur- agreement dries. There is seldom a vehicle stand out from the com- ing that there is another supplier someone waiting in the wings, and petition, the focus—and the com- in the wings. Multiple suppliers are even when there is, lack of process pany's interaction with its suppli- asked to present prototypes early documentation and know-how, as ers—becomes more nuanced and in the design phase, and multiple well as risk avoidance and bad ex- more hands-on. There may be suppliers are selected for further periences from previous switches, more collaboration or joint devel- development. As production draws combine to keep companies from opment, or simply more guidance near—perhaps a year out—yet an- pulling the trigger. Or they pull it and input from the automaker.
other vendor is added to the mix and misfire: without strong ven- and asked to try its hand at a com- dor-management capabilities, a Of course, the areas that get ponent. Even during actual assem- company may find the next provid- flagged for special attention will bly, dual sourcing is common. er as disappointing as the first. vary. Some premium European There is always someone else to brands, for example, view the whom the automaker can assign To shake things up—and get them- lighting system as a differentiator some of the job.
selves closer to the automotive and have been working closely with suppliers to bring out innova-tive offerings such as laser head- Not all sourcing engagements are equal. It's lamps. But in all cases, the idea is the same: not all sourcing engage- okay to have a favored son.
ments are equal. It's okay to have a favored son.
This gives automakers great lever- model—companies should think This is in stark contrast to how IT age in the sourcing relationship, about moving to standardized en- sourcing typically works. Whether but it also begs the question: Why vironments that make switching a process is a "differentiator" or a would suppliers put up with this? providers a less Herculean under- more commoditized task, it tends The answer is that there are bene- taking. For some tasks, cloud-based to be handled in a similar hands- fits for both sides. While suppliers services may prove a good option off way, with the company agree- know they can be swapped out, as they become more standardized ing to a price and relying on the they also know that if they keep (keep in mind, though, that even vendor to get things right. Instead, the innovations and efficiencies cloud vendors work on "stickiness" companies should be identifying coming, they'll get long-term and to keep customers from going else- those processes that can set them even increasing work. A 70/30 split where). Also worth considering is apart and how IT supports them. of work could become 60/40, but it the "champion/challenger" model, For instance, for a logistics compa- could become 80/20, too. In addi- which is particularly popular in ny, one differentiating process tion, automakers provide financial application development. By as- might be the routing of its trucks, and technical support to spur im- signing one provider the bulk of which IT may support through a provements—R&D costs are gener- the work and another a nontrivial specialized software application. ally covered by the carmaker—so fraction, companies can, in effect, This is an application whose sourc- even if a supplier doesn't win the hedge their bets. Alternatively, The Boston Consulting Group 37 there have been cases where for days to months. The idea is not identify how their own require- key outsourced processes, one ven- just to check—and, when neces- ments drive up costs for both their dor was tasked with execution and sary, improve—processes but to vendors and themselves and make another with quality assurance— develop a freer flow of data and adjustments to avoid that tendency.
ensuring that the work was done ideas between supplier and auto- well. Finally, should companies in- maker. At the same time, procure- deed switch vendors, they'll find ment staff at Toyota closely work Striking a Better Balance their odds of success improved by with vendors to better understand One of the main reasons IT-sourc- having their documentation in or- how they perform. This collabora- ing engagements disappoint—or fail outright—is that the relation-ship between customer and pro-vider is off balance. Many compa- IT organizations can devote procurement staff nies have lost their expertise, have to calculating the cost base of their providers.
taken—or gradually veered to-ward—a hands-off policy for key processes, and have little ability to der and developing their own ex- tive approach helps give the auto- challenge or encourage vendors to pertise, as described above.
maker a more accurate picture of deliver better performance and how its sourcing engagements are Emphasize Transparency going—and when it may need to take preventive or remedial action.
That balance can be restored. By The fourth way automakers im- embracing the lessons from the au- prove sourcing is by constantly IT organizations, on the other tomotive industry and treating IT staying on top of vendor costs and hand, typically have nothing close as a core part of their business, performance. Manufacturers like to this level of transparency. They companies can get back in the Renault and BMW, for example, tend to pay for services based on a driver's seat in their IT-sourcing re- typically have significant staff— volume-centric measure—be it lationships—and enjoy a smoother dozens if not hundreds of employ- MIPS, terabytes, or number of ees—dedicated to the single task transactions—that doesn't shed of calculating the cost base of their light on the vendor's cost struc- Andreas Dinger is a partner and suppliers. Carmakers often require ture. Without an understanding of managing director in the Munich of- suppliers to provide cost-related that structure—the costs of the fice of The Boston Consulting Group. metrics, and they employ audits to personnel, hardware, and other el- You may contact him by e-mail at verify the information. From an ements that make up the service— outsider's perspective, this might companies are hard pressed to ne- seem a bit excessive—and perhaps gotiate an optimal price or to Heiner Himmelreich is a partner and even obsessive—but by under- gauge performance. managing director in the firm's standing the costs of everything Amsterdam office. You may contact from raw materials to labor to de- But it doesn't have to be this way. him by e-mail at himmelreich.heiner@ preciation, manufacturers gain in- Like carmakers, IT organizations sight into what they should be pay- can devote procurement staff to ing for components and where calculating the cost base of their Wouter Pomp is a project leader problems may be lurking.
providers and foster more dialogue in BCG's Amsterdam office. You and information sharing. Mean- may contact him by e-mail at Transparency on performance, while, as companies develop more meanwhile, is often enhanced by internal expertise, they'll be better close working relationships with able to evaluate both the pricing suppliers. Toyota, for example, and quality—and, in the end, the sends engineers to key partners' value—of the services they're locations for periods ranging from sourcing. They'll also be able to 38 BCG Technology Advantage—Outlook NOTE TO THE READER Jon Brock
John Luijs
The authors thank their colleagues Principal at The Boston Consulting Group who contributed to this publication, +44 020 7753 5353 especially Alex Asen, Astrid Blum- brock.jon@bcg.com stengel, Julia Booth, Minishrang Borgoyary, Antoine Gourevitch, Wouter Pomp
Richard Helm, Ben Horner, Mark Project Leader Kim, Jan Willem Kuenen, Daniel Küpper, Stefan Mohr, David Ritter, John Rose, Stuart Scantlebury, Rob pomp.wouter@bcg.com Trollinger, Albert Waas, BCG's Tech- nical Advantage knowledge team, Karalee Close
Devesh Raj
and BCG alumnus James Platt. Partner and Managing Director Senior Partner and Managing Director They also thank Mickey Butts, Gary Callahan, Alan Cohen, Angela Di- +44 020 7753 5353 Battista, Gina Goldstein, and Gerry close.karalee@bcg.com Hill for writing, editing, design, and Stefan A. Deutscher
Senior Partner and Managing Director For Further Contact
Senior Partner and Managing Director Global Leader, Technology Advantage Partner and Managing Director Senior Advisor +44 020 7753 5353 soderlund.neil@bcg.com Heiner Himmelreich
Partner and Managing Director +44 020 7753 5353 William Yin
Partner and Managing Director ++33 1 40 17 10 10 baltassis.elias@bcg.com Walter Bohmayr
Senior Partner and Managing Director Senior Partner and Managing Director bohmayr.walter@bcg.com larsson.stefan@bcg.com The Boston Consulting Group 39 The Boston Consulting Group, Inc. 2014. All rights reserved.
For information or permission to reprint, please contact BCG at: E-mail: bcg-info@bcg.com +1 617 850 3901, attention BCG/Permissions The Boston Consulting Group, Inc.
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