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Mit digital transformation a roadmap for billion $ companies 2011


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Claire Calméjane is a dynamic executive with an international experience to lead complex, large transformation projects & teams, monitor IT budget at large scale and a strong expertise in Digital …

Claire Calméjane is a dynamic executive with an international experience to lead complex, large transformation projects & teams, monitor IT budget at large scale and a strong expertise in Digital Transformation and Digital Banking. She worked for the last 7 years for Capgemini Consulting in Paris, Boston (US) and London, for several banks such as BNPP, MABanque, RBS and airline industries. She lead the phase 1 of a research program around digital transformation program at MIT working with the researchers.Her research paper has been ranked as one of top 5 thought leadership pieces across consulting publications by Source. She joined Lloyds Banking Group in October 2012 to lead the delivery of the Service to Customer portfolio and embrace operation challenges after a decade in consulting. She is specialized in Digital Transformation and IT Financial Services. She graduated from a Computer Science Engineering School and holds a Master degree from HEC Paris Business School.

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  • 1. MITSloan MANAGEMENTAbout Capgemini ConsultingCapgemini Consulting is the Global Strategy and Transformation Consulting brandof the Capgemini group, specializing in advising and supporting organizations intransforming their business, from the development of innovative strategy throughto execution, with a consistent focus on sustainable results. Capgemini Consultingproposes to leading companies and governments a fresh approach which usesinnovative methods, technology and the talent of over 4,000 consultants worldwide DIGITAL TRANSFORMATION: A ROADMAPFor more information: FOR BILLION-DOLLAR ORGANIZATIONSFollow us on Facebook: us on Twitter: @CapgeminiConsul FINDINGS FROM PHASE 1 OF THE DIGITAL TRANSFORMATION STUDY CONDUCTED BY THE MIT CENTER FOR DIGITAL BUSINESS AND CAPGEMINI CONSULTINGAbout the MIT Center for Digital BusinessFounded in 1999, the MIT Center for Digital Business ( leading companies, visionary educators, and some of the best studentsin the world together in inventing and understanding the business value madepossible by digital technologies. We are supported entirely by corporate sponsorswith whom we work in a dynamic interchange of ideas, analysis, and reflectionintended to solve real problems. The Center has funded more than 50 facultyand performed more than 75 research projects focused on understanding theimpact of technology on business value, and developing tools and frameworksour sponsors can use for competitive advantage. 101011010010 101011010010 101011010010
  • 2. Contents 1 The Study 06 2 Common pressures; different results 08 ••Common pressures to begin digital transformation ••Different digital transformation speeds and different results Case Study: Finding new opportunities for digital transformation across a hospitality company Case Study: Digital transformation in India 3 The shape of digital transformation 16 ••Transforming customer experience ••Transforming operational processes ••Transforming business models ••Digital capabilities Case Study: Digital transformation in an international banking group Case Study: Moving from separate to integrated digital initiatives in an apparel manufacturer 4 Digital technology usage 28 5 Challenges on the road to transformation 34 ••Initiation challenges ••Execution challenges ••Governance challenges Case Study: Evolving as a value chain orchestrator in mortgages Case Study: Digital transformation in an international airport 6 How can you make your digital journey successful? 46 ••Envision the digital future for your firm ••Invest in digital initiatives and skills ••Lead the change from the top Case Study: Driving digital transformation across a global media company 7 What is digital transformation maturity? 58 ••The What and the How ••Digital Maturity Matrix ••How to assess your digital maturity Case Study: Capitalizing on digital opportunities for a business directory 8 Conclusion 652 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 3
  • 3. Digital transformation (DT) – the use of technology to radically that new technologies provide. Major digital improve performance or reach of enterprises – is becoming transformation initiatives are centered on re-envisioning a hot topic for companies across the globe. Executives in customer experience, operational processes and all industries are using digital advances such as analytics, business models. Companies are changing how mobility, social media and smart embedded devices – and functions work, redefining how functions interact, and improving their use of traditional technologies such as ERP even evolving the boundaries of the firm. – to change customer relationships, internal processes, and EXECUTIVE value propositions. Other executives, seeing how fast digital • Successful DT does not happen bottom up. It must be technology disrupted media industries in the past decade, driven from the top. know they need to pay attention to changes in their industries now. • Focus on the “how” more than the “what.” The most successful transformations we have seen focus as much SUMMARY How can senior executives successfully lead digital transformation? (or more) on how to drive change as on the detailed While many experts urge companies to get started on the digital content of the change. A compelling transformative transformation journey, few tell how to do it. In this report we vision, with related engagement, governance and KPIs share the findings from a global study of how 157 executives in will allow people throughout the enterprise to identify 50 large traditional companies are managing – and benefiting new “whats” to meet or extend the vision. from – digital transformation. We will describe the elements of successful digital transformation and show how to assess your • Successful DT comes not from creating a new firm’s digital maturity. organization, but from reshaping the organization to take advantage of valuable existing strategic assets in new Our research shows that, although large traditional firms ways. are truly different from digital entrants, many are starting to transform their businesses successfully through digital • Companies can do much more to gain value from technology. Specifically, investments they have already made, even as they envision radically new ways of working. • Companies face common pressures from customers, employees and competitors to begin or speed up their Despite the hype around innovative digital technologies, most digital transformation. However they are transforming at companies still have a long way to go in their digital transformation different paces with different results. journeys. Leadership is essential. Whether using new or traditional technologies, the key to digital transformation • Successful digital transformation comes not from is re-envisioning and driving change in how the company implementing new technologies but from transforming operates. That’s a management and people challenge, not just your organization to take advantage of the possibilities a technology one.4 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 5
  • 4. Many popular stories of digital – and benefiting from – Digital transformation involve digital start- Transformation. We are working to ups or high-tech firms such as understand how digital technology is Amazon, Apple, or Google. Executives changing the business of large leading in traditional companies often find firms. these examples hollow. Big traditional companies, with decades of history Phase 1 of this multi-year study is an and legacy, are simply different from exploratory investigation involving these newer digital entrants. Other 157 executive-level interviews in stories focus on exciting initiatives 50 companies in 15 countries (see by traditional companies, but are Figure 1). These companies are large, anecdotal and do not show how those with typically $1 billion or more in companies implemented the change. annual sales. We conducted in-depth These examples may be good triggers interviews to qualitatively explore the for other companies to take action, but nature of the digital transformation they give no advice on how or whether phenomenon with real executives in to do so. real companies. To provide balanced perspectives, approximately half of With that in mind, MIT Center for the interviewees are business leaders Digital Business and Capgemini such as CEOs, line of business Consulting set out investigate the ways managers, marketing heads, or in which large traditional companies COOs, while the other half are IT and around the world are managing technology leaders. Figure 1: Interviews cover a broad range of countries and industries Transport Retail & Energy, Utilities1 Americas Food services and Chemical & Canada Telecom, Media, and Entertainment 12% 30% 6% 12% Services 20% 54% 22% 16% 8% 12% 8% Europe Asia Pacifi c Pharmaceuticals Manufacturing Government Financial & Medical & distribution Services THE STUDY6 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 7
  • 5. 2.1 Common pressures to Customers, too, are becoming more begin digital transformation demanding. An airport executive described an “ever-rising tide of The executives we interviewed customer expectations” for service and report feeling pressure to transform convenience. For a manufacturer/ from forces inside and outside the retailer, “People’s expectations have company. Figure 2 shows that most changed. They want to be more in charge. executives expressed at least moderate They expect that we know them more... pressure to change. Employees are their online behavior is developing asking why they cannot collaborate expectations and behaviors that they apply with coworkers the way they can in other contexts as well.” with friends. One executive quoted younger employees as saying “Come Nearly every executive (72 percent) on. I know the company’s more than cited competitive pressures to change. 100 years old, but our IT capabilities This relates closely to increases in the don’t have to match the age of the pace of business. Respondents rated company.” Other employees are the current pace of business relative Executives rated incorporating their personal practices to five years ago as 5.6 on a scale from into their work lives without waiting the pace of business for corporate practices to catch up. 1=very much slower to 7=very much faster. Most indicated the pace will compared to five According to one CIO, “Officially iPads continue to increase, leading to further are prohibited by our policies. Yet 50 years ago as percent of our employees are using them pressure to transform their businesses. While several executives indicated 5.6 out of 7* at work.” this was “the new normal” for their *Scale: 1=very much slower than 5 years ago, 7=very much faster than 5 years ago Figure 2: Pressures for change* High Medium2 72% 70% M M 32% H H M H Customers Competitors Employees * Percentage of companies experiencing moderate or high pressure to transform from customers, competition, or employees as mentioned by their executives. Some firms mentioned more than one pressure. COMMON PRESSURES; DIFFERENT RESULTS8 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 9
  • 6. Case Study industries, others expressed concern or other technology-enabled changes, that the acceleration would not be but obtained only basic levels of value HOTELCO: FINDING NEW OPPORTUNITIES sustainable. from the investments. They can obtain much more value by continuing the FOR DIGITAL TRANSFORMATION Executives on average rated their effort – envisioning new capabilities and ACROSS THE ENTERPRISE H innovation culture at only 4.2 on a process changes to reap larger returns 7-point scale. Although few companies from their foundational investments. strive to be as high as seven on the Manufacturers’ ERP systems have otelCo is one of the world’s ten largest hospitality scale, none of the executives felt their improved process efficiency and are companies. The firm constantly strives to improve innovation culture was as strong as it providing better financial data for operational efficiencies and customer service both within should be. strategic decisions, but companies have and across properties. The firm’s loyalty program is the not yet retrained buyers in how to use centerpiece of the company’s approach to understanding, Some executives expressed other, less the information in negotiating with serving, and selling to customers. common, pressures. Globalization suppliers. Retailers and other service is a driver for seven firms. These firms are gathering detailed information HotelCo executives, who have always believed in companies have a strategic need on buyer behavior, but lack the analytics the power of technology to improve processes and to expand globally or are facing capabilities to truly understand the increase customer intimacy, see further opportunity for digital transformation. pressures to generate information and power of the data. A hospitality Opportunities exist not only in new technologies such as social media and process synergies across their global company is conducting experiments mobile, but also in the firm’s more traditional areas like transactional IT and enterprises. Executives in three firms in mobile marketing in two different analytics. HotelCo is actively pursuing digital transformation in many areas and mentioned M&A as a pressure to business units, and building digitally- is working to innovate further. Because HotelCo experiences organizational and transform. enhanced customer service apps in IT challenges common to many large global enterprises, it seeks to take a rational,Executives rated another, but is not conducting a unified well-defined approach to its digital transformation initiatives wherever possible. 2.2 Different digital digital transformation of the customertheir innovation transformation speeds and experience. HotelCo has created opportunities for digital transformation in three areas: onlineculture as 4.2 on a different results presence, mobile customer engagement, and internal operational processes. These companies are gaining some7-point scale. A few companies in our study are using value from transforming parts of their Online: HotelCo continually evolves its online presence. It has integrated the digital technologies, old and new, to truly businesses, but are only part of the way website presence of all its properties on a common platform, enabling marketing transform their businesses. However, toward achieving the potential of digital across properties within a market. It also added new capabilities. For example, these companies are in the minority. transformation. Still others have not property managers using the firm’s corporate digital marketing tools can control yet begun their digital transformation their property content, e.g., events, independently of other properties, while not Despite internal and external pressures, journeys. having to build and maintain their own online capabilities. Further extending very few businesses are gaining the full online capabilities, HotelCo has begun to implement social media and mobile value of technologically-enabled change, In the following sections, we will marketing capabilities. Employees actively monitor social media for negative even with technologies they already describe how firms are digitally information and can respond. However, organizational questions remain about own. Many companies we interviewed transforming, the challenges they are how to improve the response capability as volumes continue to grow: “Who took on the significant effort and facing, and the levers executives can use handles it? Marketing? Product support? Customer support?” expense of implementing ERP, CRM to drive digital transformation. In addition, HotelCo is integrating social media information onto its websites. The website allows user comments on select pages, and the firm is working to extend comments to additional pages. HotelCo is also incorporating third-party social media onto the site. For example, ratings feed directly into property web pages, despite the initial hesitation of some property managers. “First off, this conversation is happening and most of the customers are now savvy enough they’re going to tripadvisor anyway. Let’s bring the content right to our site, positive or negative. Customers see that and they say ‘OK, well this10 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 11
