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Some Impressionistic takes from the book of
George Westerman, Didier Bonnet & Andrew McAfee
“Leading Digital “
( Turning Technology into Business Transformation“ )
by Ramki
ramaddster@gmail.com
About the Authors
George Westerman is a research scientist with the MIT
Initiative on the Digital Economy, focusing on digital
technology leadership and innovation.
He has contributed to publications ranging from Sloan
Management Review to Organization Science to the Wall
Street Journal. Westerman is coauthor of two respected
books: The Real Business of IT: How CIOs Create and
Communicate Value, named the best IT business book of
2009 by CIO Insight magazine, and IT Risk: Turning
Business Threats into Competitive Advantage, named one
of the top five books of 2007 by CIO Insight.
He regularly conducts keynote presentations and senior
executive workshops with companies around the world.
Prior to earning his doctorate from Harvard Business
School, Westerman gained more than 13 years of
experience in product development and technology
leadership roles.
About the Authors
Didier Bonnet is a senior vice president at Capgemini Consulting, where he
serves as global practice leader and heads the Digital Transformation
program. He has more than 25 years’ experience in strategy development,
globalization, Internet economics, and business transformation for large
global corporations. He has published
several articles and book chapters, and is frequently quoted in the press,
including the Wall Street Journal, Forbes, Financial Times, and the
Economist. Prior to working at Capgemini, Bonnet was a vice president at
Gemini Consulting and a senior associate at economic consulting firm
Putnam, Hayes and Bartlett. He received an MBA in business economics
from a French business school and holds a PhD from Oxford University.
Andrew McAfee is a principal research scientist and confounder of the MIT
Initiative on the Digital Economy. He has also held appointments on the
faculty of Harvard Business School and as a fellow at Harvard’s Berkman
Center for Internet and Society. He has written for magazines and journals
such as Harvard Business Review and Sloan Management Review. McAfee
is coauthor of Race Against the Machine and the New York Times bestseller
The Second Machine Age. He is also the author of Enterprise 2.0. McAfee
earned his doctorate from Harvard Business School, and completed two MS
and two BS degrees at MIT
Over the past years digital has been transforming businesses – from large to small, and
across industries, from manufacturing to banking to pharmaceuticals.
For executives the transition to a digital business places them at a crossroads – on the one
hand it provides potentially huge opportunities, on the other hand it brings along significant
strategic and operational challenges.
Recent research from Capgemini Consulting and MIT (‘The Digital Advantage’) reveals that
digital leaders – so-called ‘Digital Masters’ – realize up to 9% more revenue and up to 26%
profit than competitors.
Yet despite the clear benefits, businesses are at the same time struggling with capturing the
potential of digital, through either insufficient priority, focus or budget and/or poor
implementation capabilities. As a result, the researchers estimate that currently ‘only’ 15%
of companies can be coined digital leaders, while 65% of companies still find themselves in
the early phase of adoption.
Prelude
 The book commences with outlining the potential of digital, concluding that in
the next decade, companies, industries and entire economies will be
transformed by a barrage of technology innovations that will “make everything
that’s happened so far look like a prelude”, write the authors Didier Bonnet
(SVP of Capgemini Consulting), Andrew McAfee (MIT) and George
Westerman (MIT). “When it comes to the impact of digital technologies on the
business world, we aren't seen nothing yet,” says McAfee.
 Based on the game changing role digital is forecasted to have, the authors
subsequently look at the key characteristics required for successfully
embracing digital.
 To do so, they researched the practices and operations of more than 100
companies, including amongst others digital leaders as Burberry, Lloyds
Banking Group and Nike. Interestingly, they conclude that digital leadership is
possible in any industry: “We found that it doesn’t matter what industry you
are in,” explains Bonnet.
 In addition, it turns out that driving digital transformation successfully is not an
arcane or mysterious art; it is to the contrary an achievable goal for “any
enterprise with the leadership and willingness to do so.”
.
Prelude
 Lastly, for executives willing to transform their business to a digital
leader, the authors offer a practical framework which allows
organizations to improve their performance in three key areas:
 Customer experience,
 Operational processes and
 Business models.
 The framework is based on a step-by step guide (12 steps), from
strategy setting and planning to deployment and embedding the
change within the organization.
 Each section also provides is also accompanied by a self-
diagnostic exercise, as well as useful examples and techniques to
employ. “In this book, the authors provide not only the inspiration,
but the practical guidance required for CEOs to successfully
navigate the digital transformation,”
Prelude
1
What is Digital Mastery
 Digital Masters are the organizations that use digital
technologies to work differently.
 They employ strong digital and leadership capabilities
to get closer to their customers, empower their
employees, and improve their business processes.
 When organizations attain digital mastery, they show a
clear performance advantage.
 Digital Masters are significantly more profitable than
their competitors and have greater achievement, more
money for investment, and more engaged employees.
 The benefits to digital mastery are great, but many
organizations struggle to adopt & use digital
technology.
Context
What Do These Great Companies Have In Common?
DigitalCapability
Leadership Capability
The DNA Of Digital Masters
The What:
Using digital technology to transform the customer
experience, operational processes and business
models
The How:
Successful transformations depend as much
on how firms manage digital transformation than
solely on implementing new technologies
Digital Masters combine digital capabilities and leadership capabilities to achieve
performance that is greater than either dimension can deliver on its own.
 In today’s business world, executives must use digital
technology to improve their product designs, increase their
manufacturing speed, and make their organizations more
efficient. Digital Masters, firms that are making huge
technological strides, are investing in both the what of
technology (referred to as digital capabilities) and the how of
change leadership (or leadership capabilities) to gain
advantages over their competitors.
 These two dimensions are made up of four levels of digital
mastery:
 Beginners
 Fashionistas
 Conservatives
 Digital Masters
Digital Mastery
Four Levels Of Digital Mastery
DigitalCapability
Leadership Capability
FASHIONISTAS DIGITAL MASTERS
CONSERVATIVESBEGINNERS
* Average performance difference for firms in each quadrant versus the average performance of all large
firms in the same industry for the 184 publicly-traded companies in our sample
The Time To Act Is Now
Basket of indicators:
• EBIT Margin
• Net Profit Margin
DigitalCapability
Leadership Capability
REVENUE GENERATION EFFICIENCY
+6% +9%
-10%-4%
DigitalCapability
Leadership Capability
PROFITABILITY
% +26%
+9%-24%
-11%
Digital Masters Have Significantly Better Financial Performance
Basket of indicators:
• Revenue / Employee
• Fixed Asset Turnover
Four Levels Of Digital Mastery
 Beginners: Those at the beginning of their digital journeys.
Beginners have very basic digital experience and they often
lag behind their competitors in both their technological and
financial performances.
 Fashionistas: Firms that invest in the newest technological and
digital trends, but lack strong leadership and control. Because
they are so impulsive, Fashionistas often waste much of what
they spend or have to reverse their actions to better integrate
new technologies.
 Conservatives: Extremely prudent firms that often have strong
digital capabilities, but are too cautious to use them to their full
extent. Conservatives are the exact opposite of fashionistas.
 Digital Masters: The most technologically savvy firms. They
have the skills, knowledge, and resources to invest in a strong
digital future.
Digital Mastery by Industry
2
Building Digital Capabilities
Creating Compelling Customer Experience
Executives wanting to transform their organizations must first
focus on digital capability, and how organizations engage with
their customers is the most visible aspect of that capability.
Digital Masters transform their customer experiences through the
sum of four interventions:
 Designing the customer experience from the outside in.
 Digitally engaged customers expect products, services,
and information to be timely and tailored to their specific
needs. Digital Masters provide customers with the
experiences that they truly want by understanding both
customer behavior and the organizational requirements
needed to deliver exceptional experiences
Creating Compelling Customer Experience
 Creating reach & Customer Engagement.
 Digital Masters realize that digital transformation cannot
happen without digital investment, so they make smart
investments to creatively enhance the customer
experience.
 Putting Customer Data at the heart of the experience.
 Digital Masters rely on data-driven insights. They integrate
data and advanced analytics to make better decisions,
improve the quality of customer experiences, and create
greater competitive advantages.
 Meshing physical & digital experiences in new ways.
 Digital Masters understand that innovation comes from
creatively bringing together multiple digital and physical
channels to create new and improved customer
experiences and encourage continual innovation.
With customer engagement at the center of the
digital transformation, performance will be enhanced
and the company culture revamped. Anything that
interferes with a compelling customer experience
must be corrected immediately
Angela Ahrendts
Key Challenges
 In 2006 while similar companies in the sector were growing
at an average rate of 12-13%, Burberry was not passing the
1-2% mark; the board decided that the brand had to become
more competitive
 Burberry saw an opportunity in digital transformation, at a
time when the competitors were basing their strategy on
their tradition (Italian and French firms mainly) to reach their
habitual customers.
 To re-launch its brand on the market, Burberry decided to try
to reach a new target of customers; the millennial
generation. The best way to reach Generation Y customers
was to go digital.
 On the basis of this aim, Burberry established the five year
Innovation Strategy..
Burberry
 Burberry developed a 5 year strategy to implement digital solutions
 Digital marketing driven company:
 Use of non formal advertisement channels such as social media
and online platforms. The firm aimed to interact and engage with
its customers by showing them how they operate
 Creation of a system to manage and coordinate the different
online platforms that the company uses.
