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Governance: The key to effecting
successful Digital Transformation
Specially prepared
by Guy Pearce for
7 November 2018
Digital Transformation
2
After significant research, MIT ultimately defined
Digital Transformation as the adoption of digital
tools and technologies that fundamentally alter its
internal and external processes and functions
Source: Digital Transformation and Open Data,
European Data Portal, 2015
Perspective
3
Based on Digital Transformation and Open Data,
European Data Portal, 2015
“… more than 600 use cases from the private sector were gathered … from 25 countries…”
This deck talks through what it takes for
Digital Mastery (the category driving
maximum incremental profit growth)
Leadership Capability
DigitalCapability
Digital mastery - the outcome
of high Leadership Capability
and high Digital Capability
4
Sustainability
Profitability
What’s driving Digital Transformation?
Source: Directorship Sep/Oct 2018,
Closing the gap between innovation
intent and reality
Drivers
The Innovation Process
Define the problem
Understand the problem
Design a solution
Create a solution
Deploy / Commercialize
Operations Processes
What’s the impact on processes?
5
What’s the impact?
Innovation (new value creation process)
Outputs
(sales)
The relationship between the innovation process and
the operations process
6
Core Business Operations (Value Creation Process)
Inputs
(resources)
Innovation(narrowspan)
Innovation(widespan)
Innovation
Innovation
Does this kind of
innovation work?
• Sustainability
• Profitability
Core Business Operations (Value Creation Process)
Strategy
How does it all come together operationally?
7
Resources .
Processes
Business Model
Outcomes
Enables
Dependson
Core Process
Quicker processing
Lower cost
More deals
Higher profit per deal
Greater competitiveness
Greater profitability
New technology
Sustainable
Profitable
Political
Economic
Societal
Technological
Legal
Environmental
How does it all come together strategically?
8
Opportunities Strengths
Threats Weaknesses
SWOT
Customers
Suppliers
Competition
New entrants
Substitutes
Drivers of Digital
Transformation
Does Digital Transformation require board oversight?
Strategy inputs
Porter’s 5 forces
How well is Digital Transformation working?
GE, Lego, Nike, Proctor & Gamble, Burberry, Target, Alaska Airlines, Coca-Cola, The New York Times
and Chubb have all faced performance issues, failures, and/or sooner-than-expected executive departures
in the midst of a huge innovation and digital transformation effort HBR
• Half of 400 U.S.-based senior executives polled by Wipro Digital in 2017 believe their company isn’t
successfully executing 50 percent of their digital strategies CIO Magazine
• 84% of organizations fail at digital transformation Forbes
• 90% of digital transformation initiatives fail Digital Journal
• 70% of digital technology initiatives fail McKinsey
9
In spite of the hype, Digital Transformation is not working well
What’s causing this problem?
• Only 5%percent of workers in innovation programs
feel highly motivated to innovate
• 77% of workers in innovation programs claim that
ideas are poorly reviewed and analyzed
• Less than a third of surveyed firms regularly
measure or report on innovation
• More that 80% say that there are resource
constraints involved in bringing innovation to
fruition
10
Based on a survey by MindMatters, 2015
In summary, the failures are due to poor governance (the board oversees strategy)
Strategic failure
What can be done about it?
11 Source: ISACA Vol2, 2018, Minimizing the High
Risk of Failure of Corporate Innovation
How do we know that this level of governance works?
• Effective board oversight of innovation can be a deciding factor in a company’s ability to make innovation
actionable
• set the tone at the top, ensuring alignment of the innovation hub’s objectives with the organization’s
strategic objectives
• oversee innovation operationalization and change management; and
• oversee innovation policy, process, resourcing, and content by business case
• Innovation governance ultimately increases the rate of success of corporate innovation in the interests of
corporate competitiveness and sustainability
• In particular, innovation governance mitigates the risks of resource waste and hub failure, thereby
increasing the odds of achieving a return on innovation
• That’s why there’s everything to gain and nothing to lose by the better governance of corporate innovation
12 Source: Directorship Sep/Oct 2018,
Closing the gap between innovation
intent and reality
Unfortunately,
boards aren’t ready for this level of oversight
According to ISO/IEC 38500, the board has three key responsibilities with respect to IT oversight:
• To continually evaluate IT’s performance in the context of the organizational strategy
• To continually redirect IT if its performance compromises the organization’s strategy
• To continually monitor IT’s performance to ensure that the organization’s strategy will be
delivered as committed to shareholders
However, many board members are uncomfortable with IT oversight because, with an average
age of 63.1 years:
• Most board members’ professional experience is pre-digital
• Very few directors actually have any IT background
13 Source: ISACA Vol5, 2018,
Digital Transformation?