  • 7. is an honest assessment from people like myself….” The marketing people have well-defined purpose, the firm is taking a slow approach to widespread internal found that such content is much more compelling than internally generated use of social media instead of targeted efforts. information. The firm is midway through a set of initiatives aimed at rationalizing processes Mobile: Realizing that most customers now carry cell phones, HotelCo has across the enterprise. When complete, HotelCo will have a set of shared services made mobile a key part of its marketing strategy. The company offers multiple that are available to all properties, but which can be tailored by properties for smartphone apps and is making preparations for a future in which more people their own use, much as the online platform is today. IT, while a significant access sites via mobile than from a personal computer. enabler of the firm’s capabilities, remains a challenge as the company changes. For example, the loyalty database is not optimized for multi-channel interactions, HotelCo actively engages in mobile marketing. The company realizes the making it difficult to integrate information that arrives from, or is sent via, customer intimacy it can achieve through mobile because customers react multiple media. Another challenge is integrating information and processes from to messages almost instantly. SMS and WAP sites are a core part of mobile acquired companies into the firm’s core IT backbone. marketing because of their ubiquity. The different properties are in charge of their own mobile marketing messages, but the messages are delivered through a At HotelCo, analytics is “something we do a ton of.” Executives are proud of unified corporate-level system. the firm’s ability to understand drivers of customer and operational metrics. HotelCo is now investigating how to move analytics capability further out to the The company is also experimenting with location-based services. Innovation edges of the company. However, executives expressed the desire to make good activities that initially focused on embedded devices and RFID have been choices about where to apply analytics. Analytics is “absolutely a different way facilitated by mobile phones. For example, customers arriving at some properties of thinking… we don’t need every role to do it, but we definitely want the skills can receive mobile coupons for restaurants, shows, and other services in the in certain places. “ For example, analytics may enable the firm’s customer-facing hotel. Customers can also receive personalized service and information from employees to further personalize the customer experience, but executives are digital displays located around the properties using phones or their loyalty cards. aiming to do it in a way that doesn’t disempower those workers. While mobile and location-based services show promise, they have challenges. The firm is trying to balance a tradeoff between the capabilities of location-based devices and their potential intrusiveness. For example, when building a digital customer service display, HotelCo opted to ask customers to place their loyalty cards on the device rather than have the device automatically read who they are. Additional challenges are technological and organizational. The firm wants to “support experimentation by all parties, but also clearly delineate their roles and scopes.” For example, multiple groups conducting mobile experiments meet regularly to coordinate activities. And the company is starting to examine how it coordinates its use of vendors so that knowledge is not fragmented across multiple digital transformation initiatives. Internal operations: HotelCo is investigating how to incorporate emerging technologies into internal processes. Compared with the device-agnostic policy for customers, HotelCo aims to use standard devices for internal processes and to make them available only to those employees who need mobile capability for their jobs. The firm is trying to take the same measured process to implementing social media in internal processes as it does in other areas. One obstacle stems from security and cost: free platforms are not seen as secure, and the firm wants to be careful about investing large amounts of money to in license a secure platform for an uncertain goal. Another challenge is organizational: who would own the internal collaboration process? Until there is a clear internal owner and a12 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 13
  • 8. Case Study In India, Asian Paints has begun to sell services (such as a painted wall) instead of ASIAN PAINTS: DIGITAL products (a can of paint). The services strategy has benefits beyond new revenues. TRANSFORMATION IN INDIA Selling services helps to ensure that high-end products are applied properly, A thereby improving customer satisfaction. Services also help the firm to get closer to the end-consumer, understand core consumer choices, and launch high- sian Paints, India’s leading manufacturer of coatings, end texture finishes. Additionally, having a contractor in a client’s house yields has digitally transformed its business step by step. The information that marketing staff can use to understand both customer preferences firm has been able to maintain fast growth and globalize and potential demand. Gaining better knowledge of end-customer preferences is a while increasing efficiency and reducing its impact on the high priority for the company, since its business model – operating largely through environment. retailers – means that customer involvement has been traditionally very low. In the early 2000s, as part of an effort to reduce debt The relationship between IT and business executives has traditionally been very and increase internal efficiencies, the firm implemented strong. The IT team consists of business graduates with a deep understanding an enterprise-wide ERP and advanced Supply Chain of the underlying business processes. They act as internal process consultants. Management system. This helped to create an enterprise-wide platform that was Governance is centralized and top down, with a strong executive-level the basis for further improvements in sales and customer processes. The change understanding about the importance of standardization and coordination. also liberated working capital that helped fund acquisitions in emerging markets. Although business executives suggest many digital investments, IT executives Asian Paints gained further efficiencies by linking subcontractors and suppliers on originate others such as the firm’s new analytics initiative. a B2B portal. In 2003, the firm invested in a CRM system. Corporate growth and new technology demands have increased the challenges of In 2010, Asian Paints centralized its order taking process into a single corporate digital governance. The firm is in the first year of a new portfolio planning process. call center. This change helped the company further improve operational “We have enjoyed great equity with the business because we have delivered solutions. But efficiencies and sustain its growth. In customer-facing processes, the move entailed seeing so many projects coming at us, we felt that now we need to establish processes to much more than just creating the call center. Retailers were encouraged to place match expectations and resources whilst taking on innovative projects,” says Mr. Manish orders through the call center, where they could receive a more consistent service Choksi, CIO and Chief of Strategy. level than they could through the firm’s 100 local depots. Centralized data also enabled delivery of products to large institutional customer job sites, giving the Asian Paints’ investment in strong IT capabilities, combined with organizational company a capability that competitors could not provide. and process changes intended to leverage those investments, will serve as a foundation upon which the organization can continuously envision and implement The biggest change resulting from centralizing order taking was in the way new forms of digital transformation. salespeople interacted with retailers. Liberated from routine order collection, the sales team could focus on building stronger relationships. To enable a more meaningful dialogue between the sales team and each retailer, the company provided salespeople with vital customer data in the field using mobile devices. A rollout of tablet devices, which is currently underway, will further mobile-enable the sales staff. Asian Paints’ digital transformation also extended to internal production processes. High growth in paint demand creates the need to set up new manufacturing plants every three years. Given the scale and size of these plants, the firm has begun to focus on creating highly automated plants. Automation has led to greater scalability, better quality and stronger safety and environmental protections. The new plants are fully integrated from an information management perspective. Data from shop floor control systems and automated warehouses are linked seamlessly to the ERP. This has helped to further sustain the firm’s operational efficiencies.14 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 15
  • 9. The companies interviewed are moving are changing. These nine elements forward with digital transformation form a set of building blocks for digital at varying paces and experiencing transformation. Currently, no company varying levels of success. Some are in our sample has fully transformed transforming many parts of their all nine elements. Rather, executives organizations while others are still are selecting among these building doing only the basics. Others are blocks to move forward in the manner encountering organizational issues or that they believe is right for their other challenges that prevent them organizations. The tenth element– from transforming successfully. digital capabilities – is an essential enabler for transformations in all areas. Analysis of the interviews shows clear patterns. Executives are digitally In this section, we explore how transforming three key areas of their companies in our study are enterprises: customer experience, implementing each transformational operational processes and business building block. Subsequent sections models (see Figure 3). Within each examine adoption of four key of the three pillars, different elements technologies and then common Figure 3: Building blocks of the digital transformation Customer Operational Business Model Experience Process Customer understanding Process digitization Digitally-modified businesses • Performance improvement • Product/service augmentation • Analytics-based segmentation • New features • Transitioning physical to digital • Socially-informed knowledge • Digital wrappers3 Top line growth Worker enablement New digital businesses • Digitally-enhanced selling • Working anywhere anytime • Digital products • Predictive marketing • Broader and faster communication • Reshaping organizational • Streamlined customer processes • Community knowledge sharing boundaries Customer touch points Performance management Digital globalization • Customer service • Enterprise integration • Operational transparency • Cross-channel coherence • Redistributing decision authority • Data-driven decision-making • Self service • Shared digital services Digital Capabilities • Unified Data & Processes • Business & IT Integration • Analytics Capability • Solution Delivery THE SHAPE OF DIGITAL TRANSFORMATION16 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 17
  • 10. challenges that interfere with digital educational digital tools aimed at A medical device salesforce is processes through a digital plug- transformation. The paper concludes helping clients invest more safely. replacing in-person interactions with in. A retailer automatically loads with a set of key levers senior These tools, while not selling the firm’s digital interactions. When visiting a customer’s last online shopping executives can use to successfully products directly, aligned closely with a doctor’s office, a salesperson list into its e-commerce site. This transform their organizations. the firm’s reputation for conservatism leaves an iPad with video and other streamlines the shopping process, and safety. information on new products. The allowing customers extra time to 3.1 Transforming customer aim is to get the doctor’s attention look at other products. Customers experience Companies are also building new and gain a 10 minute conversation can then decide whether to use home online communities to advise and when the salesperson returns to delivery or a drive-through service build loyalty with clients in medical, retrieve the iPad. with a specific pick-up time. A Customer understanding real estate or financial services mortgage company also developed an products. Others are building products Better understanding helps firms integrated multi-channel experience Companies are starting to take that improve branding in lifestyle to transform the sales experience. to help investors set their realistic advantage of previous investment communities. A consumer sports Companies are integrating customer expectations quickly. Then, processes in systems to gain an in-depth equipment manufacturer enables purchasing data to provide more can cross-sell or up-sell products. understanding of specific geographies individuals to publish their sport personalized sales and customer and market segments. performance to communities and stay service or even to offer customized Customer touch points connected with other customers who product packages. One executive Other firms are exploring social Customer service can be enhanced have similar interests. commented “Analytics help us to segment media to understand customer significantly by digital initiatives. Fast our clients and to connect SME offerings satisfiers and dis-satisfiers. A and transparent problem resolution Many firms are building analytics and clients in a predictive way.” A mortgage executive noted “We builds trust for customers. A bank capability to understand customers in hospitality firm engaged in location- launched a non-profit real estate established a twitter account to answer more detail. Some insurance firms, for based marketing uses analytics to community to help our customers. As client complaints quickly, helping example, are improving their portfolios send personalized mobile coupons an unplanned benefit this helps us to customers avoid going physically to and cost structures through analytics- to customers as they near a facility understand them better. We launched a branch. This digital initiative also based underwriting and pricing. Other and can track uptake in real time. A special products, such as a special loan leveraged an expert community, companies are conducting analytics- mortgage firm is setting up a CRM offering for divorced people, following allowing crowd sourcing with several based experiments to drive customer strategy to link customers to local real several customer questions.” employees and other customers. behavior. In one case, a restaurant firm estate references. This system proposes is actively conducting experiments new offers in real time via the internet. In addition, companies are learning to Companies with multiple channels to in pricing and promotion across a set promote their brands more effectively the customer are experiencing pressure of franchised stores. The experiment Other firms are using concept stores through digital media: to provide an integrated experience. dynamically adjusts product prices as flagships for their digital selling in response to demand, weather, innovations. A mortgage company A hospitality executive commented “I • A medical device firm is launching think consumers still respond in the same inventory levels, and proximity to offers investors an integrated process a social media campaign to promote way, but consumers are now looking in so closing time. combining real estate and bank a radically new class of products in many different places that’s it’s now hard services with external services, and an online community of medical to get that message across efficiently.” Top-line growth showcases the overall process in a specialists. Executives expect Many firms, especially in retail and concept megastore. A bank created awareness to grow in weeks rather Companies are using technology financial services, are making strong a concept store in a major city to than years. to enhance in-person sales inroads in integrated multichannel innovate customer relationships and conversations. Financial services offer a different experience. Customers activity. However, multichannel • A media company has teamed with firms are using tablet-based services require envisioning and could connect their experiences in product manufacturers for social presentations instead of paper-based implementing change across customer concept stores to social community media-based brand enhancement slide decks to make sales pitches. experience and internal operational initiatives like Facebook. tied to in-person events. Some are going beyond. Insurance processes. Many retailers now offer firms are introducing mobile tools Some firms try to make the life of home shopping with the option to • After the 2009 economic downturn, to help sales people and customers receive products by mail or in a store. the customer easier, simplifying their a financial firm built a set of engage in analytics-based planning.18 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 19