 Creation of e Stores and mobile apps:
 Creation of online stores through which customers can purchase
goods to be picked up in store
 Live projection of runway shows and other events in stores. In
this occasion customers are allowed to have privileged pre-sales
through tablets in stores
 Implementation of a Mobile App which allows customers to view
products and purchase them even if not yet available in stores
Burberry- Digital Solution
 As a result of the 5 year innovation strategy, Burberry
transformed itself from an underscoring company in 2005 to
one in the top 5 of its sector
 Burberry finished 2012 as the most followed luxury brand on
Facebook, with nearly 15 million fans. Burberry was also the
leading luxury lifestyle brand on Instagram.
 Total revenues grew by 23% in 2012
 Data collected reveals that 60% of customers buy luxury
goods online and collect items in stores
 Burberry made investments in human resourcing to set up
specific departments dedicated to the Innovation Strategy
implementation
 Further developments are blurring the lines between digital
and physical stores
Burberry- Outcome
Adam Brotman-CDO
Starbucks-Life Cycle
 Two decades of growth
 Sales started declining
At Starbucks, coffee is big business. Since
opening its first location in Seattle, Washington
in 1971, the company has grown into one of the
world’s largest specialty foods retailers and one
of the most globally-recognized brands.
Starbucks- Challenges
 Starbucks has built a billion-dollar enterprise on more
than just coffee; it has succeeded in creating a unique
Starbucks experience in its stores and online.
 Following a rapid expansion, Starbucks faced declining
same-store sales in 2008 and its share price had been
nearly cut in half over the prior two years.
 The picture wasn’t much better on the technology front.
Unintuitive point-of-sale systems still ran on antiquated
technology, and store managers did not have access to
email.
 To turn the tide, senior leaders took a number of
strategic actions, key among them using digital
technologies to engage customers in new ways.
Starbucks- Value Chain
Value Chain
New Value Chain
Starbucks-Digitization
 Starbucks’ recipe for success in Digital Transformation
has been equal parts technology-savvy and committed
leadership. Today, Starbucks continues to leverage
these strengths to create value for customers and
shareholders alike through digital
 Today, 94% of all Facebook users are either a
Starbucks fan or are friends with one.
 Starbucks boasts 7 million active users of its mobile
payment system, and nearly 100 thousand downloads
of its mobile apps every week.
 In 2012, the company booked $3 billion in payments via
its loyalty card, and is on track to double user enrollment
to 9 million in 2013.
“Everything we are doing in digital is about enhancing and
strengthening those connections [with our customers] in only the
way that digital can and only the way that Starbucks can.’”
- Adam Brotman, Chief Digital Officer
Starbucks-Digitization
Codelco:
Revolutionizing Mining Through Digital Technologies
Codelco
 Codelco, the largest copper producer in the world,
has its roots back in the 1800s.
 Owned by the Chilean State, it operates
internationally and employs over 18,000 people.
 At the beginning of the millennium – facing
increasing challenges around workers’ security,
environment and productivity – Codelco took a hard
strategic look at what the future of mining could be.
 An important goal was to automate mining
operations, shifting from a physical-intensive model
to a knowledge and technology-intensive one. To
turn vision into reality
Codelco
 Codelco Digital was created in 2003.
 It has both operational and strategic objectives:
 To drive initiatives in mining-automation and also to support the
CEO in developing, evolving and communicating a digital
vision.
 Today, four mines in Chile are operated automatically:
 Trucks drive themselves,
 Operations are controlled remotely,
 Information is shared in real-time, and so on.
 This was more than just a technology implementation challenge.
 It involved a new culture, employee engagement, and new skills.
 As CIO Marco Antonio Orellana Silva explains: “Our company is
very conservative, so changing the culture is a key challenge. We
created internal innovation awards to promote new ideas and
encourage our workers to innovate.
Codelco
Today, the firm is shifting from the traditional “Codelco 1.0”
model to “Codelco 2.0”, a real-time mining model with highly
automated processes and remotely-controlled machines.
And there is already a vision for “Codelco 3.0”: an intelligent
mining model relying on integrated information networks and
fully-automated processes.
Leading digital summary
Nike
Nike
 The world’s leading maker of athletic shoes, apparel, equipment, and
accessories, has traditionally built its business through a combination of strong
innovative products, intensive brand-building, and efficient operational
processes.
 As new digital innovations appeared, Nike was fast to capitalize in all three
areas.
Social Media:
 Nike entered social media by building a presence on major social media
platforms around the world, and then by launching social sites dedicated to
specific sports, products, or major events such as the soccer World Cup.
 Nike then went much farther by developing the Nike+ concept for runners. Nike+
monitors and tracks each workout by connecting sensors in shoes with devices
such as the iPhone and an internet platform.
 Runners can share their performance online and even receive customized
advice from coaches. Meanwhile, Nike gathers detailed data about how
customers use its products. According to CEO Mark Parker, “Connecting used
to be, ‘Here’s some product, and here’s some advertising. We hope you like it.’
Connecting today is a dialogue.”26
Nike
Mass-Customizing products:
 Nike’s custom shoe offerings allow customers to design and order shoes
online, share designs with friends, and vote on others’ designs.
 These social media capabilities enable customers to engage with the
product online before and after they buy.
 And listening to these online conversations allows Nike to identify popular
designs and sense new trends.
Digital Product design:
 Nike started using 3D design tools to create new products in the early
2000s. It then diffused digital design and collaboration capabilities to the
whole supply chain.
 The transition did more than improve the firm’s design capability. It also
supported sustainability policies and appealed to younger designers who
expected digital design capabilities.
 CEO Parker explained “Materials, componentry, construction methods,
manufacturing methods, the whole digital revolution … We are embedding
all that thinking into the product.”
Nike
Connecting digital silos:
 Nike was innovating successfully in silos, but missing potential synergies
between them. In 2010, Nike created a division called Nike Digital Sport.
 The new unit provides skilled resources, budget, and coordination across
the enterprise.
 The goal was to create a unified consumer experience that can respond to
– and even shape – rapidly-evolving consumer preferences.
 The unit now leads most customer-facing digital projects, releasing
products under the Nike+ brand.
 Teams of marketers, designers and IT people work together to develop
digital innovations.
 They are also finding ways to mine mountains of highly accurate customer
data – a key strategic asset for marketing and product development in the
highly competitive digital space.
 Looking to the future, Nike plans to become ever-closer to each of its
customers around the world.
Leading digital summary
Asian Paints
 Asian Paints is the largest paint company in India. Initially, the
Company was composed of 13 independently operated companies.
 The Asian Paints leadership team developed a vision to unify all 13
companies into one enterprise. To accomplish this goal, they
installed an ERP system to standardize processes company-wide.
The combination of digital capabilities and leadership capabilities
has transformed the business in the following ways:
 The sales process was reinvented. A call center now takes
orders from customers. The sales team was up skilled and given
mobile technology. Rather than taking customer orders, sales
people are now relationship managers that solve problems and
upsell clients.
 Advanced automation has been introduced to plants. By building
unmanned factories,
 Asian Paints enjoys higher product quality, fewer safety issues,
and improved environmental performance.
Asian Paints
 Data analysis revealed additional service improvements that
could be implemented.
 The company was the first in India to ship paint directly to end
users. Analytics showed that customers had the most issues
with high-end products, due to problems with painters.
 Now Asian Paints also offers application services.
 The service platform has been leveraged to expand the
business. Asian Paints now uses its service platform to sell
kitchen renovation services. Their biggest competitor in this
space has only 5% of the market and Asian Paints believes it
can capture 15%.
 In addition to kitchen renovations, the company has expanded
its paint business to 17 countries.
 The key to Asian Paints’ success was starting with a vision and
then continually asking what else could be accomplished.
Leading digital summary
UPS
 UPS was founded in 1907 as a messenger company, and today has
revenues of USD 58 billion from delivering over 16 million packages per day.
 The company employs over 400,000 people globally and owns around
100,000 vehicles and 600 airplanes to send shipments in a timely manner to
its customers across the world.
 To enhance its operations, UPS relies on descriptive & predictive analytics,
which considers where the company is today & where it will be in the future,
with plans to tackle prescriptive analytics in the future, which considers where
the company should be, making it the most complex and useful tool in
business analytics.
 UPS creates value by analyzing the vast amount of data that it collects.
 This includes data from GPS devices and sensors in vehicles to track speed,
location, number of stops, number of U-turns, and number of left turns.
ORION (On Road Integrated Optimization and Navigation), the system the
company uses at a cost of USD 1 billion a year, uses fleet telematics and
advanced algorithms to optimize routes for each driver to deliver his/her
assigned packages every day as well as provide additional training to drivers
who need it.
UPS
 The system has over 250 million data points, indicating the sophistication
of the analyses being run in a few seconds. The system breaks down the
problem into smaller parts, which enable it to find answers efficiently and
in a timely manner.
 The developed solution ensures that packages are delivered on time and
in the most efficient way in terms of speed and fuel consumption.
 Therefore, ORION helps UPS reduce its costs and save the environment
by minimizing pollution from reduced fuel consumption.
 Additionally, UPS analyzes data to identify maintenance requirements for
vehicles to minimize downtime and maximize revenues by allowing UPS
to be proactive about maintenance needs of vehicles.
 UPS has the ability to capture most of the value created due to its scale.
