MITSloan                                                 MANAGEMENTDIGITAL TRANSFORMATION: A ROADMAPFOR BILLION-DOLLAR ORG...
Contents2   © 2011 MIT Center for Digital Business and Capgemini Consulting
1 The Study 	                                                                                    062 Common pressures; dif...
EXECUTIVE    SUMMARY4   © 2011 MIT Center for Digital Business and Capgemini Consulting
Digital transformation (DT) – the use of technology to radically          that new technologies provide. Major digitalimpr...
1         THE STUDY6   © 2011 MIT Center for Digital Business and Capgemini Consulting
Many popular stories of digital                     – and benefiting from – Digital                                       ...
2         COMMON PRESSURES; DIFFERENT RESULTS8   © 2011 MIT Center for Digital Business and Capgemini Consulting
2.1 Common pressures to                                                  Customers, too, are becoming more                ...
industries, others expressed concern          or other technology-enabled changes,                                        ...
Case StudyHOTELCO: FINDING NEW OPPORTUNITIESFOR DIGITAL TRANSFORMATIONACROSS THE ENTERPRISEH                        otelCo...
is an honest assessment from people like myself….” The marketing people have                                              ...
well-defined purpose, the firm is taking a slow approach to widespread internaluse of social media instead of targeted eff...
Case Study                                                                ASIAN PAINTS: DIGITAL                           ...
In India, Asian Paints has begun to sell services (such as a painted wall) instead ofproducts (a can of paint). The servic...
3          THE SHAPE OF DIGITAL TRANSFORMATION16 © 2011 MIT Center for Digital Business and Capgemini Consulting
The companies interviewed are moving                  are changing. These nine elements                                   ...
challenges that interfere with digital       educational digital tools aimed at                                           ...
A medical device salesforce is                    processes through a digital plug-replacing in-person interactions with  ...
However, problems remain as,              Process digitization                                                            ...
Worker enablement                                                they are in the office, sit near people                  ...
tools in which they can identify             3.3 Transforming business                                                    ...
being a global assembler of investment          3.4 Digital capabilitiesproducts. An airport authority isaiming to become ...
Figure 5: Digital platform implementation*                                                                     Single inte...
Analytics capabilities                              trying to conduct digital transformation.                             ...
Case Study                                                               BNP PARIBAS: DIGITAL TRANSFORMATION              ...
Case StudyMOVING FROM SEPARATE TOINTEGRATED DIGITAL INITIATIVES IN ANAPPAREL MANUFACTURERA                      n apparel ...
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
Digital transformation _a_road-map_for_billion-dollar_organizations
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How organizations reshape themselves to be successful in the digital revolution. A shared MIT and Capgemini Consulting research report.

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Digital transformation _a_road-map_for_billion-dollar_organizations

  1. 1. MITSloan MANAGEMENTDIGITAL TRANSFORMATION: A ROADMAPFOR BILLION-DOLLAR ORGANIZATIONSFINDINGS FROM PHASE 1 OF THE DIGITAL TRANSFORMATIONSTUDY CONDUCTED BY THE MIT CENTER FOR DIGITALBUSINESS AND CAPGEMINI CONSULTING
  2. 2. Contents2 © 2011 MIT Center for Digital Business and Capgemini Consulting
  3. 3. 1 The Study 062 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 India3 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 manufacturer4 Digital technology usage 285 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 airport6 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 company7 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 directory8 Conclusion 65 © 2011 MIT Center for Digital Business and Capgemini Consulting 3
  4. 4. EXECUTIVE SUMMARY4 © 2011 MIT Center for Digital Business and Capgemini Consulting
  5. 5. Digital transformation (DT) – the use of technology to radically that new technologies provide. Major digitalimprove performance or reach of enterprises – is becoming transformation initiatives are centered on re-envisioninga hot topic for companies across the globe. Executives in customer experience, operational processes andall industries are using digital advances such as analytics, business models. Companies are changing howmobility, social media and smart embedded devices – and functions work, redefining how functions interact, andimproving their use of traditional technologies such as ERP even evolving the boundaries of the firm.– to change customer relationships, internal processes, andvalue propositions. Other executives, seeing how fast digital • Successful DT does not happen bottom up. It must betechnology disrupted media industries in the past decade, driven from the top.know they need to pay attention to changes in their industriesnow. • Focus on the “how” more than the “what.” The most successful transformations we have seen focus as muchHow can senior executives successfully lead digital transformation? (or more) on how to drive change as on the detailedWhile many experts urge companies to get started on the digital content of the change. A compelling transformativetransformation journey, few tell how to do it. In this report we vision, with related engagement, governance and KPIsshare the findings from a global study of how 157 executives in will allow people throughout the enterprise to identify50 large traditional companies are managing – and benefiting new “whats” to meet or extend the vision.from – digital transformation. We will describe the elements ofsuccessful digital transformation and show how to assess your • Successful DT comes not from creating a newfirm’s digital maturity. organization, but from reshaping the organization to take advantage of valuable existing strategic assets in newOur research shows that, although large traditional firms ways.are truly different from digital entrants, many are startingto transform their businesses successfully through digital • Companies can do much more to gain value fromtechnology. 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. © 2011 MIT Center for Digital Business and Capgemini Consulting 5
