Digital Transformation: Challenges in Execution

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Framework Primer
Digital Transformation:
Challenges in Execution
Presentation created by
Legacy Challenge
Governance
Challenge
Innovation
Challenge
Resource Alloca-
tion Challenge
People
Challenge
Functional Identity
Challenge
Agility
Challenge
Ambidexterity
Challenge
Connectivity
Challenge
CHALLENGES

2
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Contents
 Overview
 Digital Transformation
 The Legacy Challenge
 The Governance Challenge
 The Innovation Challenge
 Templates
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3
Numerous challenges face organizations looking to undertake Digital
Transformation
Presentation Overview
All 9 challenges are high interdependent and impact each other.
Digital Transformation is now at the forefront of most strategic agendas, as COVID-19 has accelerated
the digitization of many industries by a decade or longer. The importance of “going digital” is
undisputed.
However, successful and truly disruptive Digital Transformation requires massive efforts to create
strategic and organizational capabilities that enable the organization to compete successfully in the
Digital Era. These efforts become increasingly complex for larger organizations.
This framework introduces 9 key challenges to large scale Digital Transformation, which can be
categorized into 3 areas:
This presentation is part of a series of 3 frameworks, each focused 1 of the 3 categories of Digital
Transformation challenges. We will cover the initial category of change; and its 3 composite challenges:
This deck also includes slide templates for you to use in your own business presentations.
Challenges in Execution
1
Challenges in Resources
2
Challenges in Organization and Change
3
The Legacy Challenge
1
The Governance Challenge
2
The Innovation Challenge
3

4
Contents
 Overview
 Templates

5
As the role of technology is shifting from being a business enabler to a
business driver, opportunities for Digital Transformation emerge
For a foundational primer to Digital Transformation Strategy, refer to this framework:
https://flevy.com/browse/flevypro/digital-transformation-strategy-primer-2253.
Digital Transformation – Shift in Technology Role
The role of technology has shifted…
… from purely a business enabler to also a business driver.
Technology
enables the
business
B
T
Historically, business requirements collected from
“business users” drove the technology that then
enabled the business to advance. Technology
purely played a supporting role in this model.
In the Digital Age today,
technology creates new
opportunities and
fundamentally transforms
businesses in all aspects—
operations, business
models, strategies. It not
only enables the business,
but also drives its growth
and can be source of
competitive advantage.
B
T

6
Contrary to some beliefs, Digital Transformation is highly relevant to
most organizations—let’s dispel some of these myths
Digital Transformation – Common Myths
Digital applies only to B2C companies.
It matters less for B2B companies.
Digital is fundamentally personal. This makes it easier to see digital's B2C
opportunities. However, digital changes how organizations use information and
communications to create value. This is how B2B companies, such as GE and
Caterpillar, among others, are executing digital strategies to create value.
Digital business is just for online
businesses. It's not for companies
selling physical products.
Digital is transforming traditional sectors, like banking, energy, mining, and
manufacturing, by changing customer experiences, products, services, and
processes. Digital opportunity comes from how you leverage digital to create new
combinations of digital and physical resources to help drive growth and
outcomes.
The more digital we become, the less
our customers are willing to pay for
our products and services.
This may be true when digital applies exclusively to marketing and sales
channels. A digital business strategy finds new connections between customer
value and company revenue that create pricing power and avoid commoditization.
Digital customer experiences, digital supply chain performance, and digital
innovation will create a premium that combats the tendency for commoditization.
My customer demographic is more
established. It’s only Generation X
and millennials who care about having
digital experiences.
Baby boomers and older consumers are among the most avid digital users. They
regularly use financial and health services online and on their phones, and they
shop extensively online, including comparison shopping. Digital opportunities
exist across customer demographics.
Digital is relevant only in developed
markets.
Many emerging markets are digitally sophisticated; some are creating mobile
banking and advertising business models and platforms that are now being
implemented in advanced economies. IDC predicts that by 2020, 62% of the
digital universe (a measure of all the digital data created, replicated, and
consumed in a single year) will be attributable to emerging markets.
1
2
3
4
5