 UPS could save up to USD 50 million annually from a reduction of one
mile driven per driver per day.
 UPS was able to decrease the number of miles driven by 5.3 million miles,
decrease vehicle idle time by 10 million minutes, saved 650,000 gallons of
fuel, and decreased carbon emissions by 6,500 metric tons.
The Value of Data Analytics
Figs are US $ per year
Operational Paradoxes – Predigital age
In the past, Standardizing limited empowerment. Controlling impacted
innovation. The desire to orchestrate action suggested “leashing” rather than
unleashing employees. As the web became increasingly open, social & participatory,
Husband’s Wirearchy Concept becomes possible, breaking these old paradoxes.
Exploiting the Power of Core Operations
Although not as visible as customer engagement, Operational
processes are an important element of digital capability.
Better operations lead to better productivity, higher efficiency,
and greater customer experiences.
But to many executives, improving operational performance
creates 3 Management paradoxes.
 Standardizing and empowering.
 Workers empowered to choose their own methods are
considered less efficient, yet the standardization of
production tasks can make workers less empowered.
Digital Masters realize that standardization can make
workers more efficient without replacing them because
standardization systems provide consistent information
that helps people do their jobs better
Exploiting the Power of Core Operations
 Controlling and innovating.
 Tightly controlling processes can improve efficiency, yet
controlling variation can prevent workers from innovating
processes in useful ways.
 Digital Masters knows that automation is well suited to
applications that require control, and new technologies are
creating ways to improve process efficiency, increase
product quality, and prevent fraud.
 Orchestrating and unleashing.
 Managers tend to want orchestration, which ties workers to
the places & methods that do the orchestrating. Workers,
however, want to be unleashed from old technologies so
they can focus on more important activities. Digital Masters
realize that digital technologies create many opportunities to
better orchestrate supply chains.
Transforming operational processes is not simply
about adding new technology. Rather, technology,
processes, and people must effectively interact for
the organization to excel. Sound data must be
accessible in real time to both the people and
equipment that utilize it, and overcoming
constraints and revamping “legacy systems” may
be necessary to accomplish this
Reinventing Business Models
 Digital Masters create value from transforming the customer
experience and achieve huge operational efficiencies from transforming
operations.
 They also realize that new business models can help them gain an
advantage over their competitors.
 Executives in organizations still working toward digital mastery must
understand the opportunities and threats that exist because of the
digital evolution.
 Then, they must be prepared to reinvent their business models.
Archetypes of business-model reinvention that are driven by digital
technology include
 Reinventing Industries
 Substituting Product & Services
 Creating new digital businesses
 Reconfigure Value delivery models
 Rethinking Value propositions
Reinventing Business Models
 Reinventing industries.
 An industry structure is reshaped to deliver new forms of
value. It can require new competencies, new economic
models, and new modes of operations. The power of new
digital technologies helps companies connect and create new
platforms for greater interaction.
 Substituting products or services.
 Core products become substitutable by new digital formats.
When a company notices declines in customers or profits, it
must learn to replace itself and immediately experiment with
new offerings.
 Creating new digital businesses.
 New products and services are created to drive additional
revenue. Many times, new start-ups and new entrants spur
larger companies into creating new digital businesses.
Reinventing Business Models
 Reconfiguring value delivery models.
 Products, services, and data are combined to change the value
chain. Technology allows companies to connect all of their
products, services, and information in a way that brings it to
customers and provides greater competitive advantage.
 Rethinking value propositions.
 New digital capabilities are utilized to target unmet needs for
existing or new customers. When rethinking value propositions,
companies can combine products and services in innovative
ways to reinforce their presence in their current markets
Successful business models do not last forever, & Digital Masters know how to make
sense of business-model transformation. They have a good grasp of their current
business models, which leads them to operate either defensively or offensively. When
operating defensively, companies use data to slow the decline of their old models
while also cutting costs and releasing investment capacity. Companies operating
offensively change their business models first, disrupting competitors by substituting a
traditional product or service with a new digital offering.
The What: Building Blocks Of Digital Capability
Most common Linkages between domains of Excellence
To many, digital transformation is either
irrelevant or just another passing fad. Still
other people may not understand how the
change affects their jobs or how they might
make the transition
3
Building Leadership Capabilities
Crafting your Digital Vision
 Leadership capabilities are essential to achieving digital
transformation, and leaders must be able to create a
transformative digital vision.
 Although leaders may understand the value of
transformation, their employees often need to be convinced.
 Successful digital transformation begins at the top of a
company, with senior executives creating a compelling vision
of the future and communicating it throughout the
organization.
 Digital visions involve one of three perspectives, and the
approach that an organization takes should reflect its
capabilities, its customers’ needs, and its industry’s nature of
competition.
Crafting your Digital Vision
The three perspectives are
 Re-envisioning the customer experience.
 Some companies begin by re-envisioning how they
interact with customers. They think about how they can
transform their relationships with customers, how they
can be smarter in serving their customers, how they can
utilize digital tools to learn from customer behavior, or
how they can change customers’ lives.
 Re-envisioning operational processes.
 Organizations that sell largely to other businesses tend to
focus on re-envisioning their operations to become more
efficient and to integrate disparate operations. They think
about how they might change operations within their
industry or with their customers.
Crafting your Digital Vision
 Combining the two approaches to re-envision
business models.
 Some executives combine ideas around
customer experience and operational processes.
Some are forced to re-envision their business
models because of threats that hurt their chances
for long-term survival. Others are not facing a
crisis, but wish to focus on potential opportunities
for new, digitally powered business models. And
some create visions to drive the next long-term
shift in their industries
Transformative Digital Vision
 A truly transformative digital vision must build on an organization’s
strengths, engage its employees, and be able to evolve over time. To
build the vision, executives must identify the benefits they want, what
their end points look like, and how they will engage with customers,
employees, and investors.
 This can be accomplished by following four steps:
 Identifying strategic assets. A new vision must be able to build
on an organization’s existing strengths.
 Strengths can be identified by looking at the physical,
competence-based, intangible, and data assets that already exist.
Once assets have been identified, executives must decide if they
will remain strategic in the new digital environment.
 Assets that will continue to be strategic are those that are
valuable, rare, and inimitable and that cannot be substituted.
Transformative Digital Vision
Creating transformative ambitions.
 Digital aspirations can fall into three categories.
 Substitution is the use of a new technology as an alternative or
replacement for the same function that the organization already performs.
 Extension means improving the performance of a product or process
without drastically changing it.
 Transformation is the fundamental redefinition of a process or product
through technology.
Defining a clear intent and outcome.
 Because employees are so busy in the workplace, a digital vision that
effectively engages employees must include intent and outcome. Intent is a
picture of what needs to change, and outcome is a measurable benefit to the
company, customers, or employees. When combined, intent and outcome
allow employees to visualize the organization’s future and motivate them to
realize the outcomes.
Evolving the vision over time.
 A digital vision must be specific enough to give employees a clear direction and
the flexibility to innovate and build on it.
Engaging Organization at Scale
Having a strategic vision is imperative for organizations, but that vision is
only as good as the people behind it. Employees must be engaged to turn
a vision into a reality.
Organizational leaders can engage the organization to take an active part
in the digital transformation by following 4 steps:
 Connecting the many.
 Executives should use social platforms like wikis, micro-blogging
tools, and enterprise social networks to open strategic
conversations with everyone in the organization. The social
platforms allow the business discussions to be visible to all, which
increases transparency and accountability for what needs to be
done.
 Engaging the wider conversation.
 Executives should lead by example, acting as role models to
encourage open dialogue and increase adoption of new ways of
working. Further, executive presence on digital platforms increases
the likelihood of employee adoption.
Engaging Organization at Scale
 Taking advantage of the crowd.
 Executives should use crowdsourcing to create solutions
for their strategic problems, for it allows employees to
actively engage and share their ideas in a non
segregated environment.
 Accepting the sometimes rough waters of engagement.
 New technologies do present implementation challenges.
Many organizations see a digital divide between tech-
savvy Millennial employees and more tenured employees
who face a learning curve to adopt digital technologies.
To avoid alienating either group, executives must use
communication tools to encourage both groups.
Vision Sets Direction, Engaged People Make It Happen
FOSTER NEW WAYS
OF WORKING
CONNECT THE
ORGANIZATION
ENCOURAGE WIDER
CONVERSATIONS
• Closing knowledge gaps
• Increasing engagement
• Solving business issues
• Generating new ideas
• Wikis
• Microblogs
• Social Networks
• Video Conferencing
• Executive involvement
• Digital champions
• Reverse mentoring
• Use cases
SCALINGWIRING ADOPTING
New innovation process is creating
more innovation, collaboration, and
employee engagement across the
company’s business units.
“Communities that are created on
the network are free from
geographical, functional or
hierarchical boundaries.”
“With executive engagement, you
don’t have to mandate activity.”
Governing the Transformation
 While vision & engagement are important components to
leadership capabilities, digital governance is also required.
 Digital governance helps move an organization’s digital
activities in the right direction. It is essential for companies
because of new demands for digital capabilities & new risks
from digital activities.
 Digital Masters see digital governance as an opportunity to
implement new solutions faster, manage challenges better,
and gain a more integrated view of customers and
operations.
 They also use governance to create and enforce policies that
focus on the challenges emerging from organizational
structures that require collaborating across geographic
locations, business units, and specialties.