  6. 6. 1 THE STUDY6 © 2011 MIT Center for Digital Business and Capgemini Consulting
  7. 7. 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, Utilities 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 © 2011 MIT Center for Digital Business and Capgemini Consulting 7
  8. 8. 2 COMMON PRESSURES; DIFFERENT RESULTS8 © 2011 MIT Center for Digital Business and Capgemini Consulting
  9. 9. 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 relativeExecutives rated incorporating their personal practices to five years ago as 5.6 on a scale from into their work lives without waitingthe pace of business for corporate practices to catch up. 1=very much slower to 7=very much faster. Most indicated the pace willcompared to five According to one CIO, “Officially iPads continue to increase, leading to further are prohibited by our policies. Yet 50years ago as percent of our employees are using them pressure to transform their businesses. While several executives indicated5.6 out of 7* at work.” this was “the new normal” for their*Scale: 1=very much slower than 5 yearsago, 7=very much faster than 5 years ago Figure 2: Pressures for change* High Medium 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. © 2011 MIT Center for Digital Business and Capgemini Consulting 9
  10. 10. industries, others expressed concern or other technology-enabled changes, that the acceleration would not be but obtained only basic levels of value sustainable. from the investments. They can obtain much more value by continuing the Executives on average rated their effort – envisioning new capabilities and 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 scale, none of the executives felt their improved process efficiency and are innovation culture was as strong as it providing better financial data for should be. strategic decisions, but companies have not yet retrained buyers in how to use Some executives expressed other, less the information in negotiating with common, pressures. Globalization suppliers. Retailers and other service is a driver for seven firms. These firms are gathering detailed information companies have a strategic need on buyer behavior, but lack the analytics to expand globally or are facing capabilities to truly understand the pressures to generate information and power of the data. A hospitality process synergies across their global company is conducting experiments enterprises. Executives in three firms in mobile marketing in two different mentioned M&A as a pressure to business units, and building digitally- transform. enhanced customer service apps inExecutives rated another, but is not conducting a unified 2.2 Different digital digital transformation of the customertheir innovation transformation speeds and experience.culture as 4.2 on a different results These companies are gaining some7-point scale. A few companies in our study are using value from transforming parts of their digital technologies, old and new, to truly businesses, but are only part of the way transform their businesses. However, toward achieving the potential of digital these companies are in the minority. transformation. Still others have not yet begun their digital transformation Despite internal and external pressures, journeys. very few businesses are gaining the full value of technologically-enabled change, In the following sections, we will even with technologies they already describe how firms are digitally own. Many companies we interviewed transforming, the challenges they are took on the significant effort and facing, and the levers executives can use expense of implementing ERP, CRM to drive digital transformation.10 © 2011 MIT Center for Digital Business and Capgemini Consulting
  11. 11. Case StudyHOTELCO: FINDING NEW OPPORTUNITIESFOR DIGITAL TRANSFORMATIONACROSS THE ENTERPRISEH otelCo is one of the world’s ten largest hospitality companies. The firm constantly strives to improve operational efficiencies and customer service both within and across properties. The firm’s loyalty program is the centerpiece of the company’s approach to understanding, serving, and selling to customers. HotelCo executives, who have always believed in the power of technology to improve processes andincrease customer intimacy, see further opportunity for digital transformation.Opportunities exist not only in new technologies such as social media andmobile, but also in the firm’s more traditional areas like transactional IT andanalytics. HotelCo is actively pursuing digital transformation in many areas andis working to innovate further. Because HotelCo experiences organizational andIT challenges common to many large global enterprises, it seeks to take a rational,well-defined approach to its digital transformation initiatives wherever possible.HotelCo has created opportunities for digital transformation in three areas: onlinepresence, mobile customer engagement, and internal operational processes.Online: HotelCo continually evolves its online presence. It has integrated thewebsite presence of all its properties on a common platform, enabling marketingacross properties within a market. It also added new capabilities. For example,property managers using the firm’s corporate digital marketing tools can controltheir property content, e.g., events, independently of other properties, while nothaving to build and maintain their own online capabilities. Further extendingonline capabilities, HotelCo has begun to implement social media and mobilemarketing capabilities. Employees actively monitor social media for negativeinformation and can respond. However, organizational questions remain abouthow to improve the response capability as volumes continue to grow: “Whohandles it? Marketing? Product support? Customer support?”In addition, HotelCo is integrating social media information onto its websites.The website allows user comments on select pages, and the firm is working toextend comments to additional pages. HotelCo is also incorporating third-partysocial media onto the site. For example, tripadvisor.com ratings feed directly intoproperty web pages, despite the initial hesitation of some property managers.