  • 11. However, problems remain as, Process digitization Worker enablement they are in the office, sit near people for example, one retail executive with whom they are temporarily described customers being angry that Companies historically have used Once-novel technologies such as collaborating. Meanwhile, the firm’s customer service representatives in automation to make processes more mobile e-mail, collaboration tools, collaboration and networking tools a store could not access online order efficient and scalable. ERP for example and video conferencing have now allow employees to talk with anyone history. has enabled significant efficiency and become the norm in many companies. in the company from wherever quality gains in core transactional, Employees routinely collaborate they are sitting. This is setting the Some firms are moving beyond simple financial, and supply chain processes. with people whom they have never stage for further changes related to multi-channel models to enable new An insurance firm has created a central met in person, in regions they have globalization. forms of digital strategy. A mortgage digital platform for core claim processes never visited. Mobile devices allow company, for example, is offering and deployed the model across several employees to stay connected with the In a broader sense, digital B2C offerings in one channel to countries. Employee self-service systems, office at all hours and to work from transformation replaces limited one- complement its existing B2B offerings especially in areas like HR, are also home when not able to be in the office. way vertical communication with in another. It supplements the becoming widespread. Individual level work has, in essence, broad communication channels that multichannel experience through a been virtualized – separating the work are both vertical and horizontal. CxOs new type of storefront. Some firms are going beyond simple process from the location of the work. can engage in 2-way communication automation to gain additional benefits. quickly at scale. Employees can Several companies are offering self- Automation can enable companies to Some companies are starting to collaborate in ways that were service via digital tools. These tools refocus their people on more strategic examine new possibilities for previously not possible. The tools allow the customer to save time, while tasks. A manufacturer has begun to virtualizing individual work processes. that virtualize individual work, saving the company money. Classic centralize the HR function, allowing A financial services firm rearranged while implemented for cost reasons, mobile apps allow bank customers to economies of scale through self-service its headquarters so that nobody had have become powerful enablers for access account information or media while freeing HR people to “focus on an assigned desk, even the CEO. knowledge sharing. Salespeople and customers to have electronic rather enlarging manager skills, rather than counting Employees now work from home front line employees, for example, are than paper subscriptions. Many firms days off.” A specialty materials company one or two days per week and, when beginning to benefit from collaborative are now offering customer apps to has automated many R&D processes. enhance customer touch points. In Automation allows researchers to focus a hospitality firm, smart phone apps on innovation and creativity rather than are linked to the customer’s profile, repetitive efforts. It also creates streams Figure 4: Digital transformation creates a virtuous cycle of knowledge sharing enabling integration across SMS, of data that can be useful in later data apps, and social media efforts. A mining efforts. dge sharin media company offers apps with geo- owle g Kn localization and augmented reality to New technologies are extending this trend help customers find interesting places of gaining benefits beyond efficiency. A CxOs to visit and provide special offers via paint manufacturer has created fully- vouchers and e-couponing. automated plants that significantly reduce Communication at scale labor requirements, improve product 3.2 Transforming quality and enhance environmental, Virtualization of work operational processes health, and safety performance. An Remote working, Collaborative tools, Knowledge platforms, Cloud Computing apparel company has moved to digital Although transformed customer design processes when collaborating with Internal experiences are the most visible – and manufacturing partners. Going digital Crowdsourcing arguably the most exciting – aspects eliminates most need to ship physical Employees of transformation, firms are also prototypes back and forth, reducing the realizing very strong benefits from product development lifecycle by 30 transforming internal processes. Kn percent. It allows the firm to be much owl edge sharing more agile, changing designs quickly in response to market changes.20 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 21
  • 12. tools in which they can identify 3.3 Transforming business being a global assembler of investment 3.4 Digital capabilities experts and get questions answered in models products. An airport authority is real time. They are also increasingly aiming to become the owner of a Digital capabilities cut across all three gaining access to a single global view traveler’s end to end process. It will pillars. They are a fundamental building Digitally-modified businesses of the company’s interactions with a enable for travelers an integrated block for transformation in customer customer. multichannel experience including experience, operational processes, and A media executive said: “We’ve information on airplane traffic and business models. Although CIOs and realized that if we don’t transform the Performance management reservations, duty-free shopping existing IT departments are leading way we do business, we’re going to die. promotions and other benefits. digital initiatives across companies, It’s not about changing the way we do Performance transparency was technology but changing the way we do they hire extra skills or implement a key highlight mentioned by business.” It is finding ways to augment Digital globalization separate units to coordinate digital several executives. Executives in physical with digital offerings and transformation. most companies say they are more to use digital to share content across Firms are increasingly transforming informed when making decisions. organizational silos. A grocery firm is from multi-national to truly global Unified Data and Processes Transactional systems give executives staying true to its traditional business, operations. Digital technology deeper insights into products, regions, but using digital to transform a new coupled with integrated information The most fundamental technology and customers, allowing decisions growth business. “After two years, is allowing firms to gain global need for digital transformation is a to be made on real data and not our e-commerce platform is bringing us synergies while remaining locally digital platform of integrated data and on assumptions. “Instead of simply 20 percent of our new clients and our responsive. They are, in the words processes. Large successful companies revising last year’s plan, we can use data traditional clients are consuming 13 of many executives, “becoming more often operate in silos, each with their to make better decisions about how we percent more on average.” centralized and decentralized at the same own systems, data definitions, and prioritize.” This is happening in both time.” These companies benefit from business processes. Generating a internal processes and customer- Other firms are building digital or global shared services for finance, common view of customers or products facing processes. The level of detail service wrappers around traditional HR, and even core capabilities like can be very difficult. Without the is also increasing, allowing managers products. A national post office is manufacturing and design. Global common view, advanced approaches to compare status across sites or creating a free digital mailbox attached shared services promote efficiency and to customer engagement or process reallocate product manufacturing to each physical mail address that reduce risk. They even promote global optimization cannot occur. capacity in ways they could not do companies can use as a substitute for a flexibility. One manufacturer can shift before. It is also prompting additional person’s physical mailbox. A business production around the globe with The difficulty of operating without a data gathering and integration as credit firm is developing a digital only a few days’ notice in response to platform becomes greater as companies managers start to see the value of business for some credit products that interruptions or excess demand. engage in multi-channel operations. being better informed. requires less involvement than their Many companies, for example, cannot traditional high-touch offerings. For local managers, the pain of link customers’ activity in stores or Beyond being better informed, centralization is balanced by bank branches to their activity on the digital transformation is actually efficiency benefits and ability to web or mobile. An executive in one New digital businesses changing the process of strategic focus on more strategic activities. company, echoing statements by many decision-making. Top executives in Local managers, empowered to others, said “data integration is the biggest Companies are introducing a medical device manufacturer used make decisions autonomously, also challenge in setting up our digital services: digital products that complement the company’s existing collaboration gain a broader view of the business self-services, web-strategy and running traditional products. A sports apparel tools to extend strategic planning through centralized data. They have partnerships.” manufacturer started selling GPS and sessions from 12 people to more than the freedom to tailor business to their other digital devices that can track 300 of the firm’s top managers. This local needs, but the responsibility Unified data and process is one reason and report on a customer’s workout. enabled better input into the process to act in the interests of the larger that web-based companies are able Other companies are changing and better uptake of the vision after enterprise. Globalization also entails to gain advantage through analytics business models by reshaping decisions were made. a different approach to policy: “fewer and personalization much more their boundaries through digital. A mandates from headquarters, but more readily than traditional firms. For many mortgage company is moving from guidelines.” traditional companies, the first step in being a link in the value chain to preparing for digital transformation22 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 23
  • 13. Figure 5: Digital platform implementation* Analytics capabilities trying to conduct digital transformation. These companies often have issues Information management and analytics common to those that do not govern IT Single integrated No platform were highlighted as major goals by well, namely complex IT architectures, digital platform executives across industries. Several firms unintegrated data, and processes that are echoed the statement of an executive not well-enabled through technology. 39% 47% who stated “It’s time to harvest the data and turn it into insights.” Combining integrated In contrast, companies with a solid IT/ data with powerful analysis tools is seen business relationship are in a solid as a way to gain strategic advantage over position to begin digital transformation. 14% competitors. A bank executive stated: “IT has been brought closer to business during the last five Companies are engaging in analytics years. It is very important to success because at varying levels of intensity. Some are many of the important transformations just beginning to make better use of in our business enabled by technology.” Multiple digital platforms * Percentage of companies in each digital platform state among the 50 interviewed for the study the data available from transactional With trust and shared understanding, systems. They are making more-informed IT executives can help business and better decisions and reacting more executives meet their goals, and business to invest – sometimes heavily – in but not to emerging digital technologies quickly to changes in their operations. executives listen when IT people suggest integrating data and processes across and practices. Mobile and social media, Companies with integrated data are able innovations. Where strong relationships the enterprise. In this respect, firms that for example, often require iterative to engage in more powerful analytics exist, executives on both sides of the have already implemented ERP and CRM approaches to learn about what will work strategies. An Insurance company is able relationship are willing to be flexible in systems are a step ahead of others. in the market or workplace. They also use to do predictive sales, helping salespeople creating new governance mechanisms or technology that is not commonly available to target products that a specific type of digital units without feeling threatened. Unified platforms can also help in enterprises. Analytics activities customer is likely to buy. A hospitality to manage the centralization/ often require specific knowledge and company and a restaurant firm are In most firms, digital transformation decentralization challenge in temperaments that typical IT developers using analytics to target promotions is being led by CIOs. Where the globalization. Hospitality firm properties do not possess. and conduct pricing experiments. A relationship is strong, this approach can can use centralized platforms to deliver media company is using web analytics be very effective. At a manufacturer, locally-customized information while Some IT departments have established to provide real-time KPIs to customers the CIO is also head of strategy. He led not having to support the technology. special units to build emerging in order to demonstrate the added-value aggressive investments in technology A media company common technology technology skills and methods. Others of the firm’s products. Several insurance that generated tremendous benefits for platform allows the firm to share content have innovation units to identify how new firms are using analytics to underwrite the firm (see case study). The CIO of a at worldwide level, offering media content technologies and practices might change policies, enabling better pricing and global services firm also manages the developed in one part of the world to the business. Still others look outside the reshaping the firms’ risk portfolios. firm’s e-commerce operations and its be used easily in other markets and firm for help. 78 percent of the companies However, all executives also mentioned innovation activities. Other companies publishing formats. interviewed hire vendors to address large that building analytics capability was place responsibility for digital in another projects or those that require advanced difficult, requiring skills and culture unit or executive who works closely with Solution delivery technologies. Vendor partners can be very change in addition to investments in the CIO. An apparel firm established a effective, but some executives expressed information technology. new digital division that works closely Companies also need the capabilities concern about over-reliance on vendors. with the existing IT department. A to modify their processes or build new A hospitality executive firm said that Business and IT integration business directory company hired a methods onto the data and process knowledge of key emerging technologies second CIO to focus on transformation- platform. Solution delivery requires is spread across silos of external vendors, Digital Transformation, more than related activities, working in concert with effective methods and strong skills. Most making integration difficult. Several other business changes, requires strong the CIO who focused on keeping the IT departments have solid development executives described knowledge gaps integration between technology and firms’ existing platform functional. methods in place. However, those that existed after they ended a vendor business executives. Companies with methods are often geared to well-defined relationship. a history of strained IT and business requirements and mature technologies relationships are handicapped when24 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 25