Governing the Transformation
 When building digital governance, executives must think
about how they will use 3 major governance mechanisms:
 Committees:
 Steering committees are the most common type of
governance committees. They consist of some of an
organization’s most senior executives and work to make
decisions related to policies, interests, and projects.
Innovation committees can be used in organizations to
govern emerging technology. They identify the challenges
that can be resolved through innovation, fund
experiments, and consider how to adopt useful innovation
Governing the Transformation
 Leadership roles:
 While committees can make decisions, only leaders can drive
change. New leadership roles in organizations include chief
digital officers and digital liaisons. Chief digital officers create
unifying digital visions, energize their companies around digital
possibilities, coordinate digital activities, rethink products and
processes for the new digital environment, and provide critical
tools and resources. Digital liaisons work to steer digital
transformation at the local level within an organization.
 Shared digital units:
 Committees decide, leaders drive change, and digital units
implement change. Although they vary in size and role, all
digital units share a goal to drive synergy across the
organization. These units can exercise great power, but they
do require significant resource and management investment.
Business executives need to be comfortable with
technology and with being challenged by their IT
counterparts. IT leaders need to have a mind-set
that extends beyond technology to encompass the
processes and drivers of business performance.
Building Technology Leadership Capabilities
 Executives need help when it comes to building the Technology
leadership capabilities required to successfully transform their
organizations into Digital Masters.
 Technology leadership requires the merging of the skills and
perspectives of both business and information technology (IT) leaders
so they can drive transformation together. Strong IT/business
partnerships are important, as they can merge customer and product
knowledge, technical knowledge, organizational change capabilities,
and IT capabilities into a single collaboration.
 However, poor relationships between IT and business leaders can
occur. Fixing these relationships requires transparency around
performance, roles, and value. IT employees must be helped to think
and talk differently about what they do. How well or how poorly IT
delivers value for money must be clearly illustrated.
 Finally, changes must be made regarding how IT and business leaders
make investment decisions.
• New ways of working
• Rethinking
infrastructure /
replatforming
IT Business
Relationship
Digital
Platform
Digital
Skills
• Digital IQ program
Together Drive Transformation Efforts Better Than They Do Apart
Business & IT Leaders
Building Technology Leadership Capabilities
 One effective approach is to create a dual-speed IT
structure, where one part of the IT unit supports traditional IT
needs, while another part develops processes and methods
to operate at digital speed with the business.
 To build dual-speed IT units, the right leaders from both
sides of the relationship must be brought together.
 The leaders must be able to communicate about topics with
both IT and business focuses and constantly pay attention to
the links between IT-business relationships, skills, and
digital platforms that could create valuable digital
transformation opportunities.
Create a shared
transformative vision of
the digital future
Engage employees at
scale to make vision a
reality
Fuse IT & business
communities to build
digital skills & transform
technology platforms
Establish strong digital
governance to steer the
course
Is What Turns Digital Investments Into Digital Advantage
IT/BUSINESS VISION
ENGAGEMENTGOVERNANCE
The How: Leadership Capabilities
Number of Firm Convictions Around Digital Transformation
Enablers
The ‘WHAT’
Consumers At The Heart
Data As A New Currency
Digital Across The Value Chain
Open Innovation
The ‘HOW’
Led From The Top
People Engagement
Governance Drives
Performance
Experiment & Scale Quickly
+
• Wiring The Enterprise
• Building Digital Capabilities
4
Back at the office – A Leader’s playbook
for Digital Transformation
New ways of working, powered by digital technologies, are
evolving the cultures and work practices within
organizations. And over time, they will also change how
organizations are structured and function
The Digital Transformation Compass
The Digital Compass
consist of 4 steps/phases:
 Frame
 Focus
 Mobilize
 Sustain
Companies That Build Digital Skills Faster Will Get
Ahead of the Pack
PLUGGING
THE SKILL
GAP
Innovative
Recruitment
Methods
Target
Company
Acquisitions
Ecosystem
Partnerships
Incubating for
the Future
Training
Programs
Made several
Acquisitions
of Mobile, Social and
Technology Firms
Gamified their
Recruitment Process
Launched a Digital IQ
training. Over 20,000
employees trained in 2
years
Implemented reverse
mentoring programs
Launched an incubator program
for mobile startups
77% of the
companies
highlighted “skills”
as the key hurdle
to digital
transformation
...YET...
Only 30% of HR
functions were
actively involved in
digital skills
development
Ecosystem of JVs
for core technology
developments
Digital Skills
Framing the Digital Challenge
Once digital and leadership capabilities are built, executives must
encourage momentum around digital transformation by framing the digital
challenge.
To do so, they must address:
 Building awareness.
 An organization’s senior leaders must be made aware of the
potential business impact of digital technologies.
 They must understand the scale and pace of the digital impact,
and must design digital transformation programs that protect
profitable operations and assets while also transitioning to new
digital business.
 Executives must also make the awareness process experiential,
using fact-based research to get employee support.
 Finally, executives must build a coalition of believers, involving
senior leaders to help drive digital transformation inside the
organization
Framing the Digital Challenge
 Defining the starting point.
 Executives must assess their digital mastery by taking a
look at their organizations’ current digital initiatives and
skills.
 Then, they must assess the physical assets,
competencies, intangible assets, and data. With this
information in hand, executives can challenge their
current business models and think of new ways to deliver
greater value to customers.
 Creating a shared vision.
 An organization’s top team must be aligned around a
shared digital vision.
 Team members must craft a digital vision focused on the
business and its customers, not the technology
Focusing Investment
Once an organization’s senior leadership team has become aware of the challenge,
understands the starting points, and can articulate a shared vision of what the digital
future looks like, it can move on to execution, for which it must focus its investments.
Executives must carefully manage:
 Translating vision into action. Digital Masters first translate their visions into
strategic goals. Then, they build roadmaps that begin guiding their organizations
toward the vision.
 Building governance. Governance guarantees that everyone within an
organization will keep moving in the right direction. Building governance requires
executives to decide what they want to coordinate and share, determine how to
make it happen, and find ways to adjust over time.
 Funding the transformation. Transformations always require serious
investment. Executives must build a digital investment portfolio that balances the
goals of the organization’s vision with the desired combination of both short-term
and long-term pay off. They must also diversify their sources of funding between
central, local, and partner-supported investments. Finally, executives must
present their transformation goals in terms that make sense to both senior leaders
and employees so everyone can clearly understand and support investment and
funding goals
Mobilizing the Organization
The transformation to digital mastery can occur when the organization is
mobilized.
To mobilize, executives must consider:
 Signaling -Getting an entire organization on board with digital transformation
is difficult. Leaders must send clear signals to their organizations about the
importance of digital transformation and the expected changes that will result.
Leaders must also clearly explain the benefits of making a digital
transformation by focusing on how transformation will improve how people
and various organizational communities do their jobs.
 Earning the right to engage- Leaders can influence the digital transformation
by serving as role models for the desired change, using crowdsourcing to
generate new ideas from people in all areas of their organizations, identifying
digital champions and true believers from both IT and business sides of their
organizations, and showcasing results.
 Setting new behaviors - Digital technology allows for different and more
transparent ways of sharing information within an organization. Executives
must make visible changes to work practices, encourage adoption,
institutionalize new work practices, and learn from failures as they gain more
knowledge.
Sustaining Digital Transformation
Many organizations fail to achieve their transformation goals
because they lose momentum. To sustain the momentum,
executives can:
 Build foundation capabilities.
 Digital Masters understand their skills gaps. They use this
information to develop organization development plans
that focus on hiring the best people, training existing
employees, partnering with those who possess critical
skills, and acquiring small companies that have great
talent. Digital Masters also build digital platforms that
make their organizations’ business processes more
efficient, less risky, and more agile. Finally, Digital
Masters fuse together IT and business skills to create
environments of trust, understanding, and collaboration.
Digital Transformation Compass -Sustaining
12 Core Activities
Sustaining Digital Transformation
 Align reward structures.
 Reward structures help link transformation goals and
measures. They should not be purely financial, but should
also include intangible incentives such as status, reputation,
recognition, expertise, and privileges to drive the employee
motivation and productivity that will help reach transformation
goals.
 Measure, monitor, and iterate.
 A measurement and monitoring system will provide an
organization with the confidence that its investments and
business change can bring real benefits. Properly measuring
progress requires that executives manage their strategic
scorecards, have metrics that measure the progress of digital
initiatives, connect top-down and initiative-level measures,
and develop an iterative review process
Sustaining Digital Transformation
Sustaining the digital transformation in an age
when technology is always changing is
challenging. Only those organizations that build
successful digital capabilities and effective
leadership capabilities will be able to keep up and
transform into Digital Masters who will thrive.
Digital Technology will remain the endless agitator of the Business World
To Conclude
The pace of technological change is accelerating, and
executives in every industry are paying attention. They
face a vast set of alternatives for gaining digital
advantage.
Unfortunately, they also hear a bewildering barrage of
advice – sometimes conflicting and often wrong –
about how to move forward digitally.
In two-year study, it is discovered that many common
perceptions about digital transformation were actually
myths These myths can lead executives to make
unfortunate and costly decisions.
Myths & Realities of Digital Transformation
Leading digital summary
 Digitization is not a technology issue—it is a strategy and business
transformation issue, which is a sweet spot.