“First off, this conversation is happening and most of the customers are nowsavvy enough they’re going to tripadvisor anyway. Let’s bring the content rightto our site, positive or negative. Customers see that and they say ‘OK, well this © 2011 MIT Center for Digital Business and Capgemini Consulting 11
  12. 12. is an honest assessment from people like myself….” The marketing people have found that such content is much more compelling than internally generated information. Mobile: Realizing that most customers now carry cell phones, HotelCo has made mobile a key part of its marketing strategy. The company offers multiple smartphone apps and is making preparations for a future in which more people access sites via mobile than from a personal computer. HotelCo actively engages in mobile marketing. The company realizes the customer intimacy it can achieve through mobile because customers react to messages almost instantly. SMS and WAP sites are a core part of mobile marketing because of their ubiquity. The different properties are in charge of their own mobile marketing messages, but the messages are delivered through a unified corporate-level system. The company is also experimenting with location-based services. Innovation activities that initially focused on embedded devices and RFID have been facilitated by mobile phones. For example, customers arriving at some properties can receive mobile coupons for restaurants, shows, and other services in the hotel. Customers can also receive personalized service and information from digital displays located around the properties using phones or their loyalty cards. 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
  13. 13. well-defined purpose, the firm is taking a slow approach to widespread internaluse of social media instead of targeted efforts.The firm is midway through a set of initiatives aimed at rationalizing processesacross the enterprise. When complete, HotelCo will have a set of shared servicesthat are available to all properties, but which can be tailored by properties fortheir own use, much as the online platform is today. IT, while a significantenabler of the firm’s capabilities, remains a challenge as the company changes.For example, the loyalty database is not optimized for multi-channel interactions,making it difficult to integrate information that arrives from, or is sent via,multiple media. Another challenge is integrating information and processes fromacquired companies into the firm’s core IT backbone.At HotelCo, analytics is “something we do a ton of.” Executives are proud ofthe firm’s ability to understand drivers of customer and operational metrics.HotelCo is now investigating how to move analytics capability further out to theedges of the company. However, executives expressed the desire to make goodchoices about where to apply analytics. Analytics is “absolutely a different wayof thinking… we don’t need every role to do it, but we definitely want the skillsin certain places. “ For example, analytics may enable the firm’s customer-facingemployees to further personalize the customer experience, but executives areaiming to do it in a way that doesn’t disempower those workers. © 2011 MIT Center for Digital Business and Capgemini Consulting 13
  14. 14. Case Study ASIAN PAINTS: DIGITAL TRANSFORMATION IN INDIA A sian Paints, India’s leading manufacturer of coatings, has digitally transformed its business step by step. The firm has been able to maintain fast growth and globalize while increasing efficiency and reducing its impact on the environment. In the early 2000s, as part of an effort to reduce debt and increase internal efficiencies, the firm implemented an enterprise-wide ERP and advanced Supply Chain Management system. This helped to create an enterprise-wide platform that was the basis for further improvements in sales and customer processes. The change also liberated working capital that helped fund acquisitions in emerging markets. Asian Paints gained further efficiencies by linking subcontractors and suppliers on a B2B portal. In 2003, the firm invested in a CRM system. In 2010, Asian Paints centralized its order taking process into a single corporate call center. This change helped the company further improve operational efficiencies and sustain its growth. In customer-facing processes, the move entailed much more than just creating the call center. Retailers were encouraged to place orders through the call center, where they could receive a more consistent service 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 company a capability that competitors could not provide. The biggest change resulting from centralizing order taking was in the way 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