  • 14. Case Study Case Study BNP PARIBAS: DIGITAL TRANSFORMATION MOVING FROM SEPARATE TO IN AN INTERNATIONAL BANKING GROUP INTEGRATED DIGITAL INITIATIVES IN AN I APPAREL MANUFACTURER A nternational banking group BNP Paribas grew rapidly in the past decade by acquiring banks in several countries. The firm is now aiming to solidify its international position, aligning processes at global scale. The group strategy is n apparel company has built its successful business by defined around three key points: internationalization, process rationalization combining good products with compelling branding and a set and maintaining trust with the customer. of high-profile celebrity relationships. Its entrepreneurial spirit has led to growth in product silos. The firm spent the past Crisis, regulation and technology adoption by customers and employees are ten years improving internal processes and its connections to pushing BNP Paribas to consider digital transformation. Executives envision manufacturing partners. digital as a way to reshape boundaries, focus on profitable business areas and streamline middle and back office processes, but BNP Paribas is only part-way through The firm’s entry into digital occurred in three successful its transformation journey. The first step of the transformation has focused on reach: but disconnected areas. In customer experience, the firm creating a multichannel strategy that includes the web as well as emerging technologies developed a customized products offering. Customers can go online or work with an such as mobile and social media. BNP Paribas is today in a transition phase to reach the advisor in a store to configure products in exactly the color schemes they wish, and second step of the transformation: integrating transactions across channels and building then receive the products by mail. This process modified existing customer-facing a conversation with clients via an external CRM and analytics-based tools. BNP Paribas and manufacturing capabilities to deliver a new customer experience. Separately, is currently developing a new digital platform leveraging the firms various distribution the company made forays into social media. It built communities around different assets into multichannel processes and tools. categories of product, allowing customers to communicate with the company and each other via Facebook and Twitter. It also launched a few digital products meant To improve customer experience, the firm launched multiple initiatives. Mobile apps to augment the lifestyle needs of customers, such as GPS devices for athletes. provide a substitute to using the internet website. The firm increased customer touch points via social media, providing customer service on twitter and advertising on In internal operations, the product design area moved from paper-based design Facebook. In 2010, BNP Paribas launched a new branch model. This Concept Store processes to a fully digital process. Although some designers initially experienced will help develop new ways of interacting and selling products to the customer via new trouble in the transition, the process has yielded important benefits. Shipping technologies and self-service areas. The firm’s next step is to start a conversation with digital designs instead of physical prototypes between headquater and suppliers has customers on social media. This will require building social-customer knowledge, via cut the product development cycle time by months. It also allows the company to an external CRM, and increasing analytics capability. In 2011, BNP Paribas launched adjust designs much more easily in response to manufacturing issues or changes new mobile bank services in partnership with a telecom operator. This was more than a in customer demand. In addition, the firm can use digital designs to promote new simple website substitution. It was a switch from traditional business model to a digital products to retailers differently, gaining attention and orders much earlier and one, with a different cost and revenue structure. making retailer promotion easier than was possible with a physical design process. From an operational process point of view, BNP Paribas is still at the beginning of its The company has recently recognized the need to begin coordinating its digital transformation journey. The firm is focusing on security improvements and cloud efforts. It has created a digital division to deliver all digital efforts for the firm. solutions, which executives see as key differentiators in the industry. The objective of This included recruiting key senior executives with experience in different process rationalization will be to have end-to-end digitized processes in an integrated aspects of digital business management, and building an innovation unit charged platform, which could generate international economies of scale. with identifying new customer and process approaches that cut across the firm’s traditional silos. The digital division does more than enable and capture synergies A group digital committee sponsored by general management elaborates the group digital between initiatives. It also opens up new possibilities for taking the firm from a strategy and encourages digital best practice sharing. product-focused to a customer-centric approach. BNP Paribas’ next digital objectives are to move into mobility, reach the next level of customer intimacy and develop a strong analytics strategy. Challenges on this road are to strengthen digital coordination at the group level and to balance digital and physical in the front-office perspective26 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 27
  • 15. The interviews asked how four digital Customer-experience applications of technologies – analytics, mobile, social media are more common than social media, and embedded devices internal uses, reflecting awareness of – are being used in the enterprise. the fact that consumers are rapidly All of the executives we interviewed adopting these technologies, and were aware of these technologies, well as some skepticism about how although few considered themselves effective they will be for internal experts. Most could describe how the collaboration. Analytics, too, is more company used the technology, or how common in customer experience it might or might not be important in applications, reflecting organizations’ the future. increasing efforts to target marketing activities and personalize customer Figure 6 shows how often firms experience better than in the past. in the study used each digital Mobile is used widely in both technology to improve customer domains. experience and operational processes. Analytics, Mobile and Embedded devices are still an Social Media are widespread in these emerging technology. Less than one- large organizations, despite their fourth of companies are using these relative newness to most industries. Figure 6: Applications of digital technology in customer experience and operational process Customer experience Operational process 72% 66% 66% 62% 62%4 52% 24% 14% Analytics Mobile Social Media Embedded Devices Note: Percentage of firms using digital technologies in their customer experience and operational processes. DIGITAL TECHNOLOGY USAGE28 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 29
  • 16. devices. Most executives commented with a different technology and a process through technology. analytics to engage in location-based that they did not yet see applications process. Blackberries and iphones A power company and a paint marketing with its customers. for the technologies. In the case of substitute for PCs in both internal company provide full information RFID, they mentioned the cost of the operations (email) and customer to field workers on mobile devices, Figure 7 shows examples of how RFID tags or the difficulty of using experience (web access). Many eliminating the need for workers companies are using the four digital them in busy, machine-filled spaces. employees use both methods to spend time in the office at the technologies. Figures 8 and 9 show Many executives did express interest depending on their needs at a point start and end of shifts. A pharma the extent to which each is being in using embedded devices in the in time. Analytics, in the form of company’s social media physician used to improve customer experience future. basic business intelligence tools community enables the company to or internal operations. The most and detailed reporting, substitutes learn about issues and opportunities common usage of each technology Companies varied greatly in the ways for similar information sources by allowing doctors to talk with one is in substitution -- Mobile email they used the four technologies. We available through other methods. another. replaces desktop email, Facebook identified three levels of usage: Substitution is useful when it pages and ads substitute for web. improves performance over, or is • Transformation is fundamentally However, companies are making • Substitution is using new more convenient than, traditional redefining a process or function inroads in each technology. Roughly technology as an alternative or methods. through technology. A paint 30 percent of firms are engaging in replacement for substantially company uses a combination of extension or transformation with the same function that the • Extension is significantly improving embedded devices and analytics to Mobile, Social, or Analytics. Although enterprise already performed performance or functionality of create fully-automated factories that usage of embedded devices lags the deliver higher efficiency, quality other technologies, some companies and environmental protections are already extending or transforming Figure 7: Applications of digital technologies in the enterprises we studied than manually-tended factories. their processes through these devices. A hospitality firm uses predictive • Predictive promotion • Insurance underwriting transformation • Location-based marketing • Remote-control mining operations Transformation • Social lead generation • Social-enabled product development • Smart grid devices • Automated factories Figure 8: Use of digital technologies to transform operational processes • Deeper customer segmentation • Production/Supply chain optimization • M-Commerce • Mobile salesforce enhancements 2% Extension • Pharma / medical device firm • Internal collaboration communities 8% physician communities • Consolidated status monitoring for 14% 18% • Phones as payment devices medical devices 4% 28% 16% 40% 36% 4% • Basic reporting or BI • Basic reporting or BI 22% • Simple apps • Working anytime, anywhere, anyplace Substitution • Facebook pages and ads • Employee blogging, internal Facebook 6% • Cards replace passwords • Building access control Analytics Mobile Social Embedded Media Devices Customer Operational Substitution Extension Transformation Experience Process Note: Chart plots extent of transformation each firm is attaining in operational processes using a particular technology. Many companies had multiple applications of a technology. For each firm, only the most transformative usage is counted.30 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 31
  • 17. Figure 9: Use of digital technologies to transform customer experience These types of multi-technology solution are signs of a maturing approach to digital transformation in enterprises. Executives are beginning to envision possibilities that cross 4% organizational and technological 18% silos – letting the possibilities drive 14% technology and organization rather 22% 4% than the reverse. 18% 20% 36% 12% 36% 28% 8% Analytics Mobile Social Embedded Media Devices Substitution Extension Transformation Note: Chart plots extent of transformation each firm is attaining in customer experience using a particular digital technology. Many companies had multiple applications of a technology. For each firm, only the most transformative usage is counted. The interviews show an interesting for customer-facing applications. trend toward identifying transformative opportunities that • An apparel company aims to combine multiple technologies with integrate its social and web-based new management practices. marketing approaches with its digital product design capabilities • Remote-control mining equipment and embedded devices in products and automated paint factories to be more responsive to emerging include both mobile and analytics consumer preferences. technologies to improve production significantly. • Concept stores combine multiple technologies to test or deliver a new • Mobile phones are increasingly buying experience. becoming seen as embedded devices32 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 33
  • 18. What is causing firms to have difficulty was astonished that none of the senior starting or benefiting from digital executives were aware of TripAdvisor.” transformation? Challenges occur in all Executives need not be aware of all three elements of the transformation changes in industries outside their process: Initiation, Execution, and own, but knowing major digital Coordination. consumer services products such as Tripadvisor, Facebook, or eBay can be 5.1 Initiation challenges very useful fodder for envisioning how executives might change their own Lack of impetus businesses. Impetus often starts at the very top Regulation and reputation of the firm. Executives are justifiably skeptical of the benefits of emerging Many executives, especially in technologies. The experience of healthcare and financial services, are e-commerce taught many executives being careful about mobile and social that a fast follower approach can technologies because of security and sometimes be lower risk than a privacy concerns. In our sample, 47 pioneering approach. However, this percent of companies stated a high skepticism can result in bureaucratic or medium concern over regulatory investment processes that prevent the impacts on their potential digital firm from engaging in useful digitally- initiatives. A lost or hacked mobile enabled experiments and business device can give outsiders access changes. A manufacturing executive to confidential data on patients or stated: “We’ve always been fairly slow in customers. This has reputational adopting technology because we more or repercussions well beyond any less have the ambition of not being first regulatory penalties. A financial ...but we have become even slower at the services executive said “The last thing same time that technology development that any of us want to do is put the has been speeding up. So, the gap has reputation that we built for more than increased.” 100 years on the line because someone lost a device.” A medical executive had a5 Company performance can also slow similar concern: “We’ve done a good job the move to transformation. If the of becoming a trusted partner to a lot of company is not experiencing pain, the governments and customers. If we violate perceived risk of change may outweigh that trust, if we have one bad apple, you the potential benefits in the minds of can throw the whole thing out the window many executives. A manufacturer said very quickly.” “At the end of the day, we don’t want to stay on the edge of the latest trend. It’s not Companies, especially in financial really our business.” services, are taking a slow approach to social media for fear of regulatory An other concern issue can be lack sanction. For example, blogs, tweets of awareness of the opportunities or and other messages are typically threats of digital transformation. An not reviewed as carefully as other executive in one of the world’s largest corporate communications, but may financial companies said “When I be construed as advice by readers. A made a presentation to the board, I financial company executive said “We CHALLENGES ON THE ROAD TO TRANSFORMATION34 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 35
