A New Leadership Model for Digital Business

1. © 2015 Lundberg Media A New Leadership Model for Digital Business Abbie Lundberg President, Lundberg Media Contributing Editor, Harvard Business Review Analytic Services Former Editor in Chief, CIO magazine
2. Copyright © 2015, Lundberg Media Photo by Dimov Milen - Creative Commons Attribution-NonCommercial-ShareAlike License https://www.flickr.com/photos/42845805@N00 Created with Haiku Deck
3. Copyright © 2015, Lundberg Media Photo by Shachenta - Creative Commons Attribution-NonCommercial License https://www.flickr.com/photos/30485374@N02 Created with Haiku Deck
4. Copyright © 2015, Lundberg Media WHAT SHOULD BRIAN PROPOSE NEXT?
5. 5 A presentation in Three Acts The Digital Threat & the Need for Responsive IT The Business/IT Partnership The CIO as Digital Leader
6. Act 1: The Digital Threat Is digital business a threat to your company?
7. 7 75%Our company’s survival depends on our ability to exploit IT Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014 n=750
8. 8 #1 Changing customer behavior and expectations FACTOR DRIVING MARKET CHANGE Source: The Digital Dividend, First Mover Advantage, Harvard Business Review Analytic Services, Aug. 2014
9. 9 #2 Commoditization, drive for cost savings FACTOR DRIVING MARKET CHANGE Source: The Digital Dividend, First Mover Advantage, Harvard Business Review Analytic Services, Aug. 2014
10. Copyright © 2015, Lundberg Media “Digital” is a board level issue EMERSON CASE STUDY DIGITAL BUSINESS IS A BOARD ISSUE Source: Engaging Boards on Digitization, MIT CISR, 2014
11. THREAT: Changing Models of Customer Engagement
12. OPPORTUNITY: Changing Business Models In the 21st century, we will differentiate our company and provide value to our customers and shareholders through trading on information. Charlie Peters, Sr. Executive Vice President Emerson “ Source: Engaging Boards on Digitization, MIT CISR, 2014
13. 13 38% The confluence of new technologies has significantly changed our business model/s* Source: The Digital Dividend, First Mover Advantage, Harvard Business Review Analytic Services, Aug. 2014 “ *Scoring 8-10 on a 10-point scale n=672
14. 14 28% Commercialized internal IT initiatives Source: Business Transformation and the CIO Role, Harvard Business Review Analytic Services Digital business = top-line IT
15. 15 28% 29% 37% 66% Redefined product value chain as service to others Make analytics capability available for a fee Offer internally developed capability as cloud service Make products smarter & sell info/services around them What’s being commercialized Q: What types of IT initiatives has your company commercialized? Source: Business Transformation and the CIO Role, Harvard Business Review Analytic Services
16. 16 47% We’ve missed business opportunities because IT was too slow to respond Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014 “
17. 48% Followers 20% Leaders 32% Laggards 68% 45% 33% Customer Engagement 64% 45% 25% Employee Work Processes 62% 36% 29% Product Offerings 62% 37% 24% Business Models 59% 40% 22% Core Business Operations & Processes To what extent is the confluence of new technologies changing the following in your organization? IT Responsiveness = Digital Opportunity Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014
18. How to be MORE RESPONSIVE Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014
19. Act 2: The Business/IT partnership Digital business requires close collaboration between IT & other parts of the business
20. 60% directly involved in I.T. decision making Only 27% work in I.T. function Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014
21. 21 90%Collaboration is critical to exploit I.T. for business advantage Digital business is a team sport Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014
22. Changing Roles & Relationships The lines have blurred. IT is extending into marketing and engineering, and they are extending into areas traditionally owned by IT. Kathy McElligott, CIO Emerson Electric Source: Engaging Boards on Digitization, MIT CISR, 2014 “
23. 23 Working Together ▪ Job rotations, co-location ▪ X-functional reporting ▪ Blended roles ▪ Business relationship managers ▪ Business IT strategy board
24. 24 Emerson’s Business IT Strategy Board  Created by COO, CIO, head of strategy  25 leaders meet 4x/year  De facto governance body  Business strategy, with deep dives into specific topics  Ensures alignment, ability to adjust
25. 25 Digital Partnership Assessment To what extent do you agree with the following: 1. Business and IT leaders at our company trust and respect each other 2. Roles and responsibilities for digital transformation are clearly defined 3. We use a common vocabulary when we talk about digital business 4. We have a digital strategy board made up of senior company leaders 5. We “embed” IT staff in the business (e.g., business relationship managers) 6. The CIO and CMO collaborate on an ongoing basis around digital customer understanding and engagement 7. We employ a coaching model to help business partners gain digital acumen Add and double (out of = 100) Score each question on a scale of 0 (low) to 7 (high)
26. Act 3: CIO as Digital Leader CIOs are well positioned to lead digital transformation, but…
27. 27 0% 3% 3% 3% 8% 9% 12% 18% 42% 0% 2% 1% 2% 4% 8% 6% 12% 64% 0% 4% 4% 3% 15% 6% 17% 21% 30% CHRO CFO CMO Other COO CDO LOB leader CEO CIO All IT respondents Gen Mgmt respondents Who do you believe is best suited to lead digital transformation at your organization? n=750 CIOs Should Lead Source: The Leadership Edge in Digital Transformation, Harvard Business Review Analytic Services, Aug. 2014
28. 28 Build Awareness • Engage digital experts • Collect & tell external peer stories • Take digital field trips • Form a digital advisory board • Set up reverse mentoring
29. 29 • Skunkworks innovation group • Crowdsourcing • “Speed dating” with VCs, startups • Innovation days • Hackathons • Simulations and prototypes • Cross-functional innovation board • Shark tanks Foster Innovation
30. 30 Lead through Influence Credibility Relevance The three pillars of influence Trust
31. Copyright © 2015, Lundberg Media Photo by Dimov Milen - Creative Commons Attribution-NonCommercial-ShareAlike License https://www.flickr.com/photos/42845805@N00 Created with Haiku Deck
32. 32 What Digital Requires of You Responsive IT Business/IT Partnerships CIO Leadership In summary… Simplify, automate, offload Connect at many levels Focus on innovation Summary
33. Abbie Lundberg lundbergmedia.com Twitter, LinkedIn, Slideshare: @abbielundberg