  15. 15. In India, Asian Paints has begun to sell services (such as a painted wall) instead ofproducts (a can of paint). The services strategy has benefits beyond new revenues.Selling services helps to ensure that high-end products are applied properly,thereby improving customer satisfaction. Services also help the firm to get closerto the end-consumer, understand core consumer choices, and launch high-end texture finishes. Additionally, having a contractor in a client’s house yieldsinformation that marketing staff can use to understand both customer preferencesand potential demand. Gaining better knowledge of end-customer preferences is ahigh priority for the company, since its business model – operating largely throughretailers – means that customer involvement has been traditionally very low.The relationship between IT and business executives has traditionally been verystrong. The IT team consists of business graduates with a deep understandingof the underlying business processes. They act as internal process consultants.Governance is centralized and top down, with a strong executive-levelunderstanding about the importance of standardization and coordination.Although business executives suggest many digital investments, IT executivesoriginate others such as the firm’s new analytics initiative.Corporate growth and new technology demands have increased the challenges ofdigital governance. The firm is in the first year of a new portfolio planning process.“We have enjoyed great equity with the business because we have delivered solutions. Butseeing so many projects coming at us, we felt that now we need to establish processes tomatch expectations and resources whilst taking on innovative projects,” says Mr. ManishChoksi, CIO and Chief of Strategy.Asian Paints’ investment in strong IT capabilities, combined with organizationaland process changes intended to leverage those investments, will serve as afoundation upon which the organization can continuously envision and implementnew forms of digital transformation. © 2011 MIT Center for Digital Business and Capgemini Consulting 15
  16. 16. 3 THE SHAPE OF DIGITAL TRANSFORMATION16 © 2011 MIT Center for Digital Business and Capgemini Consulting
  17. 17. 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 commonFigure 3: Building blocks of the digital transformation Customer Operational Business Experience Process Model Customer understanding Process digitization Digitally-modified business • Analytics-based segmentation • Performance improvement • Product/service augmentation • Socially-informed knowledge • New features • Transitioning physical to digital • Digital wrappers Top line growth Worker enablement New digital business • Digitally-enhanced selling • Working anywhere anytime • Digital products • Predictive marketing • Broader and faster communication • Reshaping organizational boundaries • Streamlined customer processes • Community knowledge sharing Customer touch points Performance management Digital globalization • Customer service • Operational transparency • Enterprise Integration - • Cross-channel coherence • Data-driven decision-making • Redistribution decision authority • Self service • Shared digital services • Unified Data & Processes • Business & IT Integration • Analytics Capability Digital capabilities • Solution Delivery © 2011 MIT Center for Digital Business and Capgemini Consulting 17
  18. 18. challenges that interfere with digital educational digital tools aimed at transformation. The paper concludes helping clients invest more safely. with a set of key levers senior These tools, while not selling the firm’s executives can use to successfully products directly, aligned closely with transform their organizations. the firm’s reputation for conservatism and safety. 3.1 Transforming customer experience Companies are also building new online communities to advise and build loyalty with clients in medical, Customer understanding real estate or financial services products. Others are building products Companies are starting to take that improve branding in lifestyle advantage of previous investment communities. A consumer sports in systems to gain an in-depth equipment manufacturer enables understanding of specific geographies individuals to publish their sport and market segments. performance to communities and stay connected with other customers who Other firms are exploring social have similar interests. media to understand customer satisfiers and dis-satisfiers. A Many firms are building analytics mortgage executive noted “We capability to understand customers in launched a non-profit real estate more detail. Some insurance firms, for community to help our customers. As example, are improving their portfolios an unplanned benefit this helps us to and cost structures through analytics- understand them better. We launched based underwriting and pricing. Other special products, such as a special loan companies are conducting analytics- offering for divorced people, following based experiments to drive customer several customer questions.” behavior. In one case, a restaurant firm is actively conducting experiments In addition, companies are learning to in pricing and promotion across a set promote their brands more effectively of franchised stores. The experiment through digital media: dynamically adjusts product prices in response to demand, weather, • A medical device firm is launching inventory levels, and proximity to a social media campaign to promote closing time. a radically new class of products in an online community of medical specialists. Executives expect Top-line growth awareness to grow in weeks rather Companies are using technology than years. to enhance in-person sales conversations. Financial services • A media company has teamed with firms are using tablet-based product manufacturers for social presentations instead of paper-based media-based brand enhancement slide decks to make sales pitches. tied to in-person events. Some are going beyond. Insurance firms are introducing mobile tools • After the 2009 economic downturn, to help sales people and customers a financial firm built a set of engage in analytics-based planning.18 © 2011 MIT Center for Digital Business and Capgemini Consulting