  • 19. jumped into going ahead with Twitter and Executives in our sample used a Figure 10: How companies justify their digital transformation investments YouTube and Facebook without knowing set of four methods (see Figure what people are actually saying about us. 10) to justify investment in digital Now we have started to monitor it.” transformation initiatives. Some initiatives can be justified in the While these regulatory concerns are traditional way, through quantified ECONOMIC: BURNING PLATFORM: real, they need not prevent companies economic business cases. Audio and Traditional capital “bet the business” from moving forward. Two financial videoconferencing technologies, for budgeting processes investments made in emphasizing measurable response to rapidly services firms and one medical example, can be justified on travel cost or revenue declining performance device firm are already successfully cost savings or other efficiencies, improvements. in the existing selling products and services with as could a financial firm’s move to businesses tablets instead of paper. Several a transformed office environment. firms have implemented tools to Larger process transformations also protect confidential information on can cite clear returns, such as when an STRATEGIC FOUNDATION LOW-RISK EXPERIMENT: INVESTMENT: phones and tablets or to wipe the apparel firm justified its move to digital investments structured devices in case they are lost. Nearly design processes through cost savings initiatives undertaken to with limited size and risk all of the regulated companies we and significantly shortened product provide important to learn about organizational technologies, interviewed are establishing policies development cycles. capabilities, usually customers, or potential for employee use of personally owned without a quantified capabilities. financial business case or mobile devices and for using social However, other investments are media. Many firms we interviewed truly bet-your-company, do-or-die are using Facebook and Twitter propositions, in which the financial for brand building. Meanwhile, an case is one of survival. Firms facing insurance firm is helping agents build a burning platform often make large their presence on LinkedIn, and a changes without a strict financial medical device company plans to business case. A business directory often funded “below the radar”, using would be funded on its own merits, use Facebook as a radically new way service, realizing their paper-based the spending authority available to a but the initial investment to set up the to reach the specialists who use its model was declining rapidly, brought senior executive. shared service was seen as a strategic products. in a new CEO to lead a radical foundation investment. Similarly, digital transformation. An airport Other initiatives are funded as several firms hired senior executives Unclear business case authority invested heavily in digital strategic foundation investments that or content experts to get started in the transformation when governments build infrastructure and capabilities to analytics and social media spaces. The Healthy skepticism or regulatory stated that they would withdraw 60 be used elsewhere. These investments new leaders must financially justify concerns are legitimate reasons percent of public funding within 5 rarely go through the rigor of their existence in the future, but the to be careful when investigating years. developing a quantified business case, initial investment was considered as new technologies. Certainly not all but rather are undertaken as strategic capability-building. digital initiatives make sense for all However, as with many innovations, bets. Collaboration tools and internal companies (or for all employees in digital transformation investments knowledge bases, for example, were When enabling larger transformations, the company). One CIO, discussing often have less clear business cases often justified as relatively low cost/ executives often use a combination of mobile-enabled process changes, than these examples. Many companies low risk infrastructure investments approaches over time. Analytics is an said “At the end of the day, we’re still considered their initial forays into to smooth cooperation and synergies interesting example. Specific customer looking at value and cost. For some folks, Facebook or Twitter as simple among a distributed workforce. segmentation or predictive analytics the most cost-effective technology is still experiments built with limited funding However, some foundation investments efforts can often show a business the desktop.” However, these reasons and risk to investigate the potential of are larger. A manufacturing firm case. Marketing experiments either should not prevent companies from the new media. Similarly, initial mobile invested in building a shared digital generate higher sales or they don’t. investing in potentially valuable apps or pilot experiments with mobile division to provide capabilities and Insurance analytics either generate experiments or transformations. marketing have been scoped to limit support to digital initiatives across a better risk/return profile or they cost and risk. These experiments are the firm. Each new digital initiative don’t. However, firms often require36 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 37
  • 20. an investment in infrastructure – Missing skills Figure 11: Organizational gaps in digital transformation integrating data, buying tools or hiring expertise – before they can start to Analytic-based decision-making does conduct more measurable analytic- not always come naturally to people based experiments. For a restaurant accustomed to using “professional 77% firm considering analytics, the return judgment” or other methods to make for hiring new skills and conducting decisions. A grocery CFO lamented Missing initiatives was initially unclear, but “We have all of the information in place, Skills senior executives believed it was a but we can’t get those guys to change the 55% bet worth making to understand way they work.” Emerging technologies Culture better sales trends and start to are another area where skills may be Issues engage in dynamic localized pricing scarce internally, especially in areas 50% experiments. such as mobility and social media. Ineffective IT Regardless of how an initial investment Firms are filling gaps by hiring experts is justified, the interviews highlighted or working with vendors. Skills that an important point. The real value are in short supply in one industry Note: Percentage of firms encountering gaps in skills, IT or culture as mentioned by their executives. Some firms are encountering more than one gap. of digital transformation comes not can sometimes be found in others. A from the initial investment, but from restaurant executive said “We have been continuously re-envisioning how hiring analytics experts from other firms. capabilities can be extended with We give them a chance to play a more grocery executive mentioned that the vision and frequent communication as digital technology to increase revenue, senior role than they could in their previous firm’s information-based benefits are essential for driving culture change. cut costs or gain other benefits. Initial employers, where their skills are more reduced by managers who cannot investments, made with or without plentiful.” A medical company executive think differently about how they make Labor relations issues are a stickier a financial business case, become said “We missed the boat on social media. decisions. Other executives find that source of culture change issues. foundational capabilities on which We just hired a global CMO to take care they must work to change the culture A business directory company, additional investments can be made. of our social media strategy.” Meanwhile, when empowering front-line workers. even in the midst of a successful When it first centralized order taking although the executive recognizes Executives shared that these workers, digital transformation, continues to and implemented an ERP system, that smart embedded devices will be accustomed to taking orders from experience resistance from unions. executives at the home improvement essential to the firm’s future product headquarters, needed help to adopt In an airline firm, flight employees products company did not envision strategy “We have nobody to look into the idea of using new information embrace digitally-enabled changes, but the many successful business model that.” A hospitality firm, aiming to capabilities to make autonomous ground employees, fearing job cuts, changes they would be able to add in limit long-term HR investment while decisions. Meanwhile, previously- are strongly resistant. These labor- the future. But, to their credit, they experimenting with new technologies, autonomous country managers in related culture issues can be overcome. continuously envisioned what else they is working with vendors who have the globalizing firms often require coaching Consider two airport operators from could do with their digitally-enhanced right skills and are willing to work for to grow comfortable working in an different countries. Both feel pressure foundation, and earned higher and reduced rates to get a foot in the door. environment of centralized shared to change from governments, airlines higher returns as a result. However, it is encountering knowledge services and standardized processes. and customers. One company feels integration issues as key skills are “stuck” in their environment, unable to 5.2 Execution challenges located in different vendors. One lever for change is to hire new move because of a culture that resists leaders. These people, while bringing changes. The other operator overcame While a top-level impetus for Culture issues new skills, also bring new vision that these cultural issues. It is now starting transformation is important, it is often helps change the culture in their areas. to partner with airlines to develop not enough. Interviewees cited three Cultural issues can also become a A business directory company, apparel initiatives such as self-service drop-off, missing elements that threatened to bottleneck for digital transformation. company, and restaurant firm have all common check-in desk, and selling prevent them from moving forward A major cultural issue is related to benefited from this approach. However, online airport-related (as opposed to successfully (see Figure 11). changes in jobs due to automation whether leaders come from inside or airline-related) products to customers. or information empowerment. A outside, senior executives cite a strong38 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 39
  • 21. IT Difficulties A strong IT/business relationship can be very helpful in transformation. Digital initiatives are built on a solid The CIOs in a hospitality and foundation of technology-enabled medical devices firm have very processes and data, as well as the strong relationships with other analytics, solution delivery and senior executives, enabling them to relationship capabilities to create suggest and deliver important digital and extend that platform (see Figure initiatives. A financial services firm has 5). Information technology is a consolidated operations and IT under fundamental part of the firm’s digital a single senior executive, enabling the capabilities. However, many companies firm to envision and execute process find their information technology and technology changes in sync. infrastructures and capabilities severely lacking. According to the 5.3. Governance challenges head of the disability business for a major insurer, “We have through the Benefiting from transformation last 50 years proliferated our IT systems typically requires changes in processes and applications. We don’t retire systems. or decision-making that span We just add on top of them, which traditional organizational or functional creates a tremendous amount of expense structures. Transformation, like any and complexity.” Data issues are felt major organizational change, requires especially keenly in marketing. One top-down effort to help employees marketing executive, echoing the envision a different reality, and sentiment from many we interviewed, coordination to ensure the firm moves said “It is very difficult to get a good in the right direction. understanding of the customer when transformative vision of the future, establish a picture of what is legitimate customer data is spread across so many managers in the rest of the firm will and help to delegitimize local behavior systems.” tend to locally optimize within their that detracts from a more global 40 percent of the own spheres of authority. approach. Beyond technical issues in IT, relationship issues can be difficult. companies envision An overarching vision can span More common is a vision that does not A history of poor business / IT a radical digital organizational boundaries. Firms go far enough. Insurers and financial relations is a difficult foundation for undergoing globalization are services firms are using tablets to the collaborative work required in transformation envisioning themselves as a single replace paper in sales presentations, digital transformation. One business entity with local offices, rather than a but have not yet integrated all executive said “IT is a mess. Their costs collection of independent units. The customer information or sales tools are not acceptable. They propose things in restaurant firm has a vision in which into the new mobile or tablet format. 9-10 months where external firms could do Incremental vision every outlet will learn from innovations Many companies are using video and them in 3-9 weeks. We started offshoring in other outlets. An airport authority collaboration tools to reduce travel our IT, and now our IT guys are trying While incremental investments can is re-examining the boundaries of its costs, but a financial services firm to change.” A CIO described how he be effective starting places to build business to consider whether it should and a consulting firm are building communicates about the possibilities of digital capability, the largest benefits of take on some functions traditionally capabilities to enable flexible global digital transformation, but none of his digital transformation come from truly performed by airlines and vice versa. collaboration among employees business executive peers (interviewed transforming activities. This requires The apparel firm is starting to envision working either from home or an office. separately) seemed to find the a more radical vision – one that offers linkages between design, marketing, Marketing units are trying experiments discussions credible. a view of a different way of working, and operations so that each can rapidly with social media and location-based not just a faster or more efficient one. adjust to what is learned in another marketing, but a restaurant company Unless senior executives establish a area. These overarching visions conducts pricing and promotion40 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 41