7
In fact, companies across a wide array of industries are beginning to
undertake Digital Transformation initiatives
Digital Transformation – Industry Examples
Telco, Media,
Technology
Energy &
Chemicals
Financial Services Retail and CPG Life Sciences
Telco, Media,
Technology
Energy &
Chemicals
Financial Services Retail and CPG Life Sciences
• Telcos partner with
retailers (for a fee) to
push offer to shoppers
who opt-in
• Media companies
digitize their operational
value chain, resulting in
time improvement and
reduced costs (e.g.
Warner Bros. Studio)
• Telcos extend their
business model by
integration mobile
payment solutions (e.g.
African mobile payment
trend)
• Retail banks offer
additional services, like
mobile payment or
advanced wealth
management for normal
customers (e.g. Chase
Private Client)
• Retail banks optimize
their processes and
leverage customers self-
service opportunities
(E.g. BBVA AI-
supported self service)
• Crowdfunding-based
loan options, allowing
retail banks to reduce
their risk exposure (e.g.
Kickstarter)
• Chemicals companies
provide online portal for
partners to manage
orders for a fee
• Energy companies apply
analytical methods to
improve asset
maintenance, resulting
in reduced number of
unplanned downtimes
• Chemicals companies
extend their portfolios
with solutions combining
traditional products with
value-added services
(e.g. BASF)
• Office supply companies
sell its products through
their e-commerce
platforms
• Big box retailers
optimize inventories due
to analytical driven
demand forecast and
supplier integration in
value chain (e.g.
Walmart)
• Individually customized
products, instead of
mass production (e.g.
sneaker customization
via web portal)
• Pharma companies use
analytics to customize
products
• Public health services
reduce process costs by
digitization of
administration
processes and customer
self service options
• Life sciences companies
extend business into
lifestyle nutrition
supplies, based on
individual analytical
results

8
There are 9 key challenges organizations face when undertaking Digital
Transformation
All 9 challenges are interconnected and impact each other—in this presentation, we focus
on the 3 challenges in Execution.
Digital Transformation – Key Challenges
With faced with Digital Transformation, there are 9 common key challenges that we must be aware of and deal
with accordingly.
Source: Digital Transformation Challenges in Large and Complex Organizations, Deiser, Center for the Future of Organization, 2018
These challenges can
be categorized into
the areas of:
 Execution Challenges
 Resource Challenges
 Organization and
Change Challenges
Legacy
Challenge
Governance
Challenge
Innovation
Challenge
Resource Alloca-
tion Challenge
People
Challenge
Functional
Identity Challenge
Agility
Challenge
Ambidexterity
Challenge
Connectivity
Challenge
CHALLENGES

9
Contents
 Overview
 Templates

10
The Legacy Challenge deals with overcoming the spiderweb of legacy IT
systems and infrastructure
First, we need to get the basics in place to provide the foundation for any disruptive Digital
Transformation initiatives.
Legacy Challenge – Overview
OVERVIEW
In order to adopt new, emerging technologies, we must first deal with the complex and likely outdated legacy systems.
The Legacy
Challenge
DETAILS
 The true power and impact of Digital Transformation is its ability to create disruptive change in the organization,
including creating entirely new products and business models.
 However, many digitization projects within large organizations focus only small, incremental changes, such as:
– IT integration work
– Streamlining internal processes
– Improving the Customer Experience
– Building digital features to existing products and services (e.g. launching a mobile app)
– Upgrading internal IT systems
 Through years (often decades) of IT changes, many organizations now have a patchwork of legacy infrastructure that
has now become a barrier for Digital Transformation change.
 These legacy systems slow down large organizations and are very costly to maintain, because any new technology
often requires extensive integration the myriad of existing systems.
 The legacy systems create structural disadvantages. It likewise makes it difficult for organizations to compete with
nimble startup companies.
Execution
CHALLENGE
CATEGORY

11
The ideal system end state to support Digital Transformation consists of
4 critical Business Ecosystems
For a foundational primer on these Business Ecosystem layers, refer to this framework:
https://flevy.com/browse/flevypro/digital-transformation-business-ecosystems-primer-3444.
Legacy Challenge – Business Ecosystems
Customer Solutions Ecosystem integrated with Operations, Technology, and People
Ecosystems can provide competitive, end-to-end solutions.
Organizations that have excelled in Digital Transformation distinguish themselves through their mastery of the
4 critical Business Ecosystems.
The 4 primary business layers serve as the thread that connects the organization’s activities. It is the basis of the
enhanced Digital Value Chain.
Customer Solutions
ecosystem
Operations ecosystem
Technology
ecosystem
People
ecosystem
These “Digital Leaders” excel at managing and
integrating 4 critical Business Ecosystem Layers to
outpace competitors.
 Value is created through Integrated Customer
Solutions Ecosystems.
 A cutting-edge Customer Solutions Ecosystem
established to serve clients with complete digital
product and service solution.
 A fit for purpose Operations Ecosystem with the right
set of Technologies, People, and Culture.
Source: Digital Champions, PwC, 2018