  19. 19. A medical device salesforce is processes through a digital plug-replacing in-person interactions with in. A retailer automatically loadsdigital interactions. When visiting a customer’s last online shoppinga doctor’s office, a salesperson list into its e-commerce site. Thisleaves an iPad with video and other streamlines the shopping process,information on new products. The allowing customers extra time toaim is to get the doctor’s attention look at other products. Customersand gain a 10 minute conversation can then decide whether to use homewhen the salesperson returns to delivery or a drive-through serviceretrieve the iPad. with a specific pick-up time. A mortgage company also developed anBetter understanding helps firms integrated multi-channel experienceto transform the sales experience. to help investors set their realisticCompanies are integrating customer expectations quickly. Then, processespurchasing data to provide more can cross-sell or up-sell products.personalized sales and customerservice or even to offer customized Customer touch pointsproduct packages. One executivecommented “Analytics help us to segment Customer service can be enhancedour clients and to connect SME offerings significantly by digital initiatives. Fastand clients in a predictive way.” A and transparent problem resolutionhospitality firm engaged in location- builds trust for customers. A bankbased marketing uses analytics to established a twitter account to answersend personalized mobile coupons client complaints quickly, helpingto customers as they near a facility customers avoid going physically toand can track uptake in real time. A a branch. This digital initiative alsomortgage firm is setting up a CRM leveraged an expert community,strategy to link customers to local real allowing crowd sourcing with severalestate references. This system proposes employees and other customers.new offers in real time via the internet. Companies with multiple channels toOther firms are using concept stores the customer are experiencing pressureas flagships for their digital selling to provide an integrated experience.innovations. A mortgage company A hospitality executive commented “Ioffers investors an integrated process think consumers still respond in the samecombining real estate and bank way, but consumers are now looking in soservices with external services, and many different places that’s it’s now hardshowcases the overall process in a to get that message across efficiently.”concept megastore. A bank created Many firms, especially in retail anda concept store in a major city to financial services, are making stronginnovate customer relationships and inroads in integrated multichanneloffer a different experience. Customers activity. However, multichannelcould connect their experiences in services require envisioning andconcept stores to social community implementing change across customerinitiatives like Facebook. experience and internal operational processes. Many retailers now offerSome firms try to make the life of home shopping with the option tothe customer easier, simplifying their receive products by mail or in a store. © 2011 MIT Center for Digital Business and Capgemini Consulting 19
  20. 20. However, problems remain as, Process digitization for example, one retail executive described customers being angry that Companies historically have used customer service representatives in automation to make processes more a store could not access online order efficient and scalable. ERP for example history. has enabled significant efficiency and quality gains in core transactional, Some firms are moving beyond simple financial, and supply chain processes. multi-channel models to enable new An insurance firm has created a central forms of digital strategy. A mortgage digital platform for core claim processes company, for example, is offering and deployed the model across several B2C offerings in one channel to countries. Employee self-service systems, complement its existing B2B offerings especially in areas like HR, are also in another. It supplements the becoming widespread. multichannel experience through a new type of storefront. Some firms are going beyond simple automation to gain additional benefits. Several companies are offering self- Automation can enable companies to service via digital tools. These tools refocus their people on more strategic allow the customer to save time, while tasks. A manufacturer has begun to saving the company money. Classic centralize the HR function, allowing mobile apps allow bank customers to economies of scale through self-service access account information or media while freeing HR people to “focus on customers to have electronic rather enlarging manager skills, rather than counting than paper subscriptions. Many firms days off.” A specialty materials company 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 enabling integration across SMS, of data that can be useful in later data apps, and social media efforts. A mining efforts. media company offers apps with geo- localization and augmented reality to New technologies are extending this trend help customers find interesting places of gaining benefits beyond efficiency. A to visit and provide special offers via paint manufacturer has created fully- vouchers and e-couponing. automated plants that significantly reduce labor requirements, improve product 3.2 Transforming quality and enhance environmental, operational processes health, and safety performance. An apparel company has moved to digital Although transformed customer design processes when collaborating with experiences are the most visible – and manufacturing partners. Going digital arguably the most exciting – aspects eliminates most need to ship physical of transformation, firms are also prototypes back and forth, reducing the realizing very strong benefits from product development lifecycle by 30 transforming internal processes. percent. It allows the firm to be much more agile, changing designs quickly in response to market changes.20 © 2011 MIT Center for Digital Business and Capgemini Consulting