Boards aren’t ready for it
Digital Transformation success partly rests on Board refresh cycles to upskill its
IT governance competencies, especially for innovations with wide span
Conclusion
• Digital Transformation is a major global driver of business sustainability and profitability
• This impact starts at the process level, and extends to other areas of the business
• The repercussions of deploying such interventions are thus enterprise-wide
• The greater the span of the intervention, the greater the enterprise risk
• This risk is realized in significant Digital Transformation failure
• Governance is a good control for this risk
14
Boards need better skills for the kind of oversight required for successful digital transformation

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Governance: The key to effecting successful Digital Transformation

  • 1. Governance: The key to effecting successful Digital Transformation Specially prepared by Guy Pearce for 7 November 2018
  • 2. Digital Transformation 2 After significant research, MIT ultimately defined Digital Transformation as the adoption of digital tools and technologies that fundamentally alter its internal and external processes and functions Source: Digital Transformation and Open Data, European Data Portal, 2015
  • 3. Perspective 3 Based on Digital Transformation and Open Data, European Data Portal, 2015 “… more than 600 use cases from the private sector were gathered … from 25 countries…” This deck talks through what it takes for Digital Mastery (the category driving maximum incremental profit growth) Leadership Capability DigitalCapability Digital mastery - the outcome of high Leadership Capability and high Digital Capability
  • 4. 4 Sustainability Profitability What’s driving Digital Transformation? Source: Directorship Sep/Oct 2018, Closing the gap between innovation intent and reality Drivers
  • 5. The Innovation Process Define the problem Understand the problem Design a solution Create a solution Deploy / Commercialize Operations Processes What’s the impact on processes? 5 What’s the impact?
  • 6. Innovation (new value creation process) Outputs (sales) The relationship between the innovation process and the operations process 6 Core Business Operations (Value Creation Process) Inputs (resources) Innovation(narrowspan) Innovation(widespan) Innovation Innovation Does this kind of innovation work? • Sustainability • Profitability
  • 7. Core Business Operations (Value Creation Process) Strategy How does it all come together operationally? 7 Resources . Processes Business Model Outcomes Enables Dependson Core Process Quicker processing Lower cost More deals Higher profit per deal Greater competitiveness Greater profitability New technology Sustainable Profitable
  • 8. Political Economic Societal Technological Legal Environmental How does it all come together strategically? 8 Opportunities Strengths Threats Weaknesses SWOT Customers Suppliers Competition New entrants Substitutes Drivers of Digital Transformation Does Digital Transformation require board oversight? Strategy inputs Porter’s 5 forces
  • 9. How well is Digital Transformation working? GE, Lego, Nike, Proctor & Gamble, Burberry, Target, Alaska Airlines, Coca-Cola, The New York Times and Chubb have all faced performance issues, failures, and/or sooner-than-expected executive departures in the midst of a huge innovation and digital transformation effort HBR • Half of 400 U.S.-based senior executives polled by Wipro Digital in 2017 believe their company isn’t successfully executing 50 percent of their digital strategies CIO Magazine • 84% of organizations fail at digital transformation Forbes • 90% of digital transformation initiatives fail Digital Journal • 70% of digital technology initiatives fail McKinsey 9 In spite of the hype, Digital Transformation is not working well
  • 10. What’s causing this problem? • Only 5%percent of workers in innovation programs feel highly motivated to innovate • 77% of workers in innovation programs claim that ideas are poorly reviewed and analyzed • Less than a third of surveyed firms regularly measure or report on innovation • More that 80% say that there are resource constraints involved in bringing innovation to fruition 10 Based on a survey by MindMatters, 2015 In summary, the failures are due to poor governance (the board oversees strategy) Strategic failure
  • 11. What can be done about it? 11 Source: ISACA Vol2, 2018, Minimizing the High Risk of Failure of Corporate Innovation
  • 12. How do we know that this level of governance works? • Effective board oversight of innovation can be a deciding factor in a company’s ability to make innovation actionable • set the tone at the top, ensuring alignment of the innovation hub’s objectives with the organization’s strategic objectives • oversee innovation operationalization and change management; and • oversee innovation policy, process, resourcing, and content by business case • Innovation governance ultimately increases the rate of success of corporate innovation in the interests of corporate competitiveness and sustainability • In particular, innovation governance mitigates the risks of resource waste and hub failure, thereby increasing the odds of achieving a return on innovation • That’s why there’s everything to gain and nothing to lose by the better governance of corporate innovation 12 Source: Directorship Sep/Oct 2018, Closing the gap between innovation intent and reality
  • 13. Unfortunately, boards aren’t ready for this level of oversight According to ISO/IEC 38500, the board has three key responsibilities with respect to IT oversight: • To continually evaluate IT’s performance in the context of the organizational strategy • To continually redirect IT if its performance compromises the organization’s strategy • To continually monitor IT’s performance to ensure that the organization’s strategy will be delivered as committed to shareholders However, many board members are uncomfortable with IT oversight because, with an average age of 63.1 years: • Most board members’ professional experience is pre-digital • Very few directors actually have any IT background 13 Source: ISACA Vol5, 2018, Digital Transformation? Boards aren’t ready for it Digital Transformation success partly rests on Board refresh cycles to upskill its IT governance competencies, especially for innovations with wide span
  • 14. Conclusion • Digital Transformation is a major global driver of business sustainability and profitability • This impact starts at the process level, and extends to other areas of the business • The repercussions of deploying such interventions are thus enterprise-wide • The greater the span of the intervention, the greater the enterprise risk • This risk is realized in significant Digital Transformation failure • Governance is a good control for this risk 14 Boards need better skills for the kind of oversight required for successful digital transformation