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Digital Transformation : Just a Buzzword or Real Transformation


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Digital Transformation : Just a Buzzword or Real Transformation. A presentation to the St Louis Chapter of AITP to highlight, define and discuss digital transformation as well as business innovation and related topics. What IS Digital Transformation, why is it confusing, who does it, who leads, what is the maturity model?

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Digital Transformation : Just a Buzzword or Real Transformation

  1. 1. Digital Transformation : Just a Buzzword or Real Transformation? Association for Information Technology Professionals (AITP) St. Louis 11/17/2016
  2. 2. Digital Transformation The term ‘digital transformation’ has been used to describe anything from creating a fully responsive mobile website to developing a social media strategy, but in reality true transformation needs to involve much more than just the end product.
  3. 3. Digital Transformation is Confusing – What Exactly Is It? Business Innovation Digital Strategy Disruptive Innovation Disruptive Technologies Business Innovation User Experience Digital Marketing Digital Experience Digital Disruption
  4. 4. Digital Transformation is Confusing – So Many Voices
  5. 5. Digital Transformation is Confusing – Who is Responsible? CEO CTO CEO CLO COO CDO CFO CMO CIO
  6. 6. Digital Transformation is Confusing - So Many Decisions
  7. 7. Terms • Business Innovation • User Experience • Digital Experience • Digital Strategy • Digital Marketing • Digital Disruption • Disruptive Innovation • Disruptive Technologies
  8. 8. Business Innovation • Business innovation is an organization's process for introducing new ideas, workflows, methodologies, services or products. • Business innovation should enable the achievement of goals across the entire organization, with sights set on accomplishing core business aims and initiatives. • Innovation often begins with idea generation, wherein ideas are narrowed down during brainstorming sessions after which leaders consider the business viability, feasibility and desirability of each idea.
  9. 9. User Experience • User experience (UX) refers to a person's emotions and attitudes about using a particular product, system or service. • It includes the practical, experiential, affective, meaningful and valuable aspects of human–computer interaction and product ownership. • Additionally, it includes a person’s perceptions of system aspects such as utility, ease of use and efficiency. • User experience may be considered subjective in nature to the degree that it is about individual perception and thought with respect to the system.
  10. 10. Digital Experience • A digital experience is the way in which a user interacts with content on the web and how a user can achieve a goal on the web. • Digital experience not only means reading and consuming content but interacting with web content. • A good digital experience is when a user feels connected to the content and tools that they use on the web. Also, nowadays digital experiences are spread across a multitude of devices and platforms.
  11. 11. Digital Strategy • A digital strategy is a form of strategic management and a business answer or response to a digital question, often best addressed as part of an overall business strategy. • A digital strategy is often characterized by the application of new technologies to existing business activityand/or a focus on the enablement of new digital capabilities to their business. • Formulation often includes the process of specifying an organization's vision, goals, opportunities and related activities in order to maximize the business benefits of digital initiatives to an organization.
  12. 12. Digital Marketing • Digital marketing is an umbrella term for the marketing of products or services using digital technologies, mainly on the Internet, but also including mobile phones, display advertising, and any other digital medium. • The way in which digital marketing has developed since the 1990s and 2000s has changed the way brands and businesses utilize technology and digital marketing for their marketing. • Digital marketing campaigns are becoming more prevalent as well as efficient, as digital platforms are increasingly incorporated into marketing plans and everyday life, and as people use digital devices instead of going to physical shops.
  13. 13. Digital Disruption • Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods and services. • The rapid increase in the use of of mobile devices for personal use and work, has increased the potential for digital disruption across many industries. • A powerful example is the way Amazon, Netflix and Hulu Plus have disrupted the media and entertainment industries by changing how content is accessed by customers and monetized by advertisers.
  14. 14. Disruptive Innovation A disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products and alliances. The term was defined and phenomenon analyzed by Clayton M. Christensen beginning in 1995
  15. 15. Disruptive Innovation • Not all innovations are disruptive, even if they are revolutionary. For example, the first automobiles in the late 19th century were not a disruptive innovation, because early automobiles were expensive luxury items that did not disrupt the market for horse-drawn vehicles. • The market for transportation essentially remained intact until the debut of the lower-priced Ford Model T in 1908. • The mass-produced automobile was a disruptive innovation, because it changed the transportation market, whereas the first thirty years of automobiles did not.