  21. 21. Worker enablement they are in the office, sit near people with whom they are temporarilyOnce-novel technologies such as collaborating. Meanwhile, the firm’smobile e-mail, collaboration tools, collaboration and networking toolsand video conferencing have now allow employees to talk with anyonebecome the norm in many companies. in the company from whereverEmployees routinely collaborate they are sitting. This is setting thewith people whom they have never stage for further changes related tomet in person, in regions they have globalization.never visited. Mobile devices allowemployees to stay connected with the In a broader sense, digitaloffice at all hours and to work from transformation replaces limited one-home when not able to be in the office. way vertical communication withIndividual level work has, in essence, broad communication channels thatbeen virtualized – separating the work are both vertical and horizontal. CxOsprocess from the location of the work. can engage in 2-way communication quickly at scale. Employees canSome companies are starting to collaborate in ways that wereexamine new possibilities for previously not possible. The toolsvirtualizing individual work processes. that virtualize individual work,A financial services firm rearranged while implemented for cost reasons,its headquarters so that nobody had have become powerful enablers foran assigned desk, even the CEO. knowledge sharing. Salespeople andEmployees now work from home front line employees, for example, areone or two days per week and, when beginning to benefit from collaborative Figure 4: Digital transformation creates a virtuous cycle of knowledge sharing dge sharin owle g Kn CxOs Communication at scale Virtualization of work Remote working, Collaborative tools, Knowledge platforms, Cloud Computing Internal Crowdsourcing Employees Kn owl edge sharing © 2011 MIT Center for Digital Business and Capgemini Consulting 21
  22. 22. tools in which they can identify 3.3 Transforming business experts and get questions answered in models real time. They are also increasingly gaining access to a single global view Digitally-modified businesses of the company’s interactions with a customer. A media executive said: “We’ve realized that if we don’t transform the Performance management way we do business, we’re going to die. It’s not about changing the way we do Performance transparency was technology but changing the way we do a key highlight mentioned by business.” It is finding ways to augment several executives. Executives in physical with digital offerings and most companies say they are more to use digital to share content across informed when making decisions. organizational silos. A grocery firm is Transactional systems give executives staying true to its traditional business, deeper insights into products, regions, but using digital to transform a new and customers, allowing decisions growth business. “After two years, to be made on real data and not our e-commerce platform is bringing us on assumptions. “Instead of simply 20 percent of our new clients and our revising last year’s plan, we can use data traditional clients are consuming 13 to make better decisions about how we percent more on average.” prioritize.” This is happening in both internal processes and customer- Other firms are building digital or facing processes. The level of detail service wrappers around traditional is also increasing, allowing managers products. A national post office is to compare status across sites or creating a free digital mailbox attached reallocate product manufacturing to each physical mail address that capacity in ways they could not do companies can use as a substitute for a before. It is also prompting additional person’s physical mailbox. A business data gathering and integration as credit firm is developing a digital managers start to see the value of business for some credit products that being better informed. requires less involvement than their traditional high-touch offerings. Beyond being better informed, digital transformation is actually New digital businesses changing the process of strategic decision-making. Top executives in Companies are introducing a medical device manufacturer used digital products that complement the company’s existing collaboration traditional products. A sports apparel tools to extend strategic planning manufacturer started selling GPS and sessions from 12 people to more than other digital devices that can track 300 of the firm’s top managers. This and report on a customer’s workout. enabled better input into the process Other companies are changing and better uptake of the vision after business models by reshaping decisions were made. their boundaries through digital. A mortgage company is moving from being a link in the value chain to22 © 2011 MIT Center for Digital Business and Capgemini Consulting
  23. 23. being a global assembler of investment 3.4 Digital capabilitiesproducts. An airport authority isaiming to become the owner of a Digital capabilities cut across all threetraveler’s end to end process. It will pillars. They are a fundamental buildingenable for travelers an integrated block for transformation in customermultichannel experience including experience, operational processes, andinformation on airplane traffic and business models. Although CIOs andreservations, duty-free shopping existing IT departments are leadingpromotions and other benefits. digital initiatives across companies, they hire extra skills or implementDigital globalization separate units to coordinate digital transformation.Firms are increasingly transformingfrom multi-national to truly global Unified Data and Processesoperations. Digital technologycoupled with integrated information The most fundamental technologyis allowing firms to gain global need for digital transformation is asynergies while remaining locally digital platform of integrated data andresponsive. They are, in the words processes. Large successful companiesof many executives, “becoming more often operate in silos, each with theircentralized and decentralized at the same own systems, data definitions, andtime.” These companies benefit from business processes. Generating aglobal shared services for finance, common view of customers or productsHR, and even core capabilities like can be very difficult. Without themanufacturing and design. Global common view, advanced approachesshared services promote efficiency and to customer engagement or processreduce risk. They even promote global optimization cannot occur.flexibility. One manufacturer can shiftproduction