 Digital technologies such as social media, analytics, the Internet of
Things, and mobile are revolutionizing the way that companies work.
Yet, based on research by Dr. George Westerman of MIT’s Initiative
on the Digital Economy, fewer than 25% of companies are deriving
value from digital technologies. However, those businesses that have
harnessed the power of digital across the entire organization—not just
in isolated silos—are accomplishing amazing things.
 Westerman calls those companies “Digital Masters.”
 Digital Masters are not necessarily technology companies. Instead,
they are organizations that think differently about digital & see it as an
opportunity to transform their businesses along multiple dimensions.
 Examples cited of companies using digital technology to generate far
more value include Burberry, Starbucks, Asian Paints, Codelco,
Caesars Entertainment, and Nike.
Mail your comments to ramaddster@gmail.com

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Leading digital summary

  • 1. Some Impressionistic takes from the book of George Westerman, Didier Bonnet & Andrew McAfee “Leading Digital “ ( Turning Technology into Business Transformation“ ) by Ramki ramaddster@gmail.com
  • 2. About the Authors George Westerman is a research scientist with the MIT Initiative on the Digital Economy, focusing on digital technology leadership and innovation. He has contributed to publications ranging from Sloan Management Review to Organization Science to the Wall Street Journal. Westerman is coauthor of two respected books: The Real Business of IT: How CIOs Create and Communicate Value, named the best IT business book of 2009 by CIO Insight magazine, and IT Risk: Turning Business Threats into Competitive Advantage, named one of the top five books of 2007 by CIO Insight. He regularly conducts keynote presentations and senior executive workshops with companies around the world. Prior to earning his doctorate from Harvard Business School, Westerman gained more than 13 years of experience in product development and technology leadership roles.
  • 3. About the Authors Didier Bonnet is a senior vice president at Capgemini Consulting, where he serves as global practice leader and heads the Digital Transformation program. He has more than 25 years’ experience in strategy development, globalization, Internet economics, and business transformation for large global corporations. He has published several articles and book chapters, and is frequently quoted in the press, including the Wall Street Journal, Forbes, Financial Times, and the Economist. Prior to working at Capgemini, Bonnet was a vice president at Gemini Consulting and a senior associate at economic consulting firm Putnam, Hayes and Bartlett. He received an MBA in business economics from a French business school and holds a PhD from Oxford University. Andrew McAfee is a principal research scientist and confounder of the MIT Initiative on the Digital Economy. He has also held appointments on the faculty of Harvard Business School and as a fellow at Harvard’s Berkman Center for Internet and Society. He has written for magazines and journals such as Harvard Business Review and Sloan Management Review. McAfee is coauthor of Race Against the Machine and the New York Times bestseller The Second Machine Age. He is also the author of Enterprise 2.0. McAfee earned his doctorate from Harvard Business School, and completed two MS and two BS degrees at MIT
  • 4. Over the past years digital has been transforming businesses – from large to small, and across industries, from manufacturing to banking to pharmaceuticals. For executives the transition to a digital business places them at a crossroads – on the one hand it provides potentially huge opportunities, on the other hand it brings along significant strategic and operational challenges. Recent research from Capgemini Consulting and MIT (‘The Digital Advantage’) reveals that digital leaders – so-called ‘Digital Masters’ – realize up to 9% more revenue and up to 26% profit than competitors. Yet despite the clear benefits, businesses are at the same time struggling with capturing the potential of digital, through either insufficient priority, focus or budget and/or poor implementation capabilities. As a result, the researchers estimate that currently ‘only’ 15% of companies can be coined digital leaders, while 65% of companies still find themselves in the early phase of adoption. Prelude
  • 5.  The book commences with outlining the potential of digital, concluding that in the next decade, companies, industries and entire economies will be transformed by a barrage of technology innovations that will “make everything that’s happened so far look like a prelude”, write the authors Didier Bonnet (SVP of Capgemini Consulting), Andrew McAfee (MIT) and George Westerman (MIT). “When it comes to the impact of digital technologies on the business world, we aren't seen nothing yet,” says McAfee.  Based on the game changing role digital is forecasted to have, the authors subsequently look at the key characteristics required for successfully embracing digital.  To do so, they researched the practices and operations of more than 100 companies, including amongst others digital leaders as Burberry, Lloyds Banking Group and Nike. Interestingly, they conclude that digital leadership is possible in any industry: “We found that it doesn’t matter what industry you are in,” explains Bonnet.  In addition, it turns out that driving digital transformation successfully is not an arcane or mysterious art; it is to the contrary an achievable goal for “any enterprise with the leadership and willingness to do so.” . Prelude
  • 6.  Lastly, for executives willing to transform their business to a digital leader, the authors offer a practical framework which allows organizations to improve their performance in three key areas:  Customer experience,  Operational processes and  Business models.  The framework is based on a step-by step guide (12 steps), from strategy setting and planning to deployment and embedding the change within the organization.  Each section also provides is also accompanied by a self- diagnostic exercise, as well as useful examples and techniques to employ. “In this book, the authors provide not only the inspiration, but the practical guidance required for CEOs to successfully navigate the digital transformation,” Prelude
  • 8.  Digital Masters are the organizations that use digital technologies to work differently.  They employ strong digital and leadership capabilities to get closer to their customers, empower their employees, and improve their business processes.  When organizations attain digital mastery, they show a clear performance advantage.  Digital Masters are significantly more profitable than their competitors and have greater achievement, more money for investment, and more engaged employees.  The benefits to digital mastery are great, but many organizations struggle to adopt & use digital technology. Context
  • 9. What Do These Great Companies Have In Common?
  • 10. DigitalCapability Leadership Capability The DNA Of Digital Masters The What: Using digital technology to transform the customer experience, operational processes and business models The How: Successful transformations depend as much on how firms manage digital transformation than solely on implementing new technologies Digital Masters combine digital capabilities and leadership capabilities to achieve performance that is greater than either dimension can deliver on its own.
  • 11.  In today’s business world, executives must use digital technology to improve their product designs, increase their manufacturing speed, and make their organizations more efficient. Digital Masters, firms that are making huge technological strides, are investing in both the what of technology (referred to as digital capabilities) and the how of change leadership (or leadership capabilities) to gain advantages over their competitors.  These two dimensions are made up of four levels of digital mastery:  Beginners  Fashionistas  Conservatives  Digital Masters Digital Mastery
  • 12. Four Levels Of Digital Mastery DigitalCapability Leadership Capability FASHIONISTAS DIGITAL MASTERS CONSERVATIVESBEGINNERS
  • 13. * Average performance difference for firms in each quadrant versus the average performance of all large firms in the same industry for the 184 publicly-traded companies in our sample The Time To Act Is Now Basket of indicators: • EBIT Margin • Net Profit Margin DigitalCapability Leadership Capability REVENUE GENERATION EFFICIENCY +6% +9% -10%-4% DigitalCapability Leadership Capability PROFITABILITY % +26% +9%-24% -11% Digital Masters Have Significantly Better Financial Performance Basket of indicators: • Revenue / Employee • Fixed Asset Turnover
  • 14. Four Levels Of Digital Mastery  Beginners: Those at the beginning of their digital journeys. Beginners have very basic digital experience and they often lag behind their competitors in both their technological and financial performances.  Fashionistas: Firms that invest in the newest technological and digital trends, but lack strong leadership and control. Because they are so impulsive, Fashionistas often waste much of what they spend or have to reverse their actions to better integrate new technologies.  Conservatives: Extremely prudent firms that often have strong digital capabilities, but are too cautious to use them to their full extent. Conservatives are the exact opposite of fashionistas.  Digital Masters: The most technologically savvy firms. They have the skills, knowledge, and resources to invest in a strong digital future.
  • 15. Digital Mastery by Industry
  • 17. Creating Compelling Customer Experience Executives wanting to transform their organizations must first focus on digital capability, and how organizations engage with their customers is the most visible aspect of that capability. Digital Masters transform their customer experiences through the sum of four interventions:  Designing the customer experience from the outside in.  Digitally engaged customers expect products, services, and information to be timely and tailored to their specific needs. Digital Masters provide customers with the experiences that they truly want by understanding both customer behavior and the organizational requirements needed to deliver exceptional experiences
  • 18. Creating Compelling Customer Experience  Creating reach & Customer Engagement.  Digital Masters realize that digital transformation cannot happen without digital investment, so they make smart investments to creatively enhance the customer experience.  Putting Customer Data at the heart of the experience.  Digital Masters rely on data-driven insights. They integrate data and advanced analytics to make better decisions, improve the quality of customer experiences, and create greater competitive advantages.  Meshing physical & digital experiences in new ways.  Digital Masters understand that innovation comes from creatively bringing together multiple digital and physical channels to create new and improved customer experiences and encourage continual innovation.