  16. 16. Disruptive Technologies • Term coined by Harvard Business School professor Clayton M. Christensen to describe a new technology that displaces an established technology • A disruptive technology is one that displaces an established technology and shakes up the industry or a ground-breaking product that creates a completely new industry. • Here are a few examples of disruptive technologies: • The personal computer (PC) displaced the typewriter and forever changed the way we work and communicate. • The Windows operating system's combination of affordability and a user-friendly interface was instrumental in the rapid development of the personal computing industry in the 1990s. Personal computing disrupted the television industry, as well as a great number of other activities. • Email transformed the way we communicating, largely displacing letter-writing and disrupting the postal and greeting card industries.
  17. 17. Digital Transformation • CapGemini Consulting was one of the first to come up with the concept of digital transformation and a digital transformation framework. • They did so in collaboration with the ‘MIT Center for Digital Business‘ during a three-year study which defined an effective digital transformation program as one that looked at the what and the how.
  18. 18. Digital transformation is rapidly reshaping the landscape Sources: 1McKinsey, How IoT Can Support A Dynamic Maintenance Program, 2016 2IDC, 2016 ~80% margin1 driven by apps, analytics, and services in 2020 Average increase in income for the most digitally transformed enterprises $100M 2020 2009 30B Things Income Intelligence “Every business will become a software business, build applications, use advanced analytics and provide SaaS services.“ Satya Nadella 2 2
  19. 19. Digital Transformation Digital transformation is the profound and accelerating transformation of business activities, processes, competencies and models to fully leverage the changes and opportunities of digital technologies and their impact across society in a strategic and prioritized way.
  20. 20. Digital Transformation “To be clear, investing in technology to stay current or ahead of the curve isn't the same thing. Pretty much every company is putting money into new tools, platforms, and services. And, doing so is a matter of becoming tech-enabled, which doesn’t mean companies are actually changing to compete in a digital economy. With digital transformation, however, technology is driven by purpose, and that purpose is meant to reshape business.” (emphasis mine) I define it this way... The realignment of, or new investment in, technology, business models, and processes to more effectively compete in an ever-changing digital economy. Brian Solis, Principal Analyst, Altimeter Group
  21. 21. Digital Transformation • Digital transformation may be thought of as the third stage of embracing digital technologies: digital competence → digital usage → digital transformation, with usage and transformative ability informing digital literacy. • The transformation stage means that digital usages inherently enable new types of innovation and creativity in a particular domain, rather than simply enhance and support the traditional methods. Digital literacies: concepts, policies and practices By Colin Lankshear, Michele Knobel, 2008, p. 173
  22. 22. Digital Transformation • Some authors have posited that rapid advances in six primary areas have converged to create the “era of digital transformation”: • Hardware • Software • Networks (cables, wireless and social) • Commercial and consumer comprehension • Democratization of technology at scale (low costs & mass adoption) • Moving beyond human time to digital time
  23. 23. Digital Transformation • The evolutionary path to digital transformation followed a timeline that included the invention and development of the following: • Computers • Memory and data storage • Mass adoption of PCs and laptops • Local Networks • ERPs • The internet • Mobile networks and mobile phones • GPS • Mass global adoption of wireless devices (laptops, mobile phones, tablets, smartphones, wearables, sensors) • Proliferation of websites and online activity • Rapid adoption and expansion of online and mobile databases and search • Rapid adoption and expansion of online marketplaces and reviews
  24. 24. Digital Transformation • “Disruptions” and digital (business) transformation can be caused by numerous factors: • Technological innovations (technology-induced), which are more impactful than ever before. However, it’s not the technology that drives the disruption or transformation. It’s how it is used and adopted by customers, partners, competitors and various stakeholders. • Customer behavior and demands. This so-called customer-induced transformation and disruption is not necessarily related to technology. Technology often enables or, as just mentioned, causes it, when adopted and turned into business challenges. • Ecosystem-induced: economical changes, demands from partners who want you to adapt, regulatory changes, the list is endless.
  25. 25. Five Domains of Digital Transformation • Customers • Competition • Data • Innovation • Value Across these five domains, digital technologies are redefining many of the underlying principles of strategy and changing the rules by which companies must operate in order to succeed. Many old constraints have been lifted, and new possibilities are now available. Rogers, David L.. The Digital Transformation Playbook: Rethink Your Business for the Digital Age (Columbia Business School Publishing) (pp. 5-6). Columbia University Press. Kindle Edition.
  26. 26. Digital transformation hinges on four imperatives Engage your customers Empower your employees Optimize your operations Transform your products Systems of Intelligence
  27. 27. Digital Transformation Four digital transformation realities to emphasize: • Business/IT relationship is key (closing the gap between both, focusing on the same goals and NOT overlooking the role of IT). • There is a common DNA among digital leaders and the path to digital transformation shows common traits (even if context matters). • As said, each industry is impacted, including your industry. Customers, employees, partners, nor competitors or new, disruptive players, will wait for business to catch up, regardless of industry. • Digital transformation is led from the top (or at least requires firm buy-in from the top – and all stakeholders).