  • 22. Case Study experiments in one site and then marketing, and direct-to-consumer, rapidly shares the learning across the is now investing in coordination. It CREDIT FONCIER: EVOLVING AS A VALUE company. Overly-limited visions can recently created a digital division to CHAIN ORCHESTRATOR IN MORTGAGES F dramatically affect the value obtained ensure that all of its digital efforts – from each digital transformation marketing, production, design and investment. even digitally-enhanced products – are acing increasing pressure from competitors, regulatory changes, being coordinated. The significant and customers, Credit Foncier decided to incorporate digital Coordination issues investment is expected to pay strong transformation into its business model. The firm, one of the dividends from better customer top France’s largest mortgage companies, aimed to augment Many firms fail to transform because experience, stronger knowledge of its strong B2B capabilities by building a B2C experience that of coordination difficulties across rapidly-changing customer preferences, extended well beyond its traditional boundaries. It would business units or processes. Units are and synergies between internal orchestrate the entire customer experience of buying a property. able to make progress in their own functions. This required envisioning a whole new way of operating, and areas, but are unable to influence then taking steps to experiment with offerings and educate both employees and practices in other units. The paint A further concern arises from customers. manufacturer could not have continued coordination issues between new and to benefit from transformation without traditional businesses or processes. A customer can go online or use a self-service kiosk in the concept “megastore” top-down coordination of internal This channel conflict is real, and to learn how much she is qualified to borrow, or investigate what properties she and customer-facing processes. Others can be very painful for managers in is qualified to buy. The company can refer her to real estate brokers or provide are learning this lesson. A hospitality traditional units that lose when new financial products as part of the process. When the customer is ready to buy, executive mentioned “We need to start businesses gain. It often must be she returns to the store or website to start the process of obtaining a loan. At rethinking our strategy. The approach of addressed through an overarching any point, she can talk to an advisor who will help her in the process. The full throwing was everything out there and vision. In a business directory firm, experience is digitally enhanced, including color-coded maps, analytics-aided thinking that something is going to stick is that vision was to have 80 percent of suggestions, and even a RFID-based key that the customer can use to save and not the way to go.” business online. In a credit firm, the retrieve her information in the store. digital division envisioned as small An apparel firm, after conducting and complementary, so that it did Internally, the entire process is integrated with analytics and a CRM system separate initiatives in design, not compete directly with the offline connecting elements of the B2C experience into the firm’s other processes. The business. branch advisor can follow each customer through the process, offering help as needed. The company augments its existing assets by partnering with other firms from the long-standing web of business relationships that the firm has built in its B2B business. The company also hired new skills to augment its existing staff capabilities. The project, which was under consideration for 6 years, took 2 years to be implemented. While the megastore concept has been successful, and the company is considering opening a new store in the near future, the company’s focus remains on growing its successful B2B business. The vision for B2C is to augment existing B2B offerings and hedge against competitive pressure in the consumer mortgage space. As the concept matures, the firm will begin offering other products through the channel.42 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 43
  • 23. Case Study Operational processes:AIRCO: DIGITAL TRANSFORMATION INAN INTERNATIONAL AIRPORT The firm’s biggest operational challenge is to have one digital strategy for all of its airports. It plans to provide every customer in every airport with the same services.A The firm has started its platform consolidation and partnered with foreign airports to provide more information to travelers. It also made services such as drop-off or irCo manages operations for several of a country’s major check-in available to the airlines, taking advantage of the interconnectivity of the airports. Following market evolution, the government firm’s digital platform. demanded that AirCo reduces its dependency on a public subsidy that funded more than half of the firm’s operations. Digitization of operational processes is also improving the communication between The challenge of converting a former government agency to a employees. They are able to deliver a better service to the end customer. 75 percent profitable company was exacerbated as economic challenges of workers are already using mobile devices as they move through the airport. reduced air travel volumes and made airlines more aggressive in negotiating the fees they paid to AirCo. The company does not have a social media policy, but has created guidelines. It encourages employees to be active on Facebook and Twitter. The firm has alsoTo gain new revenues, AirCo is transforming its business model. The firm’s vision launched a collaborative community platform to understand travelers’ experiencesis twofold: to gain efficiencies by unifying processes across airports, and to focus on better and to be able to adapt its services.serving end customers instead of only the airlines. Implementing the transformationalso requires engagement to help employees adopt more business-oriented AirCo’s digital transformation journey, currently underway, is seen as critical toperspectives. According to executives, however, the transformation benefits from helping the firm reach financial autonomy. Executives started with a clear visiontwo strategic assets: the firm’s ownership of the airports (and thus control of how that leveraged key strategic assets, hired a new CIO, and then created governanceproducts and services are sold), and the employees’ collaborative culture. mechanisms to improve the chances of success. These leaders also started early to build digital engagement with employees to change the firm’s culture. ExecutivesAfter unifying the management team, AirCo focused on rationalizing and believe the firm is well positioned to implement the remaining elements of theintegrating processes and IT infrastructure. It launched a digital transformation digital transformation.program owned by a CIO board that would coordinate and support the digitalprogress of the airports. The objective of the program is to allow the companyairport to follow each customer as she moves through an airport, providing serviceswherever possible.Customer experience:The firm envisions increasing revenues from fliers to overcome diminishingrevenues from airlines. It plans to take advantage of a major change in customers’behaviors: travelers are increasingly their own travel agents. In this world ofself-service, the company believes it can help customers to reduce the stress ofgoing to the airport, navigating traffic, checking in, and getting to the right gatethrough the use of a website or mobile apps. Customer apps already exist for thetwo biggest airports of the country, providing both the customer and the companywith information about the trip. The firm supplements its digital services withinformation agents who roam the airport with tablets to support and guide travelers.AirCo will augment the apps with core business services like car rental, parking,and train tickets. The firm is also developing airline partnerships to provide airlinetickets on the website. © 2011 MIT Center for Digital Business and Capgemini Consulting 44 © 2011 MIT Center for Digital Business and Capgemini Consulting 45
  • 24. Successful digital transformations These elements work together in in our study used a common set of an iterative approach – constantly elements (see Figure 12). Each is a communicating and listening to lever executives can use to initiate and re-envision and further implement drive digital transformation in their new types of digital transformation. organizations. Leaders diagnose the Senior executives drive digital potential value of existing corporate transformation through an iterative assets and build a transformative three-step process: vision for the future. Then, they invest in skills and initiatives to make 1. Envision the digital future for your the vision a reality. Fundamental firm. to the transformation is effective communication and governance to 2. Invest in digital initiatives and ensure that the firm is moving in the skills. right direction. 3. Lead the change from the top. Figure 12: Digital transformation framework Transformative Digital Vision Strategic Assets Products & Partnership Customer Sales force content network knowledge Point of sale & distribution channels Product innovation Brand Culture Digital Building Blocks6 Customer Operational Digital Engagement Digital Governance Business Model Experience Process Customer Process Digitally-modified understanding digitization businesses New digital Top line growth Worker enablement businesses Customer touch Performance Digital points management globalization Digital Capabilities Digital InvestmentHOW CAN YOU MAKE YOUR DIGITAL JOURNEY SKILLS INITIATIVESSUCCESSFUL? Iterative Transformation Roadmap © 2011 MIT Center for Digital Business and Capgemini Consulting 46 © 2011 MIT Center for Digital Business and Capgemini Consulting 47
  • 25. 6.1. Envision the digital Interviewees, without being asked, market, and a manufacturer of • Customer knowledge: Across the future for your firm often identified important assets expensive long-lived transportation years, companies had gathered that could help or hinder their products is building services that more and more knowledge about Many digital transformation initiatives transformations. These strategic assets digitally diagnose and help to customers. Today, some are fail to capture all of the value available include: maintain those devices. reaching a point where they can to them because their vision is not start envisioning the next step, transformative. Only the top of the • Sales force: A strong source of • Product innovation: A high-tech monetizing this relationship to company can create a compelling customer loyalty is the set of materials firm has engineering launch new products, enhance vision of the future and communicate relationships cultivated by a strong capabilities that few other firms customer relationships or augment it throughout the organization. sales force. Digital initiatives can match in its niche markets. It sales via customer-segmentation. Successful digital transformation does can threaten to disintermediate has the opportunity to use digital not occur bottom up. The true value salespeople, leading to channel transformation to connect its • Culture: Some firms are able to of transformation often comes from conflict. However, digital engineers more closely with global use culture as a powerful asset. seeing value across silos and then transformation can also be used to manufacturers. An apparel firm has Executives in a manufacturing firm helping everyone else see that value. enhance those relationships, such as world-class fashion design talent. It found that the company’s historically a logistics firm that can use demand uses digital technology to connect entrepreneurial culture made digital data in one part of the world to designers closer to manufacturers, transformation easier. Employees Identify and diagnose strategic provide customers in another part speeding the design-to-market cycle were willing to embrace operational assets of the world with forecasts of trends time while enabling designers to changes and strategic partnerships that will hit them soon. In addition change designs at will. as part of the new vision. An Large companies survive major to sales people, front line employees airport authority noted that the transitions not by radically replacing often are an important face to • Partnership network: Strong nation’s collegial culture made it the old with the new, but rather the customer, as well as having partnerships can be a key lever easier to engage in transformation. by transforming some of their important knowledge about how for transformation. Networks of Meanwhile, another airport authority existing resources and competencies business is done. exclusive or trusted relationships found that its unionized culture for the new environment. While can enable firms to combine restricted change. this sometimes involves changing • Point of sale and distribution different expertise and deliver leadership or replacing assets, it channels: Stores are often a strong powerful new operating models. A Create a transformative vision usually involves reassigning or source of location-based advantage, mortgage company, in switching adapting assets and realigning or even in a digital world. In other from a single value chain link to a Successful digital transformation re-motivating employees. However, cases, firms with a strong warehouse value chain orchestrator, benefited comes from envisioning new ways it also requires understanding when and supply chain capabilities are greatly from its partnership assets. that digital technology improves traditional assets and sources of able to use their distribution assets Partners could have refused the idea performance and customer satisfaction, advantage no longer provide value. to disrupt the advantage of local out of fear of direct competition, not just trying to find a use for the competitors. but they cooperated in the project new technologies. As we described Digital transformation is the because of years of working together earlier, many companies that are doing same. Your company will thrive in • Products and content: Media firms on many financial products and experiments in mobile marketing, digital transformation not by doing find their content is a strong transactions. social media, or analytics find that something completely new, but by asset that can be reused in digital they can be quickly stymied by taking advantage of your powerful environments. Product companies • Brand: Companies with a strong organizational boundaries or by capabilities to gain advantage through often find they can build new digital brand are able to leverage it in culture issues. Often the problems digitization. But that requires business around strong products. An related offerings. Through mobile arise through vision focused on thoughtful diagnosis: what assets will electronics manufacturer is building web, social media, new digital technology rather than different ways be useful in a digitally transformed energy management solutions businesses and other digital of operating. More often they are world? around its highly successful devices initiatives these companies can limited by a vision that is incremental for the commercial buildings extend and strengthen their brands, instead of transformative. building additional points of contact with customers.48 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 49
  • 26. Start with an overarching vision of specific business units, while others business case may not be completely capabilities quickly while helping the what, not the how: “customer extended across the enterprise. clear. It may be a series of low- existing employees understand what it experience transformation” not Another element of the vision is the risk experiments that lead to a means to work in an analytics-driven “mobile marketing” or “social media.” relationship between new and existing larger investment. It often becomes environment. An apparel company Then support the message through businesses. Companies in the study a strategic bet that only senior hired two senior people who were consistent communication. Each had visions that included launching executives can make. As with any already well-versed in social media specific element of the transformation new businesses, digitally improving investment, digital transformation marketing and online commerce, can then be placed in a context of existing businesses, or creating an requires understanding the need asking them to help the firm build the broader vision. This will also overarching vision for a transformed for investment, managing risk, and skills in those areas. highlight when issues such as a single company. making the changes necessary to customer profile or a coordinated capitalize on the change. In addition, While outsiders can be helpful to messaging approach may be 6.2 Invest in digital there is often tremendous value to jumpstart the change, companies important in reaching the vision. initiatives and skills be gained from making the most of also found insiders very helpful. In investments you have already made. particular, it was very useful to put Our interviews showed visions Transformation does not happen senior insiders in roles that required that were internally focused, without investment. Digital Find the right skills coordinating across units and changing externally focused, or bridging the transformation is no different. The cultures. Meanwhile, other firms found two. Some visions were focused on investment may be large, and the Respondents nearly universally that they could move junior level fast- described the difficulty of finding the risers into roles where their energy and right skills to manage new initiatives resilience was essential for success. The or to change work methods. While hospitality firm moved two relatively some were able to reassign or retrain young managers into roles in mobile existing employees for the new vision, marketing and digital innovation. most found it necessary to acquire These two people oversaw rapid skills from outside. experimentation in their areas using very small staffs and a set of vendors. Find good vendors for technical skills, but Both reported to a much more coordinate them. When investigating senior executive who could manage a new technology, it is often easier coordination across their units and to hire vendors than to hire people. with the rest of the firm. Companies can hire vendors for an emerging technology experiment, Invest in initiatives that advance and then easily end the contract at the vision the end of the experiment. However, coordination is still necessary or Very few examples of successful knowledge will remain stuck in digital transformation were fully vendor silos. planned in advance. In many cases, executives built basic capabilities for Hire some stars. Analytics skills are one need, and then incrementally becoming more plentiful, but are not added capabilities. A set of relatively distributed evenly across firms. One incremental changes added up to a firm hired good analytics leaders radical transformation. A medical from firms where these skills were device firm implemented relatively more plentiful. The new people, who incremental digital changes to were skilled but experiencing limited enable knowledge sharing and upward growth in their firms, were videoconferencing, but then used them able hit the ground running. The to radically transform its strategy- new hires created initial analytics making processes. An apparel firm50 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 51