Editor's Notes

Brian, CTO, luxury brand, Italy
True story, but…
Company under a lot of pressure to develop a high-end digital customer experience
Need to keep up with their well-heeled customers’ changing expectations. Equipped with tablets and smartphones, they want a rich and integrated online, mobile and in-store shopping experience.
Some of the company’s competitors are starting to deliver.
Brian’s colleague, Katherine, the chief marketing officer, wants to hire an outside agency to create the new digital technology platform. Brian believes it’s better to keep the project in-house.
The decision about which way to go will be made during this month’s executive team meeting in the company’s board room.

The boardroom
Katherine’s case
Brian’s response
Phillip’s skepticism
Brian’s idea
Katherine’s dismissal

One of central dilemmas of digital business
Meet the needs for sophisticated development on the one hand and amazing customer experience on the other. How will they bridge that gap?
WHAT SHOULD BRIAN PROPOSE NEXT?
2-3 MINUTES DISCUSSION
…………………………………………………………………………………………….
What Brian actually proposed: co-locating developers w/marketing creatives
His appeal to Katherine to work together
Pleased at Katherine’s positive response – she’s intrigued – teams will learn new things – create something unique
Discussion of costs and logistics, Phillip’s decision
Brian’s excitement tempered by Katherine’s affect.
This is not going to be easy.

We’ll leave Brian and his colleagues for now….

750 business & tech leaders
Global but mostly NA & Europe
All industries, size cos (skewing to large)

65% put this in top 3
Today’s consumers are mobile and tech-savvy. They expect to be connected, to have access to information and to be able to conduct transactions anywhere.
Companies investing a lot in this

45% put this in their top 3
Consumers can access products and services from literally millions of vendors — from independent eBay sellers to main-street stalwarts. It is easier than ever before to find exactly what they want at the best possible price. This is having a commoditizing effect on a whole host of products and services and putting significant cost pressures on companies.
Differentiate AND offer a competitive price

Not all about retail, or B2C
Digital affecting all businesses
125 year old diversified global manufacturer
~$25 billion in sales
150 countries

Ed Mosner at G2i

Corporate buyers transitioning to online purchases.
Amazon supply
Digital customer journey
Research & find
Decide & quote
Purchase
Support & service

Cyber security

Opportunity: new products & business models
Sensors, IoT
Simulation technology built into plant control systems to predict and prescribe
Home HVAC monitoring to detect, decide, act and learn

Only 2 direct reports – CIO & CMO - plus whatever LOB is currently in transformation

Emerson is not an isolated case

Companies that really focus on technology enabled business innovation higher at 40%

Smart products
Consumer: cars
Industrial equipment: manufacturing control co.
Services: real estate
Cloud services
Mostly IT but also healthcare

On average, 47% of respondents said their organizations had missed out on new technology-enabled business opportunities because their IT department was too slow to respond. (only 27% of leaders v. 64% of laggards)

On the flip side, companies with highly responsive IT departments have been able to successfully leverage new technologies (mobile, social, etc.), seize new business opportunities, and make the transition to digital business much faster than their competitors.
Showing top box scores, 8-10 out of 10

So what can IT leaders to be more responsive?
Some of the things that came up in our in-depth interviews
Simplify Infrastructure
Focus our teams on innovation
Leverage Partners – and make sure their partnerships are strong
Exploit the cloud
Enable Innovation across the entire enterprise
Collaborate, Collaborate, Collaborate (segue to next slide)

Stat
Good or bad. Shadow IT

22% primary IT decision-makers
38% involved in IT decisions
28% decision influencers
How involved are you in making information technology (IT) decisions for your area of responsibility within your organization?
n=750

We have always pushed IT to understand the business. Now it is the business being pushed to better understand technology

Remember Brian co-locating developers with marketing creatives?
X-functional reporting & blended roles
Addidas
Emerson
AmEx
BRMs
Are you doing any of these things?

What is your digital partnership score?
What is your most important initiative to increase collaboration and partnership?

ambassadors, advocates, interpreters

42% of respondents believe the CIO is the best suited member of the C-suite to lead digital transformation. That’s more than twice as many as chose the CEO (18%).
Responses of general managers are less clearly defined. While CIOs still lead at 30 percent, there are also strong votes for the CEO (21 percent), LOB leader (17 percent), and COO (15 percent).
There is little support for having the CMO or CFO lead digital transformation.

Raise company’s digital IQ

Little direct authority…

WHAT SHOULD BRIAN HAVE DONE DIFFERENTLY?
[discussion]
He had been so focused on coming up with the best solution that he hadn’t thought through the impact of his approach.
Proposed working much more closely with Katherine and her team but hadn’t discussed the idea with her before he presented it in the meeting.

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