No shortcuts to becoming a digital business
- 16 November, 2015 06:30
“In reality, no business is born in the cloud,” contends Hamish Nuttall. “Every successful business evolves through solving a real world problem.”
Nuttall was CEO and founder of Naked Bus, which became known for offering low bus fares (from $1) across New Zealand. It was sold early this year to ManaBus. Nuttall now works as an “outsourced chief digital officer”.
In his current role, he helps organisations build and execute digital strategies, drawing on his experiences at Naked Bus, as owner of another transport company, and as a management consultant.
In the case of Naked Bus, he says the organisation was able to leverage cloud technologies and services to dramatically reduce the cost of providing the service.
“A key selling point was the low prices, so we continually focused on reducing overheads,” he says. “For instance, we continually asked ourselves, how could we automate repetitive tasks?”
“For eight years Naked Bus was self-funded and consciously operating in startup mode – experimenting, measuring and iterating at a fast rate.”
He says this agility allowed him to achieve 25 per cent year on year growth; 95 per cent brand awareness; +65 net promoter score, and a 40 per cent market share with 700,000 customers a year.
To support this growth it was important to be able to launch new products quickly, he states.
For instance, he identified the potential to operate a sleeper bus with fully lie-flat beds between Auckland and Wellington, he states.
He says it took six weeks from the decision to go ahead, to confirming designs (the beds had to convert back to seats during the day), arranging finance, getting a manufacturer and operating partner on board and launching a new website and selling tickets.
This kind of approach required tremendous focus, collaboration, communication and flexibility from the whole team, he says.
“We recognised that we would not get this from a traditional organisational structure,” says Nuttall. “Silos, turf protection and narrow roles militate against being fast-footed.”
A common language
The company adopted a ‘startup culture’ that promoted broad roles and collaboration, he says.
“We consciously recruited people with an ability to collaborate across any area of the business. This is known as T-shape, where the vertical bar represents depth in a particular skill, and the cross bar represents the ability to collaborate across a wide range of functions.
"We reinforced T-shape by cross-training all staff," he says. One strategy was to require all new staff to work at the call centre for at least two weeks.
The call centre handled all phone and email contact with the customer. “If you can answer any customer call under time pressure you understand the business,” says Nuttall.
“Naked Bus charged for customer calls so we had to work fast”, he explains. New staff were answering emails on day two and calls on day three.
Thus, new ops staff understood the network, new developers understood the data structure, and new marketing staff understood our customers.
Two-third of the new hires were graduates, so the staff in their graduate training scheme would typically spend two months in the call centre, combined with other work, to gain a thorough grounding in the business.
“This gave all our staff a common language to improve the business,” he states.
“I knew we had cracked it when a customer service rep (CSR) approached a developer with a customer problem,” says Nuttall.
“She explained it, and said where she thought the problem was. They looked at it together, agreed there was a bug, and the developer fixed it there and then.”
There were spin offs from this approach. “When the call centre is under pressure, anyone can pitch in and answer calls or emails. This swing capacity added to our flexibility.”
Create skunkworks, where people understand you are explicitly looking for a different way of doing things, where they are allowed to experiment, with clear messages about vision, goals, priority and ways of working.
The Agile way
Nuttall says the organisation practised the Agile methodology across the business.
But, as he points out, Agile, like any contribution to business success, is 5 per cent ideas, and 95 per cent execution.
“As we started the journey to increasing the velocity of delivery to our customers, it became clear that as well as methodology, we had firstly to build a culture of trust, collaboration and experimentation, and secondly, flatten the organisational structure, push responsibility down to the lowest level and build a robust feedback loop.”
He says Naked Bus was a digital organisation, as the operation of buses was outsourced, and its core competencies were IT, as it owned and developed all its own IP and had an in-house marketing team.
"We recognised that by having these teams work closely we could improve our customer experience rapidly and react rapidly to changes in customer requirements," he says.
Customer experience is now recognised as the ‘third leg’ of the digital organisation.
But in the case of Naked Bus, it was simply driven by the need to provide a better service in an ever lower cost way.
“To us, lower cost meant eliminating failure and increasing user numbers on our fixed capacity services.”
Nuttall says the group was inspired by the book Lean Startup by Eric Ries.
"Will it move the needle?" became a mantra when evaluating any idea, he says.
In other words, will this initiative increase the number of customers (conversion), reduce cost, or both?
“This led to us embedding the lean startup methodology - build, measure, learn - in which we started with a hypothesis, such as postulating that a particular initiative would increase conversion, before commencing any initiative.
“This discipline mean that lots of marginal projects did not even get considered, thus saving effort. As we increased the velocity of delivery, we realised that we could not focus on perfection. We had to get new products into the wild quickly, to evaluate customer reactions.”
Thus, he says, the group embraced minimum viable products (MVPs), or the minimum features that made a new product saleable.
Sleeper bus was an MVP, he states. “We knew it was not the final version of the product, but we wanted to test the concept as cheaply as possible; it was a success and almost every seat was sold out over the whole summer period."
He says sometimes, he tested ideas without actually having a product. For instance, following requests from customers, Naked Bus T-shirts were offered on on the website. “Almost nobody bought one, fortunately we hadn’t had any made,” he says.
“Adopting this approach had the huge benefit that we could quickly move to testing ideas rather than arguing about whose idea was better. This process of discovery reduces team conflict.”
Related: ‘We are very much naked online and that is working well for us’ - Logan Sears of Green Acres and Hire-a-Hubby
Reducing tensions across functions
It became clear that both marketing and IT needed to understand concepts such as Calls to Action, and work collaboratively to improve conversion.
Initially, individual teams experimented with Agile – daily stand-ups, Kanban boards, backlogs, priority and sprints – but the biggest value was unlocked when we rolled it out across the business.
“We were small enough that we could gather everyone's wish lists, combine them, and create a company-wide backlog. Backlogs were cascaded down to functional teams – marketing, IT, Ops, who each maintained their own Kanban boards. Everyone was kept on the same page with a weekly standup where key company metrics and progress on cross business projects were shared.”
The tensions between functional tasks and cross functional requirements and resource contention were managed by a project co-ordinator who adjusted workloads on the fly. As the teams matured they began to identify these tensions intuitively as they moved towards self-management.
Nuttall explains there was a lot of work “behind the scenes”. These included refactoring code, building APIs, implementing feature flags and automating testing and parts of the deployment, to increase throughput.
These efforts began to bear fruit as we increased the velocity of deployments – sometimes deploying twice a week, he states. “Almost all of the communication was horizontal within the business. Teams worked collaboratively in problem solving and took ownership of solutions.”
“We also had to focus on culture to make agile work -
Not without reason did employees refer to the team as the ‘Naked family’.”
A key lesson from all these experience is “there are no short cuts to success”, says Nuttall.
“The business – and by that I really mean the leader – has to focus on vision, strategy, and execution,” he says.
“With so many balls to keep in the air, my one tip is to start small,” says Nuttall. “You can create a kind of skunkworks, where people understand you are explicitly looking for a different way of doing things, where they are allowed to experiment, with clear messages about vision, goals, priority and ways of working.
“If you cannot ring-fence resources for this, then ring-fence some of the time of your key people,” he adds. “Tell them this is a priority, and keep telling them. Because without continual support the business will go back to the way things have always been done.
“And remember, if you don’t reinvent your business, chances are somebody else will.”
Related: ‘Disrupt digital businesses before you get disrupted!’ - Ray Wang of Constellation Research
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