  • 27. conducted digital transformation 6.3 Lead the change from dialogue around the transformation. awareness through communication, initiatives in product design and in the top Wikis, discussion forums, blogs and but have increased the level of marketing, and is now considering so on are easy tools to support such transparency and trust through this initiatives to link the two. Top-level vision rarely translates to conversations. open dialogue. local-level action unless reinforced In other cases, radical changes were through top-down communication and Enterprise 2.0 tools are powerful Establish digital governance just the start of even more radical governance. Consistent engagement, tools to help mobilize and align changes later. Executives envisioned backed with appropriate coordination, the workforce towards digital Bottom-up digital transformation a radical transformation of the KPIs, and incentives, make the difficult objectives. Most organizations is rarely successful. With the right company, invested in key initiatives, process of transformation possible. have already implemented some vision and leadership, opportunities and then opportunistically made of these technologies but are not from digital transformation build additional changes that advanced exploiting them to the full in their on each other to create new ways of Engage the organization the vision. In addition to the home communication efforts. Successful working that would not have been improvement products and directory organizations have not only created possible earlier. However, they require As in most business transformation, the services companies, a financial role of communication is paramount services firm is an example. Radically in effecting change and reducing changing its headquarters design organizational resistance. People caused people to rethink the way they can be a much bigger obstacle to work. Instead of working in defined successful digital transformation than offices in headquarters, employees any complex technology. Successful began to envision their work companies in our study recognized happening independently of location this by communicating early their – moving desks as needed, working digital vision and using technology to on mobile devices, collaborating mobilize their workforce. There are two virtually, or working from home. Then main characteristics of communication it was only a minor step to improve in a digital world that are making the way the firm collaborated globally. mobilizing the workforce easier and more impactful than traditional As a leader, build a roadmap for your methods: initial changes. Make it clear how the initial roadmap connects to your • Moving away from “cascading” broader vision for the company. But information through traditional then be open to ideas that will build hierarchical channels toward on that foundation for even more enterprise-wide large scale change later on. It requires judgment, communication. On top of traditional but also strategic bets. Not every tools such as e-mail, new possibilities idea will be a winner. By promoting have been opened up with webcasts, a strong vision of a transformed internal social networks or PC-based organization, you put in place a video conferencing. process through which smart people throughout the company can help you • Moving away from a one- to implement and extend that vision way “broadcasting” model of in the future. But then you must be communication toward offering open to hearing and sponsoring those people in the organization the extensions. opportunity to engage in a real52 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 53
  • 28. top-down ambition setting to put the One executive stated “There’s an Coordinating mechanisms: Successful (see Figure 13). Figure 14 shows organization in motion, coordination intense focus on the transition to digital companies in our study had strong that central coordination is the most to turn disconnected or poorly- because, from the very top, the CEO has leadership for digital initiatives. Most commonly used model in our study, considered digital investments into mandated that 20 percent of our sales will had to adjust their organizations but all models are relatively common. true platforms for transformation and be digital within 5 years. To achieve that to accommodate the new digital We found no single model that clearly monitoring to ensure that progress is we will have to change the culture and ambitions. As the CEO of a digital outperforms others. However, we do being measured and managed. the way the organization operates.” In a business unit explained “We said we’d see clearly that companies lacking financial company, the CMO stated find the balance between central and effective digital coordination do not Ambition setting: Once an organization “Unfortunately, digital transformation was de-central by creating one central role get the value possible from their has defined its transformative vision, not a priority of the board a year ago. We for coordinating the digital strategy. We digital transformation initiatives. leaders must translate that vision into had 2-3 percent of digital revenue. Now this appointed local Chief Digital Officers a set of ambitions and targets that has changed and we have set a challenging CDO in local business units reporting to Monitoring progress through KPIs: signal to executives and employees target of 15 percent for all divisions.” both the CEO of the business units and a Once the ambition is clearly stated “what good looks like.” In our study, Ambitions need not be only about CEO of an overall digital business unit. and the organization structure is some of the companies most advanced revenue changes. A home improvement In one of our business units we moved aligned, leaders need to ensure that in their digital transformation had product firm sets targets related to the CEO to the position of Chief Digital a transparent set of metrics and KPIs established a clear set of ambitious health, safety and environment, as well Officer. It was a promotion. So the Chief are in place to constantly monitor KPIs to drive the desired results. as to scrap reductions in plants. Digital Officer CDO role is more a and review progress towards that business role than a technology role.” ambition. As an executive stated Figure 13: Coordination models for digital transformation “To ensure alignment with our digital We observed in our study that not strategy, we monitor our progress through all the companies use the same a transparent scorecard where everyone Silo Central coordination structure. We found four models for can see a quantified assessment of our coordinating digital transformation progress and take actions against it.” Initiatives and skills Initiatives and skills located in HQ BD HQ located in business business units units No enterprise-level Enterprise-level coordination coordination of Figure 14: Usage of digital coordination models in the study BU 1 BU 2 BU 3 BU 1 BU 2 BU 3 locally-led digital initiatives op op op op Hub Silo BD BD 24% Hub Global 18% Digital Strategy set Senior-level Digital by a dedicated Officers in each BU business unit HQ HQ Digital BU provides 40% Digital BU provides core-business core-business solutions and 18% solutions and support Digital BU Digital BU support BU 1 BU 2 BU 3 Local business units Local business units must use central BU 1 BU 2 BU 3 must use central resources resources BD BD BD Global Central coordination op op op B op op op D D D Note: Percent of firms using each coordination model for their digital initiatives. B Budget Owner D Strategy & Digital roadmap op Deliver Digital Operations54 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 55
  • 29. Case Study Through digital, PRISA faces cannibalization of its traditional business. The PRISA: DRIVING DIGITAL firm still has profitable traditional activities and there is a temptation to focus TRANSFORMATION ACROSS A GLOBAL on retaining this current business. But the transition is being reinforced in communication from the top of the organization. For example the top management COMPANY at PRISA TV talks about the evolving interactive landscape of digital video P technologies, not just about the traditional set-top-box model of pay TV. Education is also moving fast. “It’s not only taking a book and making a textbook that’s digital. RISA is a Spanish-language-based global media organization It’s reinventing education. It’s defending the old business through the power of digital with businesses spanning television, press, radio and educational opportunities.” publishing. As with many media organizations, PRISA was faced with a rapid transition to digital in most of its core businesses, PRISA is engaged in a strategic project with technology partners “to be able to deliver and a move away from more traditional media. According to a any type of content anytime, anywhere, any device.” This digital platform will be fully senior executive, “We realized early that if we don’t transform the centralized and support information sharing in the group: “It will enable them to way we do business, we’re going to die. It’s not about changing the way get a South African interview of Christiona Ronaldo for El Pais local, and to publish it in we do technology but changing the way we do business.” The digital Spain. Of course, the system will preserve some exclusive content for a certain time.” With transformation was mandated from the top of the organization. The CEO, in laying this digital platform, “PRISA will be able to offer a global platform to its customers with out his vision of the future, demanded that the firm substantially grow its digital one identity -- fifty million customers’ credit cards -- and start giving them a consequent business from less than 1 percent to 20 percent of its sales within a span of a few ecosystem. No other media companies have yet done that.” years. For Mobile, the company faces market issues as executives believe the advertising The CEO instituted a radical change for the highly decentralized organization market is not well educated on the new cost structures. PRISA launched by creating a centralized digital unit to coordinate and assist in building digital some initiatives like an app for El Pais that was recognized as the world’s #1 businesses. The appointment of a global Chief Digital Officer from outside the media-related iPad apps in April 2011 (see organization, who reports directly to the CEO of the Group, was a major signal. imonitor™-releases-list-of-best-publication-apps/). Senior executives were appointed to the position of Chief Digital Officer in each division, coordinating with the central digital unit. The Chief Digital Officer of each In Social Media, the firm is doing some experiments. PRISA has been on Twitter division was responsible for the implementation and coordination of the digital for a couple of years and does some advertising on Facebook. The company has transformation of their division. This was a very senior role that had not existed integrated its digital products more tightly with social media and intends to use before. For example, social media information to drive content consumption. The company views social media, mobile, and video to be key drivers for future growth. The company’s digital transformation was designed around four key pillars: PRISA also envisions several new business opportunities “So if you’re watching, for 1. Creating a federated digital organization example, a soccer game of Real Madrid and you see players running around, you’re going to have technology that understands the numbers on the back of the shirts, and it can go up 2. Creating the next generation digital distribution and monetization platform to the database, and then they can say ‘give me the stats on these players’ and pull them up to ensure that all of their global assets could be shared effectively across on the right side of screen. That’s an interactive content analytics play. And maybe you can businesses, and new products could be easily created tweet about it right there.” 3. Injecting new digital skills and experience from outside the company PRISA’s transformation challenges have mainly been around cultural resistance, the differing speeds of transition in each business unit, digital skills building, and 4. Encouraging digital experimentation (e.g. social media strategy) and innovation allowing for experimentation while keeping the integrity of the unified strategy. The (e.g. crowd sourced textbooks) in the business lines. firm’s top three challenges for the future are breaking risk aversion, streamlining the decision making process, and executing technology on pace to support all of The company monitors the progress of its digital transformation through clear and the needed changes. Digital will also enable PRISA to expand to other European transparent performance management scorecards. The digital unit is simultaneously countries and to deepen its Latin American ties. driving innovation (an investment model), sales strategy (a P&L model) and service delivery (shared service model).56 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 57
  • 30. 7.1 The What and The How set of elements implemented by the organization, and the resources used The digital transformation framework to do so. Together they represent, has many moving parts because much in essence, the digital intensity of the is required to drive a successful digital organization. transformation. However, executives can think about the figure in terms of The How: The outer boxes, consisting two main areas (see Figure 15). of digital vision, governance and engagement, are the ways in which The What: The inner boxes, leaders will drive the transformation consisting of strategic assets, the nine to a successful outcome. They serve digital elements, digital capabilities, as a form of scaffolding through and investments, are the shape of the which leaders can ensure that the transformation. They are the specific elements of the “what” are built effectively and that the organization Figure 15: The What and the How of Digital Transformation Transformative Digital Vision Strategic Assets Products & Partnership Customer Sales force content network knowledge Point of sale & THE “HOW” IS THE distribution channels Product innovation Brand Culture WAY THAT SENIOR THE “WHAT” IS SPECIFIC SET OF EXECUTIVES DRIVE DIGITAL CHANGE THROUGHOUT TRANSFORMATION THE ORGANIZATION. Digital Building Blocks ELEMENTS THIS INCLUDES IMPLEMENTED BY CREATING AND Customer Operational THE ORGANIZATION, Digital Engagement7 Digital Governance COMMUNICATING Business Model Experience Process INCLUDING THE VISION, ESTABLISHING STRATEGIC ASSETS GOVERNANCE AND AND DIGITAL MEASUREMENT Customer Process Digitally-modified INVESTMENTS THAT MECHANISMS, AND understanding digitization businesses ARE USED TO BUILDING A CREATE THOSE DIGITAL-READY ELEMENTS. CULTURE. New digital Top line growth Worker enablement businesses Customer touch Performance Digital points management globalization Digital Capabilities Digital Investment SKILLS INITIATIVES WHAT IS DIGITAL TRANSFORMATION MATURITY? Iterative Transformation Roadmap58 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 59