  28. 28. Myths vs. Facts Myth Reality Digital is primarily about the customer experience Huge opportunities exist also in effeciency, productivity and employee leverage Digital primarily matters only to technology or B2C companies Opportunities exist in ALL industries, NO exceptions Let a thousand flowers bloom; bottom up activity is the right way to change Digital transformation must be led from the top If we do enough digital initiatives we will get there Transformation management intensity is more important for driving overall performance Digital transformation will happen despite our IT Business / IT relationships are key, and in many companies they must be improved Digital transforamtion approaches are different for every industry and company Digital leaders exhibit a common DNA In our industry, we can wait and see how digital develops There are digital leaders outperforming their peers in every industry today
  29. 29. The Path to Digital The path to digital transformation is less about capitalizing on new technology; it requires business leaders to embrace a different way of bringing together people and processes with those technology tools as well as an openness to re-envisioning traditional business models and the mindset of a digital company in terms of how you engage your customers, empower your employees and optimize your operations to reinvent products and business models. -Microsoft
  30. 30. Digital Transformation Maturity Models
  31. 31. Digital Transformation Maturity Model
  32. 32. Digital Transformation Maturity Model
  33. 33. The Path to Digital Transformation • There is no one way to pursue digital transformation, but without human-centered input, direction, or best practices, companies can be led astray. • This squanders time, resources, and potential ROI. Change agents must step outside of their departments and collaborate with other functional and executive leaders to foster real change. • Digital transformation takes a modern, human, market perspective to guide cross-functional research, collaboration, and innovation in how organizations compete for tomorrow … today. “Six Stages of Digital Transformation” Altimeter Group
  34. 34. The Path to Digital Transformation • A common imperative for digital transformation leaders is understanding digital customers and their differences, expectations, behaviors, and predilections. • By concentrating on digital, companies can examine how it affects or alters the connected customer’s journey, and influences their decision-making at large. • Digital transformation is more than just digital; it’s about remodeling businesses to be agile, innovative, and customer- centric at their core. “Six Stages of Digital Transformation” Altimeter Group
  35. 35. The Path to Digital Transformation • The Six Stages of Digital Transformation reflect the state and progress of an organization in motion. • The stages are defined by the digital transformation elements that are present in an organization’s current position or its immediate roadmap. • Although presented as six distinct steps, companies may not migrate through each step on a linear path or at the same speed. • Depending on which groups or change agents are leading specific efforts, and in which departments, elements of digital transformation occur in pockets across the stages. “Six Stages of Digital Transformation” Altimeter Group
  36. 36. The Path to Digital Transformation STAGE 1: CUSTOMER OPERATIONS MAINTAIN THE STATUS QUO, “BUSINESS AS USUAL” • Business as Usual: Companies in this phase are incredibly risk-averse, and the culture of the organization inhibits ideation, experimentation, and inside entrepreneurship (“intra-preneurship”). • In specific situations, compliance and regulation also deflate innovative thinking. As such, a lack of urgency exists and any need to change is largely rebuffed or dissuaded by leadership. • Organizations operate with a familiar legacy perspective of customers, processes, metrics, business models, and technology, believing that it remains the solution to digital relevance “Six Stages of Digital Transformation” Altimeter Group
  37. 37. The Path to Digital Transformation STAGE 2: NEW TECHNOLOGY SPARKS IMAGINATION AND EXPERIMENTATION AS COMPANIES BECOME “PRESENT AND ACTIVE” • These companies are evolving because of change agents who recognize new opportunities and fight to lead experiments within their respective domains. • New trends in digital, mobile, social, Internet of Things (IoT), etc., inspire early adopters to experiment with new possibilities • Pockets of experimentation are driving digital literacy and creativity, albeit disparately, throughout the organization while aiming to improve and amplify specific touchpoints and processes. “Six Stages of Digital Transformation” Altimeter Group
  38. 38. The Path to Digital Transformation STAGE 3: A SENSE OF URGENCY ACCELERATES CHANGE WITH “FORMALIZED” RESULTS • Early adapters become change agents and lead each area and also collaborate with others. Insights lead to early development of digital transformation roadmaps to prioritize and optimize areas of opportunity and deficiency. • Strategic investments in people, processes, and technology solve for current work and set the stage for a more unified digital transformation effort. • Experimentation becomes intentional while executing at more promising and capable levels. Initiatives become bolder, and as a result, change agents seek executive support for new resources and technology. “Six Stages of Digital Transformation” Altimeter Group