  • 19. With customer engagement at the center of the digital transformation, performance will be enhanced and the company culture revamped. Anything that interferes with a compelling customer experience must be corrected immediately
  • 21. Key Challenges  In 2006 while similar companies in the sector were growing at an average rate of 12-13%, Burberry was not passing the 1-2% mark; the board decided that the brand had to become more competitive  Burberry saw an opportunity in digital transformation, at a time when the competitors were basing their strategy on their tradition (Italian and French firms mainly) to reach their habitual customers.  To re-launch its brand on the market, Burberry decided to try to reach a new target of customers; the millennial generation. The best way to reach Generation Y customers was to go digital.  On the basis of this aim, Burberry established the five year Innovation Strategy.. Burberry
  • 22.  Burberry developed a 5 year strategy to implement digital solutions  Digital marketing driven company:  Use of non formal advertisement channels such as social media and online platforms. The firm aimed to interact and engage with its customers by showing them how they operate  Creation of a system to manage and coordinate the different online platforms that the company uses.  Creation of e Stores and mobile apps:  Creation of online stores through which customers can purchase goods to be picked up in store  Live projection of runway shows and other events in stores. In this occasion customers are allowed to have privileged pre-sales through tablets in stores  Implementation of a Mobile App which allows customers to view products and purchase them even if not yet available in stores Burberry- Digital Solution
  • 23.  As a result of the 5 year innovation strategy, Burberry transformed itself from an underscoring company in 2005 to one in the top 5 of its sector  Burberry finished 2012 as the most followed luxury brand on Facebook, with nearly 15 million fans. Burberry was also the leading luxury lifestyle brand on Instagram.  Total revenues grew by 23% in 2012  Data collected reveals that 60% of customers buy luxury goods online and collect items in stores  Burberry made investments in human resourcing to set up specific departments dedicated to the Innovation Strategy implementation  Further developments are blurring the lines between digital and physical stores Burberry- Outcome
  • 25. Starbucks-Life Cycle  Two decades of growth  Sales started declining At Starbucks, coffee is big business. Since opening its first location in Seattle, Washington in 1971, the company has grown into one of the world’s largest specialty foods retailers and one of the most globally-recognized brands.
  • 26. Starbucks- Challenges  Starbucks has built a billion-dollar enterprise on more than just coffee; it has succeeded in creating a unique Starbucks experience in its stores and online.  Following a rapid expansion, Starbucks faced declining same-store sales in 2008 and its share price had been nearly cut in half over the prior two years.  The picture wasn’t much better on the technology front. Unintuitive point-of-sale systems still ran on antiquated technology, and store managers did not have access to email.  To turn the tide, senior leaders took a number of strategic actions, key among them using digital technologies to engage customers in new ways.
  • 27. Starbucks- Value Chain Value Chain New Value Chain
  • 28. Starbucks-Digitization  Starbucks’ recipe for success in Digital Transformation has been equal parts technology-savvy and committed leadership. Today, Starbucks continues to leverage these strengths to create value for customers and shareholders alike through digital  Today, 94% of all Facebook users are either a Starbucks fan or are friends with one.  Starbucks boasts 7 million active users of its mobile payment system, and nearly 100 thousand downloads of its mobile apps every week.  In 2012, the company booked $3 billion in payments via its loyalty card, and is on track to double user enrollment to 9 million in 2013.
  • 29. “Everything we are doing in digital is about enhancing and strengthening those connections [with our customers] in only the way that digital can and only the way that Starbucks can.’” - Adam Brotman, Chief Digital Officer Starbucks-Digitization
  • 31. Codelco  Codelco, the largest copper producer in the world, has its roots back in the 1800s.  Owned by the Chilean State, it operates internationally and employs over 18,000 people.  At the beginning of the millennium – facing increasing challenges around workers’ security, environment and productivity – Codelco took a hard strategic look at what the future of mining could be.  An important goal was to automate mining operations, shifting from a physical-intensive model to a knowledge and technology-intensive one. To turn vision into reality
  • 32. Codelco  Codelco Digital was created in 2003.  It has both operational and strategic objectives:  To drive initiatives in mining-automation and also to support the CEO in developing, evolving and communicating a digital vision.  Today, four mines in Chile are operated automatically:  Trucks drive themselves,  Operations are controlled remotely,  Information is shared in real-time, and so on.  This was more than just a technology implementation challenge.  It involved a new culture, employee engagement, and new skills.  As CIO Marco Antonio Orellana Silva explains: “Our company is very conservative, so changing the culture is a key challenge. We created internal innovation awards to promote new ideas and encourage our workers to innovate.
  • 33. Codelco Today, the firm is shifting from the traditional “Codelco 1.0” model to “Codelco 2.0”, a real-time mining model with highly automated processes and remotely-controlled machines. And there is already a vision for “Codelco 3.0”: an intelligent mining model relying on integrated information networks and fully-automated processes.
  • 35. Nike Nike  The world’s leading maker of athletic shoes, apparel, equipment, and accessories, has traditionally built its business through a combination of strong innovative products, intensive brand-building, and efficient operational processes.  As new digital innovations appeared, Nike was fast to capitalize in all three areas. Social Media:  Nike entered social media by building a presence on major social media platforms around the world, and then by launching social sites dedicated to specific sports, products, or major events such as the soccer World Cup.  Nike then went much farther by developing the Nike+ concept for runners. Nike+ monitors and tracks each workout by connecting sensors in shoes with devices such as the iPhone and an internet platform.  Runners can share their performance online and even receive customized advice from coaches. Meanwhile, Nike gathers detailed data about how customers use its products. According to CEO Mark Parker, “Connecting used to be, ‘Here’s some product, and here’s some advertising. We hope you like it.’ Connecting today is a dialogue.”26
  • 36. Nike Mass-Customizing products:  Nike’s custom shoe offerings allow customers to design and order shoes online, share designs with friends, and vote on others’ designs.  These social media capabilities enable customers to engage with the product online before and after they buy.  And listening to these online conversations allows Nike to identify popular designs and sense new trends. Digital Product design:  Nike started using 3D design tools to create new products in the early 2000s. It then diffused digital design and collaboration capabilities to the whole supply chain.  The transition did more than improve the firm’s design capability. It also supported sustainability policies and appealed to younger designers who expected digital design capabilities.  CEO Parker explained “Materials, componentry, construction methods, manufacturing methods, the whole digital revolution … We are embedding all that thinking into the product.”
  • 37. Nike Connecting digital silos:  Nike was innovating successfully in silos, but missing potential synergies between them. In 2010, Nike created a division called Nike Digital Sport.  The new unit provides skilled resources, budget, and coordination across the enterprise.  The goal was to create a unified consumer experience that can respond to – and even shape – rapidly-evolving consumer preferences.  The unit now leads most customer-facing digital projects, releasing products under the Nike+ brand.  Teams of marketers, designers and IT people work together to develop digital innovations.  They are also finding ways to mine mountains of highly accurate customer data – a key strategic asset for marketing and product development in the highly competitive digital space.  Looking to the future, Nike plans to become ever-closer to each of its customers around the world.
  • 39. Asian Paints  Asian Paints is the largest paint company in India. Initially, the Company was composed of 13 independently operated companies.  The Asian Paints leadership team developed a vision to unify all 13 companies into one enterprise. To accomplish this goal, they installed an ERP system to standardize processes company-wide. The combination of digital capabilities and leadership capabilities has transformed the business in the following ways:  The sales process was reinvented. A call center now takes orders from customers. The sales team was up skilled and given mobile technology. Rather than taking customer orders, sales people are now relationship managers that solve problems and upsell clients.  Advanced automation has been introduced to plants. By building unmanned factories,  Asian Paints enjoys higher product quality, fewer safety issues, and improved environmental performance.
  • 40. Asian Paints  Data analysis revealed additional service improvements that could be implemented.  The company was the first in India to ship paint directly to end users. Analytics showed that customers had the most issues with high-end products, due to problems with painters.  Now Asian Paints also offers application services.  The service platform has been leveraged to expand the business. Asian Paints now uses its service platform to sell kitchen renovation services. Their biggest competitor in this space has only 5% of the market and Asian Paints believes it can capture 15%.  In addition to kitchen renovations, the company has expanded its paint business to 17 countries.  The key to Asian Paints’ success was starting with a vision and then continually asking what else could be accomplished.
  • 42. UPS  UPS was founded in 1907 as a messenger company, and today has revenues of USD 58 billion from delivering over 16 million packages per day.  The company employs over 400,000 people globally and owns around 100,000 vehicles and 600 airplanes to send shipments in a timely manner to its customers across the world.  To enhance its operations, UPS relies on descriptive & predictive analytics, which considers where the company is today & where it will be in the future, with plans to tackle prescriptive analytics in the future, which considers where the company should be, making it the most complex and useful tool in business analytics.  UPS creates value by analyzing the vast amount of data that it collects.  This includes data from GPS devices and sensors in vehicles to track speed, location, number of stops, number of U-turns, and number of left turns. ORION (On Road Integrated Optimization and Navigation), the system the company uses at a cost of USD 1 billion a year, uses fleet telematics and advanced algorithms to optimize routes for each driver to deliver his/her assigned packages every day as well as provide additional training to drivers who need it.
  • 43. UPS  The system has over 250 million data points, indicating the sophistication of the analyses being run in a few seconds. The system breaks down the problem into smaller parts, which enable it to find answers efficiently and in a timely manner.  The developed solution ensures that packages are delivered on time and in the most efficient way in terms of speed and fuel consumption.  Therefore, ORION helps UPS reduce its costs and save the environment by minimizing pollution from reduced fuel consumption.  Additionally, UPS analyzes data to identify maintenance requirements for vehicles to minimize downtime and maximize revenues by allowing UPS to be proactive about maintenance needs of vehicles.  UPS has the ability to capture most of the value created due to its scale.  UPS could save up to USD 50 million annually from a reduction of one mile driven per driver per day.  UPS was able to decrease the number of miles driven by 5.3 million miles, decrease vehicle idle time by 10 million minutes, saved 650,000 gallons of fuel, and decreased carbon emissions by 6,500 metric tons.