  • 31. has the skills and culture to drive types of approaches to driving digital some investments without effective they can’t always build organizational value from them. It is, in essence, the transformation. transformation management in place. momentum to carry out an ambitious transformation management intensity of program. As a result, though aiming the organization. Firms in the lower left are Digital Firms at the top left are Digital to spend wisely, their careful approach Beginners. They are doing very little Fashionistas. They have implemented may cause them to miss valuable Together, the “what” and the “how” with advanced digital capabilities, a large amount of sexy digital “stuff.” opportunities that their more stylish represent the digital maturity of an although they have more traditional Some of these items may be creating competitors will pounce on. organization (see figure 14). They can digital capabilities such as ERP, internet value, but some may not. While be thought about as digital “Style” and or e-mail. Companies may be in this the digital fashion items may look Firms at the top right are Digirati. “Substance.” Firms that are mature on quadrant by choice. For example, good together, they may clash with These firms truly understand both dimensions can drive powerful executives in a specialty chemicals other items, and they rarely generate how to drive value from digital digital transformation that yields firm believe that their B2B customers synergies. Digital fashionistas are transformation. They combine a strong business value. Unfortunately, many will not be interested in social media motivated to bring on digitally- shared vision for transformation, firms in our study are mature at only or mobile technologies, and that powered change, but their digital careful governance and engagement, one, or neither. their engineering employees are very transformation strategy is not founded and sufficient investment in new effective with traditional collaboration on real knowledge of how to proceed. opportunities. Through managing 7.2 Digital maturity matrix tools. However, many companies are As a result, fashionistas may look the “how” carefully, they develop in this quadrant by accident. They are good, but rarely have much substance a digital culture that can envision Figure 16 shows digital maturity as a either unaware of the possibilities of – in terms of business value – behind further changes and implement classic 2x2, highlighting four different new digital technologies or are starting the sizzle. We see many fashionistas them wisely. Through managing the in B2C businesses, where executives “what” sufficiently, they continuously Figure 16: Digital maturity matrix (especially the marketing units) believe advance the competitive advantage they must move fast to keep up with they draw from implementing digital the fast-moving world of consumer transformation. electronics, but do not necessarily have FASHIONISTAS DIGIRATI a clear vision for how the elements will 7.3 How to assess your collectively create value. Some firms digital maturity • Many advanced digital features • Strong overarching digital vision are in this quadrant at the enterprise (such as social, mobile) in silos • Good governance • No overarching vision • Many digital initiatives level even though digital efforts in silos Figure 17 shows how companies in our • Underdeveloped coordination generating business value in may be in other quadrants. This is the study scored on an initial qualitative • Digital culture may exist in silos measurable ways case with a hospitality firm, in which assessment of digital maturity. • Strong Digital culture marketing and customer service are both relatively mature digitally, but the What is your digital maturity? Use two are not yet well coordinated. the guidelines below to assess your company. Note that digital maturity Firms at the bottom right are Digital may vary across business units, Conservatives. These represent the and will usually be different at the BEGINNERS CONSERVATIVES wise old men and women of the digital enterprise level than within silos. • Management skeptical of the • Overarching digital vision exists, world. They understand the need business value of advanced but may be underdeveloped for a strong unifying vision and for • Digital intensity: consider how Digital Intensity digital technologies • Few advanced digital features, governance and internal engagement advanced your digital capabilities • May carry out some though traditional digital activities to ensure prudent investment experimentation capabilities many be mature. are relative to competitors, or management. However, they are relative to rising expectations of • Immature digital culture • Strong digital governance across silos typically skeptical of the value of new customers and employees. How • Taking active steps to build trends, sometimes to their detriment. much are you investing in new digital skills and culture Digital conservatives understand where technologies such as mobile, the company should be going and analytics and social media? Are Transformation Management Intensity how to master digital challenges, but you launching technology-enabled60 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 61
  • 32. Case Study business changes such as location- well-articulated and shared? aware marketing or analytics- How well are you governing and PAGES JAUNES: CAPITALIZING ON informed supply chain planning? Digital intensity also depends on coordinating digital investments? How well are you helping the DIGITAL OPPORTUNITIES H your firm’s IT capabilities and the organization be ready for changes? strategic relationship between IT and non-business managers, since Using these guidelines, you can plot istorically the market leader in local advertising based most digital opportunities will your own organization on the digital on printed directories, Pages Jaunes began to experience have a significant IT component. transformation maturity matrix. Then, a digitally-induced change in its markets. Individuals if your company is not yet a digerati, looking for business providers were increasingly shifting • Transformation management take steps to address any weaknesses in from paper directories to alternative digital channels in intensity: consider how carefully your digital transformation capabilities their search for information. Facing a 10 percent annual you are envisioning and or build a roadmap to maneuver up the decline in business as its clients (typically SMEs) switched managing the firm’s move into maturity cycle. their advertising spend, Pages Jaunes saw little opportunity the digital future. Is the vision for growth in the business of printed directories. Although Pages Jaunes had some significant online activity by 2009, they needed to quickly grow their online presence to counter the decline of the printed directory business, as well as the global economic and financial turmoil. Figure 17: Distribution of digital maturity New CEO Jean-Pierre Remy convinced the organization to re-envision its business. Pages Jaunes was not just a provider of directories, but was a trusted name in the relationship business. It disseminated local information to end-users (consumers) FASHIONISTAS DIGIRATI and provided local communications services to advertisers. The firm held only a 10 percent share of its newly-envisioned market, providing scope for growth. With this new vision, the company started to identify new client needs and rapidly capture opportunities to extend its relationship brokering role from paper to the Internet. Pages Jaunes’ strategy aimed to accelerate the transformation of the business from having roughly 30 percent of its business online to 75-80 percent in 3-4 years. Elements of the transformation included: • restructuring the organization into an SME-facing Advertising group and two consumer-facing -media groups, focused on Internet & print respectively. A second CIO was recruited to lead developments around new digital technology while keeping the first CIO in charge of the existing, and still critical, IT systems. • recognizing the value of the relationships built over many years between the firm’s Digital Intensity salesforce and its thousands of clients. The firm committed to keeping as many salespeople as possible and helping them to learn to sell the firm’s new services. • substantial effort to change the culture of an erstwhile state-owned company by recruiting new tech-savvy employees and by instituting KPIs to retain focus on attention and performance. BEGINNERS CONSERVATIVES • educating clients (SMEs) about how digital possibilities could impact their own Transformation Management Intensity business and drive revenues, without losing sight of that portion of its clients’ customers who continue to rely on the print channel. Note: Digital maturity assessments were conducted by the research team using information from interviews. Vertical and horizontal lines represent median points for the two dimensions in the figure.62 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 63
  • 33. CONCLUSION • building content strength online by creating and managing websites for more than Digital technology, which transformed the media industry, • Where are the key investment areas that will maximize the 100,000 SMEs in France and Spain. The firm is experimenting with social media is now transforming the rest of the commercial world. contribution to the new vision? possibilities, 3D applications, and focusing on various other services, including Companies in all industries and regions are experimenting display, SEM, SEO, direct marketing, coupons, etc. to reach an increasingly online with – and benefiting from – digital transformation. • Can you de-risk some of the investments through audience. Whether it is in the way individuals work and collaborate, experimentation and controlled testing? the way business processes are executed within and across • building and continuing to enhance a strong online mobile brand presence, organizational boundaries, or in the way the company • What skills are missing in your digital transformation reaching number three in the marketplace after Google and Facebook in France. understands and services customers, digital technology initiatives? Do you need to hire new executives? Retrain This tactic allows the firm to spend less than before on driving traffic to its sites provides a wealth of opportunity to those willing to change front-line employees? Partner with another firm to gain (search engine marketing). their businesses to take advantage of it. capabilities? • leveraging analytics heavily to analyze audience traffic and patterns, to quantify The pressure points for change are increasing from many 3. Lead the change from the top for each advertising client the value and impact of products they purchase and to angles. Globalization is dictating efficient integration of help clients optimize media spending. businesses which can only be achieved through digital • How do you communicate the vision and engage the processes and collaborative tools. Employees and customers organization on a large scale? How do you monitor Pages Jaunes’ approach built on an already strong brand, a strong network of are starting to demand new ways of working. As competitors engagement? salespeople who had existing relationships with SME clients, strong investments in and new entrants make digitally-enabled practices a reality in content and therefore the ability to partner (vs. compete) with major search engines an industry, other firms will need to follow. • What process do you have in place to iterate the vision and like Bing and Google, and with major content sources like Facebook. strategy? Faced with these challenges, what are the key steps senior Within two years of this strategic shift, Pages Jaunes earned €1billion from online executives should take to steer their organization? • How do you coordinate investments and activities across sales at a 50 percent net margin. Online business comprised about 50-60 percent of silos? What is the best organizational model to coordinate its total business, and the firm was well-positioned to reach its goal of 75-80 percent 1. Envision the digital future for your firm. digital initiatives in parallel to the core business? online business within two years. • What assets will be valuable in a digitally-transformed • What KPIs and metrics do you need to put in place to business? monitor the progress of your digital transformation towards your strategic goals? • How can you transform customer experience? Internal operations? Your business model? • What mechanism do you use to make the necessary adjustments? • How can units work differently – and work together differently – in a more connected way? Digital transformation requires skills and influence that only senior leaders possess. Create a transformative vision that is 2. Invest in digital transformation initiatives clear and compelling to galvanize the organization. Mindfully consider what parts of your company should move – and why, • Are you getting all of the value out of your previous and when – to make it implementable. Build digital maturity technology and platform investments in ERP, analytics, in two dimensions to increase your chances of success. Then or collaboration tools? If not, what is necessary to get the take actions and monitor progress to turn your vision into foundations right? reality.64 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 65
  • 34. MIT Center for Digital Business and Capgemini Consulting Team members George Westerman, a research scientist in MIT Sloan’s Center for Digital Business (CDB), is also faculty chair for the MIT Sloan executive course Transforming Your Business Through Information Technology. George’s research examines the role of executive leaders in driving competitive advantage from digital technology. George is co-author of two award-winning books, The Real Business of IT: How CIOs Create and Communicate Value, and IT Risk: Turning Business Threats into Competitive Advantage. Prior to earning his Doctorate from Harvard Business School, he gained more than fifteen years of experience in innovation and technology management. Claire Calméjane is a Managing Consultant in the Technology Transformation Practice. She worked for the last 6 years at the Paris office and is currently visiting scientist at the MIT Center for Digital Business, working with the researchers. She specializes in Digital Transformation and IT Financial Services. She graduated from a Computer Science Engineering School and holds a Master degree from HEC Paris Business School. Special thanks to our other research team members: Greg Gimpel and Mael Tannou. We would like also to acknowledge the valuable support of a number of colleagues Didier Bonnet is a Managing Director and global head of practices at Capgemini who have either helped with the data collection or have contributed with their ideas Consulting. Didier has more than 25 years’ experience in strategy development, and insights; they are: Emmanuel Rilhac, Vincent Leonetti, Julien Pontault, Deborah globalisation, internet & digital economics and business transformation for large Soule, Michael Krauch, Cyril Francois, Martin Hanlon, Kieran Draper, Jerome multinational corporations and private equity firms. Buvat. He has authored several research articles and is regularly quoted in the press e.g., WSJ, FT, the Economist and provides commentary for broadcasters such as the BBC, CNN, Last thanks to our point of contacts who facilitated access to their clients and often Reuters and CNBC. performed interviews: Eric Lamotte, Peter Lindell, Ravouth Keuky, Jesus Viceira Didier graduated from a French Business School and holds a DPhil from Oxford Alguacil, John Varghese, Diego Mackee, David Blackwood, Benoit Pradet, Philippe University. He is based in London. David, Stanislas de Roys, Mark Hoffland, Eric Kruidhof, Ulf Holmgren, Philippe Bigot, Jari Matula, Adeline Pairault, Sebastien Blot, Sandra Lagrue and others. Patrick Ferraris is the Global Leader of the Technology Transformation practice within Capgemini Consulting. With over 20 years of consulting experience, Patrick has supported large multinational organizations in their digital strategy and transformation with a focus in Telecom, Media, Internet, Insurance and Transportation. He is an alumnus from M.I.T and Ecole Nationale des Ponts & Chaussées. Andrew McAfee, a principal research scientist at MIT, studies the ways that information technology (IT) affects businesses. He coined the phrase “Enterprise 2.0;” his book on the topic was published in 2009 by Harvard Business School Press. He has also held appointments as a professor at Harvard Business School and a fellow at Harvard’s Berkman Center for Internet and Society. In 2008, he was named the 38th most influential person in IT. amcafee@mit.edu66 © 2011 MIT Center for Digital Business and Capgemini Consulting © 2011 MIT Center for Digital Business and Capgemini Consulting 67