  39. 39. The Path to Digital Transformation STAGE 4: THE STRIVE FOR RELEVANCE ESCALATES, AND COMPANIES FORMULATE “STRATEGIC” APPROACH TO CHANGE • Change agents have successfully created a sense of urgency, earned executive sponsorship, and now have the attention of the C-suite. • Efforts in digital transformation become a company priority. The roadmap becomes focused and refined by specific short- and long-term goals that necessitate changes and produce key outcomes. • This work is supported by dedicated investments in infrastructure and operations. New skillsets are also brought in to manage/execute against the roadmap. • Technology is purposeful and implemented to drive goals rather than basing processes around technological capabilities. “Six Stages of Digital Transformation” Altimeter Group
  40. 40. The Path to Digital Transformation STAGE 5: TRANSFORMATION IS IN THE DNA AS COMPANIES ARE OFFICIALLY “CONVERGED” IN THEIR APPROACH • The path toward digital transformation is now underway. • New operating models and teams are created to unify disparate, repetitive, or competitive roles and processes while streamlining operations to deliver integrated, consistent, and holistic customer experiences. • Technology is purposeful both in customer-facing and back-office integration. • Digital transformation expands beyond DCX and is now enterprise wide affecting all facets of business¬ — by function and focus, lines of business, et al. — at scale • A dedicated digital transformation team forms to guide strategy and operations based on business and customer centric goals. The new infrastructure of the organization takes shape as roles, expertise, models, processes, and systems to support transformation are solidified. “Six Stages of Digital Transformation” Altimeter Group
  41. 41. The Path to Digital Transformation STAGE 6: CULTURE OF INNOVATION BECOMES TOP PRIORITY AS COMPANIES BECOME “INNOVATIVE AND ADAPTIVE” • Digital is no longer a state; instead, it is part of how a business competes, with work in transformation continuing as technology and markets evolve. • Innovation becomes part of the company DNA with the establishment of formal teams and efforts to track customer and technology trends. • These activities feed into a variety of programs that range from test-and-learn pilots to the introduction of new roles/ expertise to partnerships with and investments in startups. • Programs then permeate deeper functions within the enterprise to continually advance key processes. Investments in people, processes, and tech are tied to business, employee, and customer experiences. • Digital transformation becomes a way of business as executives and strategists recognize that change is constant. A new ecosystem is established to identify and act upon technology and market trends in pilot and, eventually, at scale. “Six Stages of Digital Transformation” Altimeter Group
  42. 42. The Path to Digital Transformation Digital transformation maturity is focused on the following elements in the organization: Governance and Leadership People and Operations Customer Experience Data and Analytics Technology Integration Digital Literacy “Six Stages of Digital Transformation” Altimeter Group
  43. 43. Three Imperatives • Most companies that have started to transform are still in the early stages, so optimal organizational designs for large transformed digital companies are not yet clear. • MIT Sloan and CISR research has defined three clear imperatives for transformational change, that can move you aggressively toward digital redesign: • Define how you will change the world • Identify critical business components • Develop human-machine partnerships MIT CISR
  44. 44. Three Imperatives Define how you will change the world • Boldly articulate a grand new vision • Redesign, redefine or rethink an industry • Rethink industry boundaries • Reformulate products as components of solutions • Reimagine customer relationships MIT CISR
  45. 45. Three Imperatives Identify Critical Business Components • May need to redesign your company to encourage collaboration and coordination • Smaller units, less heirachy • Nimble units • Replace current functional structures with smaller, loosely coupled business components • Structure business activity around business components MIT CISR
  46. 46. Three Imperatives Human Machine Partnerships • Resist temptation to search for digital experience • Encourage people to leverage machines and technology • Encourage use of more sophisticated technology solutions and business solutions around analytics, big data, IOT to free up human resources to do other work of envisioning MIT CISR
  47. 47. Summary DIGITAL TRANSFORMATION IS A JOURNEY, NOT A DESTINATION • Technology has empowered consumers to become more mobile, social, and connected than ever. This has changed how they interact with each other and with products, services, and businesses. • Digital transformation is your organization’s internal equivalent of external consumer evolution. It opens the door to new opportunities for innovation in how to design, integrate, and manage customer (and employee) experiences. • But, digital transformation and change at large is daunting. As digital transformation involves many departments, leaders, and an overall cultural shift of an organization, there is no set prescription for its strategy and implementation. • Like the imminent customer journey you will develop, the path from phase to phase is not a linear experience. Use these best practices as your guideposts. “Six Stages of Digital Transformation” Altimeter Group