  • 44. The Value of Data Analytics Figs are US $ per year
  • 45. Operational Paradoxes – Predigital age In the past, Standardizing limited empowerment. Controlling impacted innovation. The desire to orchestrate action suggested “leashing” rather than unleashing employees. As the web became increasingly open, social & participatory, Husband’s Wirearchy Concept becomes possible, breaking these old paradoxes.
  • 46. Exploiting the Power of Core Operations Although not as visible as customer engagement, Operational processes are an important element of digital capability. Better operations lead to better productivity, higher efficiency, and greater customer experiences. But to many executives, improving operational performance creates 3 Management paradoxes.  Standardizing and empowering.  Workers empowered to choose their own methods are considered less efficient, yet the standardization of production tasks can make workers less empowered. Digital Masters realize that standardization can make workers more efficient without replacing them because standardization systems provide consistent information that helps people do their jobs better
  • 47. Exploiting the Power of Core Operations  Controlling and innovating.  Tightly controlling processes can improve efficiency, yet controlling variation can prevent workers from innovating processes in useful ways.  Digital Masters knows that automation is well suited to applications that require control, and new technologies are creating ways to improve process efficiency, increase product quality, and prevent fraud.  Orchestrating and unleashing.  Managers tend to want orchestration, which ties workers to the places & methods that do the orchestrating. Workers, however, want to be unleashed from old technologies so they can focus on more important activities. Digital Masters realize that digital technologies create many opportunities to better orchestrate supply chains.
  • 48. Transforming operational processes is not simply about adding new technology. Rather, technology, processes, and people must effectively interact for the organization to excel. Sound data must be accessible in real time to both the people and equipment that utilize it, and overcoming constraints and revamping “legacy systems” may be necessary to accomplish this
  • 49. Reinventing Business Models  Digital Masters create value from transforming the customer experience and achieve huge operational efficiencies from transforming operations.  They also realize that new business models can help them gain an advantage over their competitors.  Executives in organizations still working toward digital mastery must understand the opportunities and threats that exist because of the digital evolution.  Then, they must be prepared to reinvent their business models. Archetypes of business-model reinvention that are driven by digital technology include  Reinventing Industries  Substituting Product & Services  Creating new digital businesses  Reconfigure Value delivery models  Rethinking Value propositions
  • 50. Reinventing Business Models  Reinventing industries.  An industry structure is reshaped to deliver new forms of value. It can require new competencies, new economic models, and new modes of operations. The power of new digital technologies helps companies connect and create new platforms for greater interaction.  Substituting products or services.  Core products become substitutable by new digital formats. When a company notices declines in customers or profits, it must learn to replace itself and immediately experiment with new offerings.  Creating new digital businesses.  New products and services are created to drive additional revenue. Many times, new start-ups and new entrants spur larger companies into creating new digital businesses.
  • 51. Reinventing Business Models  Reconfiguring value delivery models.  Products, services, and data are combined to change the value chain. Technology allows companies to connect all of their products, services, and information in a way that brings it to customers and provides greater competitive advantage.  Rethinking value propositions.  New digital capabilities are utilized to target unmet needs for existing or new customers. When rethinking value propositions, companies can combine products and services in innovative ways to reinforce their presence in their current markets Successful business models do not last forever, & Digital Masters know how to make sense of business-model transformation. They have a good grasp of their current business models, which leads them to operate either defensively or offensively. When operating defensively, companies use data to slow the decline of their old models while also cutting costs and releasing investment capacity. Companies operating offensively change their business models first, disrupting competitors by substituting a traditional product or service with a new digital offering.
  • 52. The What: Building Blocks Of Digital Capability
  • 53. Most common Linkages between domains of Excellence
  • 54. To many, digital transformation is either irrelevant or just another passing fad. Still other people may not understand how the change affects their jobs or how they might make the transition
  • 56. Crafting your Digital Vision  Leadership capabilities are essential to achieving digital transformation, and leaders must be able to create a transformative digital vision.  Although leaders may understand the value of transformation, their employees often need to be convinced.  Successful digital transformation begins at the top of a company, with senior executives creating a compelling vision of the future and communicating it throughout the organization.  Digital visions involve one of three perspectives, and the approach that an organization takes should reflect its capabilities, its customers’ needs, and its industry’s nature of competition.
  • 57. Crafting your Digital Vision The three perspectives are  Re-envisioning the customer experience.  Some companies begin by re-envisioning how they interact with customers. They think about how they can transform their relationships with customers, how they can be smarter in serving their customers, how they can utilize digital tools to learn from customer behavior, or how they can change customers’ lives.  Re-envisioning operational processes.  Organizations that sell largely to other businesses tend to focus on re-envisioning their operations to become more efficient and to integrate disparate operations. They think about how they might change operations within their industry or with their customers.
  • 58. Crafting your Digital Vision  Combining the two approaches to re-envision business models.  Some executives combine ideas around customer experience and operational processes. Some are forced to re-envision their business models because of threats that hurt their chances for long-term survival. Others are not facing a crisis, but wish to focus on potential opportunities for new, digitally powered business models. And some create visions to drive the next long-term shift in their industries
  • 59. Transformative Digital Vision  A truly transformative digital vision must build on an organization’s strengths, engage its employees, and be able to evolve over time. To build the vision, executives must identify the benefits they want, what their end points look like, and how they will engage with customers, employees, and investors.  This can be accomplished by following four steps:  Identifying strategic assets. A new vision must be able to build on an organization’s existing strengths.  Strengths can be identified by looking at the physical, competence-based, intangible, and data assets that already exist. Once assets have been identified, executives must decide if they will remain strategic in the new digital environment.  Assets that will continue to be strategic are those that are valuable, rare, and inimitable and that cannot be substituted.
  • 60. Transformative Digital Vision Creating transformative ambitions.  Digital aspirations can fall into three categories.  Substitution is the use of a new technology as an alternative or replacement for the same function that the organization already performs.  Extension means improving the performance of a product or process without drastically changing it.  Transformation is the fundamental redefinition of a process or product through technology. Defining a clear intent and outcome.  Because employees are so busy in the workplace, a digital vision that effectively engages employees must include intent and outcome. Intent is a picture of what needs to change, and outcome is a measurable benefit to the company, customers, or employees. When combined, intent and outcome allow employees to visualize the organization’s future and motivate them to realize the outcomes. Evolving the vision over time.  A digital vision must be specific enough to give employees a clear direction and the flexibility to innovate and build on it.
  • 61. Engaging Organization at Scale Having a strategic vision is imperative for organizations, but that vision is only as good as the people behind it. Employees must be engaged to turn a vision into a reality. Organizational leaders can engage the organization to take an active part in the digital transformation by following 4 steps:  Connecting the many.  Executives should use social platforms like wikis, micro-blogging tools, and enterprise social networks to open strategic conversations with everyone in the organization. The social platforms allow the business discussions to be visible to all, which increases transparency and accountability for what needs to be done.  Engaging the wider conversation.  Executives should lead by example, acting as role models to encourage open dialogue and increase adoption of new ways of working. Further, executive presence on digital platforms increases the likelihood of employee adoption.
  • 62. Engaging Organization at Scale  Taking advantage of the crowd.  Executives should use crowdsourcing to create solutions for their strategic problems, for it allows employees to actively engage and share their ideas in a non segregated environment.  Accepting the sometimes rough waters of engagement.  New technologies do present implementation challenges. Many organizations see a digital divide between tech- savvy Millennial employees and more tenured employees who face a learning curve to adopt digital technologies. To avoid alienating either group, executives must use communication tools to encourage both groups.
  • 63. Vision Sets Direction, Engaged People Make It Happen FOSTER NEW WAYS OF WORKING CONNECT THE ORGANIZATION ENCOURAGE WIDER CONVERSATIONS • Closing knowledge gaps • Increasing engagement • Solving business issues • Generating new ideas • Wikis • Microblogs • Social Networks • Video Conferencing • Executive involvement • Digital champions • Reverse mentoring • Use cases SCALINGWIRING ADOPTING New innovation process is creating more innovation, collaboration, and employee engagement across the company’s business units. “Communities that are created on the network are free from geographical, functional or hierarchical boundaries.” “With executive engagement, you don’t have to mandate activity.”
  • 64. Governing the Transformation  While vision & engagement are important components to leadership capabilities, digital governance is also required.  Digital governance helps move an organization’s digital activities in the right direction. It is essential for companies because of new demands for digital capabilities & new risks from digital activities.  Digital Masters see digital governance as an opportunity to implement new solutions faster, manage challenges better, and gain a more integrated view of customers and operations.  They also use governance to create and enforce policies that focus on the challenges emerging from organizational structures that require collaborating across geographic locations, business units, and specialties.