around the globe with The difficulty of operating without aonly a few days’ notice in response to platform becomes greater as companiesinterruptions or excess demand. engage in multi-channel operations. Many companies, for example, cannotFor local managers, the pain of link customers’ activity in stores orcentralization is balanced by bank branches to their activity on theefficiency benefits and ability to web or mobile. An executive in onefocus on more strategic activities. company, echoing statements by manyLocal managers, empowered to others, said “data integration is the biggestmake decisions autonomously, also challenge in setting up our digital services:gain a broader view of the business self-services, web-strategy and runningthrough centralized data. They have partnerships.”the freedom to tailor business to theirlocal needs, but the responsibility Unified data and process is one reasonto act in the interests of the larger that web-based companies are ableenterprise. Globalization also entails to gain advantage through analyticsa different approach to policy: “fewer and personalization much moremandates from headquarters, but more readily than traditional firms. For manyguidelines.” traditional companies, the first step in preparing for digital transformation © 2011 MIT Center for Digital Business and Capgemini Consulting 23
  24. 24. Figure 5: Digital platform implementation* Single integrated No platform digital platform 39% 47% 14% Multiple digital platforms * Percentage of companies in each digital platform state among the 50 interviewed for the study to invest – sometimes heavily – in but not to emerging digital technologies integrating data and processes across and practices. Mobile and social media, the enterprise. In this respect, firms that for example, often require iterative have already implemented ERP and CRM approaches to learn about what will work systems are a step ahead of others. in the market or workplace. They also use technology that is not commonly available Unified platforms can also help in enterprises. Analytics activities to manage the centralization/ often require specific knowledge and decentralization challenge in temperaments that typical IT developers globalization. Hospitality firm properties do not possess. can use centralized platforms to deliver locally-customized information while Some IT departments have established not having to support the technology. special units to build emerging A media company common technology technology skills and methods. Others platform allows the firm to share content have innovation units to identify how new at worldwide level, offering media content technologies and practices might change developed in one part of the world to the business. Still others look outside the be used easily in other markets and firm for help. 78 percent of the companies publishing formats. interviewed hire vendors to address large projects or those that require advanced Solution delivery technologies. Vendor partners can be very effective, but some executives expressed Companies also need the capabilities concern about over-reliance on vendors. to modify their processes or build new A hospitality executive firm said that methods onto the data and process knowledge of key emerging technologies platform. Solution delivery requires is spread across silos of external vendors, effective methods and strong skills. Most making integration difficult. Several IT departments have solid development executives described knowledge gaps methods in place. However, those that existed after they ended a vendor methods are often geared to well-defined relationship. requirements and mature technologies24 © 2011 MIT Center for Digital Business and Capgemini Consulting
  25. 25. Analytics capabilities trying to conduct digital transformation. These companies often have issuesInformation management and analytics common to those that do not govern ITwere highlighted as major goals by well, namely complex IT architectures,executives across industries. Several firms unintegrated data, and processes that areechoed the statement of an executive not well-enabled through technology.who stated “It’s time to harvest the data andturn it into insights.” Combining integrated In contrast, companies with a solid IT/data with powerful analysis tools is seen business relationship are in a solidas a way to gain strategic advantage over position to begin digital transformation.competitors. A bank executive stated: “IT has been brought closer to business during the last fiveCompanies are engaging in analytics years. It is very important to success becauseat varying levels of intensity. Some are many of the important transformationsjust beginning to make better use of in our business enabled by technology.”the data available from transactional With trust and shared understanding,systems. They are making more-informed IT executives can help businessand better decisions and reacting more executives meet their goals, and businessquickly to changes in their operations. executives listen when IT people suggestCompanies with integrated data are able innovations. Where strong relationshipsto engage in more powerful analytics exist, executives on both sides of thestrategies. An Insurance company is able relationship are willing to be flexible into do predictive sales, helping salespeople creating new governance mechanisms orto target products that a specific type of digital units without feeling threatened.customer is likely to buy. A hospitalitycompany and a restaurant firm are In most firms, digital transformationusing analytics to target promotions is being led by CIOs. Where theand conduct pricing experiments. A relationship is strong, this approach canmedia company is using web analytics be very effective. At a manufacturer,to provide real-time KPIs to customers the CIO is also head of strategy. He ledin order to demonstrate the added-value aggressive investments in technologyof the firm’s products. Several insurance that generated tremendous benefits forfirms are using analytics to underwrite the firm (see case study). The