Monday, November 5, 2012

Digital Transformation Research Executive Summary

Digital Transformation may already be listed at every forward-looking business’s agenda, as the pace of pressure for change will continue to increase, leading to further pressure to transform their businesses; for some digital native companies, the change is considerably smoother, however, for many large traditional organizations, it’s a bumpy journey, with many roadblocks.

A recent report published by MIT Center for Digital Business and Capgemini Consulting shared the findings from a global study on how 157 executives in 50 large traditional companies are managing – and benefiting from – digital transformation. The research also describes the elements of successful digital transformation and show how to assess your firm’s digital maturity. 

1. Building Blocks of the Digital Transformation

 The study indicated major digital transformation initiatives are centered on re-envisioning customer experience, operational processes and business models. Companies are changing how functions work, redefining how functions interact, and even evolving the boundaries of the firm.
  • Transforming customer experience
Customers, too, are becoming more demanding. the research provides executive insight from transportation and hospitality industry on highlighting urgency of changes and an “ever-rising tide of customer expectations” for service and convenience, they also share experience on how to create opportunities for digital transformation in three areas: online presence, mobile customer engagement, and internal operational processes.
  • Transforming operational processes
In a broader sense, digital transformation replaces limited one way vertical communication with broad communication channels that are both vertical and horizontal. CxOs can engage in 2-way communication quickly at scale. Employees can collaborate in ways that were previously not possible.

Performance transparency was a key highlight mentioned by several executives. Executives in most companies say they are more informed when making decisions.Transactional systems give executives deeper insights into products, regions, and customers, allowing decisions to be made on real data and not on assumptions. Beyond being better informed, digital transformation is actually changing the process of strategic decision-making.
  • Transforming business models
It is finding ways to augment physical with digital offerings and to use digital to share content across organizational silos. New digital businesses Companies are introducing digital products/solutions that complement traditional product/services.
  • Digital globalization
Firms are increasingly transforming from multi-national to truly global operations. Digital technology coupled with integrated information is allowing firms to gain global synergies while remaining locally responsive.

They are, in the words of many executives, “becoming more centralized and decentralized at the same time." Globalization also entails a different approach to policy: “fewer mandates from headquarters, but more guidelines.”
  •  Digital capabilities
Digital capabilities cut across all above pillars. They are a fundamental building block for transformation in customer experience, operational processes, and business models. Although CIOs and existing IT departments are leading digital initiatives across companies, they hire extra skills or implement separate units to coordinate digital transformation.
  • Unified Data and Processes
The most fundamental technology need for digital transformation is a digital platform of integrated data and processes. Large successful companies often operate in silos, each with their own systems, data definitions, and business processes. Generating a common view of customers or products can be very difficult. Without the common view, advanced approaches to customer engagement or process optimization cannot occur. Unified data and process is one reason that web-based companies are able to gain advantage through analytics and personalization much more readily than traditional firms. For many traditional companies, the first step in preparing for digital transformation. 
  •  Solution delivery
Companies also need the capabilities to modify their processes or build new methods onto the data and process platform. A hospitality executive firm said that knowledge of key emerging technologies is spread across silos of external vendors, making integration difficult. Several executives described knowledge gaps that existed after they ended a vendor relationship.
  • Analytic Capability
The statement of an executive who stated  “It’s time to harvest the data and turn it into insights.” Combining integrated data with powerful analysis tools is seen as a way to gain strategic advantage over competitors.
  • Business & IT Integration
With trust and shared understanding, IT executives can help business executives meet their goals, and business executives listen when IT people suggest innovations. Where strong relationships exist, executives on both sides of the relationship are willing to be flexible in creating new governance mechanisms or digital units without feeling threatened.

2. Meet Challenges in Digital Transformation Journey challenges

  • Initiating Changes: 
A: Lack of impetus, as impetus often starts at the very top of the firm. Executives are justifiably skeptical of the benefits of emerging technologies

B: Another concern issue can be lack of awareness of the opportunities or threats of digital transformation.

C: Regulation & Reputation: concerns are being careful about mobile and social technologies because of security and privacy concerns.

D: Unclear Business Case: as with many innovations, digital transformation investments often have less clear business cases.

E: Innovation Culture: Executives on average rated their innovation culture at only 4.2 on a 7-point scale, without innovative culture, there’s friction to any changes

  • Execution challenges
While a top-level impetus for transformation is important, it is often not enough. Interviewees cited three missing elements that threatened to prevent them from moving forward successfully: Missing Skill, Culture Issue, Ineffective IT

  • Governance challenges
Benefiting from transformation typically requires changes in processes or decision-making that span traditional organizational or functional structures. Transformation, like any major organizational change, requires top-down effort to help employees envision a different reality, and coordination to ensure the firm moves in the right direction.
  • Coordination issues:
Many firms fail to transform because of coordination difficulties across business units or processes. Units are able to make progress in their own areas, but are unable to influence practices in other units

3. How to make Digital Transformation Success

 Successful digital transformations in the study used a common set of elements. Each is a lever executives can use to initiate and drive digital transformation in their organizations. Leaders diagnose the potential value of existing corporate assets and build a transformative vision for the future. Then, they invest in skills and initiatives to make the vision a reality. Fundamental to the transformation is effective communication and governance to ensure that the firm is moving in the right direction

(1) The What and the How

  • The What: The inner boxes, consisting of strategic assets, the digital elements, digital capabilities, and investments, are the shape of the transformation. They are the specific set of elements implemented by the organization, and the resources used to do so. Together they represent, in essence, the digital intensity of the organization.
  • The How: The outer boxes, consisting of digital vision, governance and engagement, are the ways in which leaders will drive the transformation to a successful outcome. They serve as a form of scaffolding through which leaders can ensure that the elements of the “what” are built effectively and that the organization customer understanding customer's touch point.
Together, the “what” and the “how” represent the digital maturity of an organization They can be thought about as digital “Style” and “Substance.”.

 (2)  Digital transformation maturity

Firms that are mature on both dimensions can drive powerful digital transformation that yields business value. Unfortunately, many firms in the study are mature at only one, or neither


Leadership is essential. Whether using new or traditional technologies, the key to digital transformation is re-envisioning and driving change in how the company operates, how do you communicate the vision and engage the organization? How do you coordinate investments and activities across silos?

  • Envision the digital future:
How can you transform customer experience? operation or business model?
How can units work differently and work together differently in a more connected way?

  • Focus on the “how” more than the “what”
 The most successful transformations from case studies in report focus as much (or more) on how to drive change as on the detailed content of the change. Build a compelling, transformative roadmap. Invest in digital transformation vision, with related engagement, governance and KPIs will allow people throughout the enterprise to identify new “what” to meet or extend the vision, and how to assess your digital maturity.

 Successful Digital Transformation comes not from creating a new organization, but from reshaping the organization to take advantage of valuable existing strategic assets in new ways.


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