  • 65. Governing the Transformation  When building digital governance, executives must think about how they will use 3 major governance mechanisms:  Committees:  Steering committees are the most common type of governance committees. They consist of some of an organization’s most senior executives and work to make decisions related to policies, interests, and projects. Innovation committees can be used in organizations to govern emerging technology. They identify the challenges that can be resolved through innovation, fund experiments, and consider how to adopt useful innovation
  • 66. Governing the Transformation  Leadership roles:  While committees can make decisions, only leaders can drive change. New leadership roles in organizations include chief digital officers and digital liaisons. Chief digital officers create unifying digital visions, energize their companies around digital possibilities, coordinate digital activities, rethink products and processes for the new digital environment, and provide critical tools and resources. Digital liaisons work to steer digital transformation at the local level within an organization.  Shared digital units:  Committees decide, leaders drive change, and digital units implement change. Although they vary in size and role, all digital units share a goal to drive synergy across the organization. These units can exercise great power, but they do require significant resource and management investment.
  • 67. Business executives need to be comfortable with technology and with being challenged by their IT counterparts. IT leaders need to have a mind-set that extends beyond technology to encompass the processes and drivers of business performance.
  • 68. Building Technology Leadership Capabilities  Executives need help when it comes to building the Technology leadership capabilities required to successfully transform their organizations into Digital Masters.  Technology leadership requires the merging of the skills and perspectives of both business and information technology (IT) leaders so they can drive transformation together. Strong IT/business partnerships are important, as they can merge customer and product knowledge, technical knowledge, organizational change capabilities, and IT capabilities into a single collaboration.  However, poor relationships between IT and business leaders can occur. Fixing these relationships requires transparency around performance, roles, and value. IT employees must be helped to think and talk differently about what they do. How well or how poorly IT delivers value for money must be clearly illustrated.  Finally, changes must be made regarding how IT and business leaders make investment decisions.
  • 69. • New ways of working • Rethinking infrastructure / replatforming IT Business Relationship Digital Platform Digital Skills • Digital IQ program Together Drive Transformation Efforts Better Than They Do Apart Business & IT Leaders
  • 70. Building Technology Leadership Capabilities  One effective approach is to create a dual-speed IT structure, where one part of the IT unit supports traditional IT needs, while another part develops processes and methods to operate at digital speed with the business.  To build dual-speed IT units, the right leaders from both sides of the relationship must be brought together.  The leaders must be able to communicate about topics with both IT and business focuses and constantly pay attention to the links between IT-business relationships, skills, and digital platforms that could create valuable digital transformation opportunities.
  • 71. Create a shared transformative vision of the digital future Engage employees at scale to make vision a reality Fuse IT & business communities to build digital skills & transform technology platforms Establish strong digital governance to steer the course Is What Turns Digital Investments Into Digital Advantage IT/BUSINESS VISION ENGAGEMENTGOVERNANCE The How: Leadership Capabilities
  • 72. Number of Firm Convictions Around Digital Transformation Enablers The ‘WHAT’ Consumers At The Heart Data As A New Currency Digital Across The Value Chain Open Innovation The ‘HOW’ Led From The Top People Engagement Governance Drives Performance Experiment & Scale Quickly + • Wiring The Enterprise • Building Digital Capabilities
  • 73. 4 Back at the office – A Leader’s playbook for Digital Transformation New ways of working, powered by digital technologies, are evolving the cultures and work practices within organizations. And over time, they will also change how organizations are structured and function
  • 74. The Digital Transformation Compass The Digital Compass consist of 4 steps/phases:  Frame  Focus  Mobilize  Sustain
  • 75. Companies That Build Digital Skills Faster Will Get Ahead of the Pack PLUGGING THE SKILL GAP Innovative Recruitment Methods Target Company Acquisitions Ecosystem Partnerships Incubating for the Future Training Programs Made several Acquisitions of Mobile, Social and Technology Firms Gamified their Recruitment Process Launched a Digital IQ training. Over 20,000 employees trained in 2 years Implemented reverse mentoring programs Launched an incubator program for mobile startups 77% of the companies highlighted “skills” as the key hurdle to digital transformation ...YET... Only 30% of HR functions were actively involved in digital skills development Ecosystem of JVs for core technology developments Digital Skills
  • 76. Framing the Digital Challenge Once digital and leadership capabilities are built, executives must encourage momentum around digital transformation by framing the digital challenge. To do so, they must address:  Building awareness.  An organization’s senior leaders must be made aware of the potential business impact of digital technologies.  They must understand the scale and pace of the digital impact, and must design digital transformation programs that protect profitable operations and assets while also transitioning to new digital business.  Executives must also make the awareness process experiential, using fact-based research to get employee support.  Finally, executives must build a coalition of believers, involving senior leaders to help drive digital transformation inside the organization
  • 77. Framing the Digital Challenge  Defining the starting point.  Executives must assess their digital mastery by taking a look at their organizations’ current digital initiatives and skills.  Then, they must assess the physical assets, competencies, intangible assets, and data. With this information in hand, executives can challenge their current business models and think of new ways to deliver greater value to customers.  Creating a shared vision.  An organization’s top team must be aligned around a shared digital vision.  Team members must craft a digital vision focused on the business and its customers, not the technology
  • 78. Focusing Investment Once an organization’s senior leadership team has become aware of the challenge, understands the starting points, and can articulate a shared vision of what the digital future looks like, it can move on to execution, for which it must focus its investments. Executives must carefully manage:  Translating vision into action. Digital Masters first translate their visions into strategic goals. Then, they build roadmaps that begin guiding their organizations toward the vision.  Building governance. Governance guarantees that everyone within an organization will keep moving in the right direction. Building governance requires executives to decide what they want to coordinate and share, determine how to make it happen, and find ways to adjust over time.  Funding the transformation. Transformations always require serious investment. Executives must build a digital investment portfolio that balances the goals of the organization’s vision with the desired combination of both short-term and long-term pay off. They must also diversify their sources of funding between central, local, and partner-supported investments. Finally, executives must present their transformation goals in terms that make sense to both senior leaders and employees so everyone can clearly understand and support investment and funding goals
  • 79. Mobilizing the Organization The transformation to digital mastery can occur when the organization is mobilized. To mobilize, executives must consider:  Signaling -Getting an entire organization on board with digital transformation is difficult. Leaders must send clear signals to their organizations about the importance of digital transformation and the expected changes that will result. Leaders must also clearly explain the benefits of making a digital transformation by focusing on how transformation will improve how people and various organizational communities do their jobs.  Earning the right to engage- Leaders can influence the digital transformation by serving as role models for the desired change, using crowdsourcing to generate new ideas from people in all areas of their organizations, identifying digital champions and true believers from both IT and business sides of their organizations, and showcasing results.  Setting new behaviors - Digital technology allows for different and more transparent ways of sharing information within an organization. Executives must make visible changes to work practices, encourage adoption, institutionalize new work practices, and learn from failures as they gain more knowledge.
  • 80. Sustaining Digital Transformation Many organizations fail to achieve their transformation goals because they lose momentum. To sustain the momentum, executives can:  Build foundation capabilities.  Digital Masters understand their skills gaps. They use this information to develop organization development plans that focus on hiring the best people, training existing employees, partnering with those who possess critical skills, and acquiring small companies that have great talent. Digital Masters also build digital platforms that make their organizations’ business processes more efficient, less risky, and more agile. Finally, Digital Masters fuse together IT and business skills to create environments of trust, understanding, and collaboration.
  • 81. Digital Transformation Compass -Sustaining 12 Core Activities
  • 82. Sustaining Digital Transformation  Align reward structures.  Reward structures help link transformation goals and measures. They should not be purely financial, but should also include intangible incentives such as status, reputation, recognition, expertise, and privileges to drive the employee motivation and productivity that will help reach transformation goals.  Measure, monitor, and iterate.  A measurement and monitoring system will provide an organization with the confidence that its investments and business change can bring real benefits. Properly measuring progress requires that executives manage their strategic scorecards, have metrics that measure the progress of digital initiatives, connect top-down and initiative-level measures, and develop an iterative review process
  • 83. Sustaining Digital Transformation Sustaining the digital transformation in an age when technology is always changing is challenging. Only those organizations that build successful digital capabilities and effective leadership capabilities will be able to keep up and transform into Digital Masters who will thrive.
  • 84. Digital Technology will remain the endless agitator of the Business World
  • 85. To Conclude The pace of technological change is accelerating, and executives in every industry are paying attention. They face a vast set of alternatives for gaining digital advantage. Unfortunately, they also hear a bewildering barrage of advice – sometimes conflicting and often wrong – about how to move forward digitally. In two-year study, it is discovered that many common perceptions about digital transformation were actually myths These myths can lead executives to make unfortunate and costly decisions.
  • 86. Myths & Realities of Digital Transformation
  • 88.  Digitization is not a technology issue—it is a strategy and business transformation issue, which is a sweet spot.  Digital technologies such as social media, analytics, the Internet of Things, and mobile are revolutionizing the way that companies work. Yet, based on research by Dr. George Westerman of MIT’s Initiative on the Digital Economy, fewer than 25% of companies are deriving value from digital technologies. However, those businesses that have harnessed the power of digital across the entire organization—not just in isolated silos—are accomplishing amazing things.  Westerman calls those companies “Digital Masters.”  Digital Masters are not necessarily technology companies. Instead, they are organizations that think differently about digital & see it as an opportunity to transform their businesses along multiple dimensions.  Examples cited of companies using digital technology to generate far more value include Burberry, Starbucks, Asian Paints, Codelco, Caesars Entertainment, and Nike.
  • 89. Mail your comments to ramaddster@gmail.com