CIO of apolicies, enabling better pricing and global services firm also manages thereshaping the firms’ risk portfolios. firm’s e-commerce operations and itsHowever, all executives also mentioned innovation activities. Other companiesthat building analytics capability was place responsibility for digital in anotherdifficult, requiring skills and culture unit or executive who works closely withchange in addition to investments in the CIO. An apparel firm established ainformation technology. new digital division that works closely with the existing IT department. ABusiness and IT integration business directory company hired a second CIO to focus on transformation-Digital Transformation, more than related activities, working in concert withother business changes, requires strong the CIO who focused on keeping theintegration between technology and firms’ existing platform functional.business executives. Companies witha history of strained IT and businessrelationships are handicapped when © 2011 MIT Center for Digital Business and Capgemini Consulting 25
  26. 26. Case Study BNP PARIBAS: DIGITAL TRANSFORMATION IN AN INTERNATIONAL BANKING GROUP I 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 defined around three key points: internationalization, process rationalization and maintaining trust with the customer. Crisis, regulation and technology adoption by customers and employees are pushing BNP Paribas to consider digital transformation. Executives envision 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 its transformation journey. The first step of the transformation has focused on reach: creating a multichannel strategy that includes the web as well as emerging technologies such as mobile and social media. BNP Paribas is today in a transition phase to reach the second step of the transformation: integrating transactions across channels and building a conversation with clients via an external CRM and analytics-based tools. BNP Paribas is currently developing a new digital platform leveraging the firms various distribution assets into multichannel processes and tools. To improve customer experience, the firm launched multiple initiatives. Mobile apps 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 Facebook. In 2010, BNP Paribas launched a new branch model. This Concept Store will help develop new ways of interacting and selling products to the customer via new technologies and self-service areas. The firm’s next step is to start a conversation with customers on social media. This will require building social-customer knowledge, via an external CRM, and increasing analytics capability. In 2011, BNP Paribas launched new mobile bank services in partnership with a telecom operator. This was more than a simple website substitution. It was a switch from traditional business model to a digital one, with a different cost and revenue structure. From an operational process point of view, BNP Paribas is still at the beginning of its transformation journey. The firm is focusing on security improvements and cloud solutions, which executives see as key differentiators in the industry. The objective of process rationalization will be to have end-to-end digitized processes in an integrated platform, which could generate international economies of scale. A group digital committee sponsored by general management elaborates the group digital strategy and encourages digital best practice sharing. 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
  27. 27. Case StudyMOVING FROM SEPARATE TOINTEGRATED DIGITAL INITIATIVES IN ANAPPAREL MANUFACTURERA n apparel company has built its successful business by combining good products with compelling branding and a set of high-profile celebrity relationships. Its entrepreneurial spirit has led to growth in product silos. The firm spent the past ten years improving internal processes and its connections to manufacturing partners. The firm’s entry into digital occurred in three successful but disconnected areas. In customer experience, the firmdeveloped a customized products offering. Customers can go online or work with anadvisor in a store to configure products in exactly the color schemes they wish, andthen receive the products by mail. This process modified existing customer-facingand manufacturing capabilities to deliver a new customer experience. Separately,the company made forays into social media. It built communities around differentcategories of product, allowing customers to communicate with the company andeach other via Facebook and Twitter. It also launched a few digital products meantto augment the lifestyle needs of customers, such as GPS devices for athletes.In internal operations, the product design area moved from paper-based designprocesses to a fully digital process. Although some designers initially experiencedtrouble in the transition, the process has yielded important benefits. Shippingdigital designs instead of physical prototypes between headquater and suppliers hascut the product development cycle time by months. It also allows the company toadjust designs much more easily in response to manufacturing issues or changesin customer demand. In addition, the firm can use digital designs to promote newproducts to retailers differently, gaining attention and orders much earlier andmaking retailer promotion easier than was possible with a physical design process.The company has recently recognized the need to begin coordinating its digitalefforts. It has created a digital division to deliver all digital efforts for the firm.This included recruiting key senior executives with experience in differentaspects of digital business management, and building an innovation unit chargedwith identifying new customer and process approaches that cut across the firm’straditional silos. The digital division does more than enable and capture synergiesbetween initiatives. It also opens up new possibilities for taking the firm from aproduct-focused to a customer-centric approach. © 2011 MIT Center for Digital Business and Capgemini Consulting 27

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