12
Contents
 Overview
 Templates

13
In the next execution challenge, organizations must put up proper
Governance structures to coordinate the transformational activities
To assess the Digital Maturity of your organization, refer to this framework:
https://flevy.com/browse/flevypro/digital-maturity-model-2250.
Governance Challenge – Overview
OVERVIEW
Like all large scaled changes, Digital Transformation requires proper Governance structures in place to be successful.
This challenge entails deploying tactics to mitigate stakeholder politics and to coordinate the abundance of
transformational activities.
The Governance
Challenge
DETAILS
 The appropriate approach to Governance varies considerably by organization.
 There are a multitude of factors that drive this approach to Governance, including:
– Digital Maturity of the organization
– Degree of centralization vs. decentralization in its management structure
– Diversity of business portfolio
– Size and global reach of organization
– Industry context
– Perspective of the CEO and senior leadership on Digital Transformation
– Micropolitical dynamics among stakeholders
– Influence of consultants and partners
 To facilitate Governance of Digital Transformation, some organizations elect to create a dedicated Chief Digital (CDO)
position. The CDO works across the entire organization on all elements of the Digital Strategy and organization.
Execution
CHALLENGE
CATEGORY

14
The CDO role spans across at least 8 functions—the CDO thus must
collaborate across the organization to drive Digital Transformation
Due to the cross-functional nature of the CDO role, structural conflicts may arise between
the CDO and leaders of those traditional functional roles.
Governance Challenge – Chief Digital Officer (CDO)
The role of CDO has becoming increasingly more pervasive in recent years, as Digital Transformation
Programs have grown and accelerated.
The CDO is a multi- and cross-
functional role. It encompasses
the following disciplines:
 Strategy (S)
 Communication (C)
 Information Technology (IT)
 Operations (O)
 Marketing (M)
 Innovation (IN)
 Human Resources (HR)
 Organizational Development
(OD)
CDO Functional Profile
Serve as Digital
Advisor to the
board (S)
Create awareness
about digital trends
in the competitive
space (S,C)
Leverage digital
technology to
optimize internal
processes (IT, O)
Leverage digital
technology for
customer centricity
(IT, M)
Help create an
overall digital
vision for the
company (S)
Drive innovation
via hackathons,
incubators, start-up
hubs etc. (IN)
Foster digital
skills, culture and
mindset within the
organization (HR)
Drive cross-
boundary
collaboration within
and beyond the
enterprise (OD)
CDO

15
For proper Governance, we should seek to deliver on 5 objectives—
foremost, our Digital Governance must align with Corporate Governance
Governance Challenge – Governance Model (1 of 2)
The Governance Model for Digital Transformation should seek to deliver on 5 key objectives.
1
OBJECTIVE
Align Digital Governance with Corporate Governance and business
objectives.
CIOs should focus on this to improve transparency for management and to ensure business objectives are
realized. Being properly aligned between technology and business helps deliver business benefits.
2
OBJECTIVE Define Governance objectives around Strategic Alignment, Value Delivery,
Risk Management, Resource Management, and Performance Management.
These dimensions are relevant to all Digital functions and disciplines:
• Strategic Alignment: Align Digital Transformation
Strategy with business strategy and ensure
advancement of business priorities
• Value Delivery: Maximize value of investments
• Risk Management: Identify and mitigate
risks in an expedient manner.
• Resource Management: Ensure availability of
appropriate resources to meet current and future
business demand (this is identified as a Resource
Challenge)
• Performance Management: Monitor performance
of Digital Transformation initiatives effectively.
3
OBJECTIVE Establish holistic Governance across disciplines spanning the entire Digital
Value Chain.
The Digital Governance Model should focus on establishing oversight and control across all key Digital
Governance disciplines.

16
We should incorporate the core Lean Management principle of
Continuous Improvement in our Governance Model
Challenges that may arise range from facilitating Organizational Change Management to
developing processes and infrastructure to support the governance model.
Governance Challenge – Governance Model (2 of 2)
4
OBJECTIVE
Identify the appropriate Digital Governance control practices to help achieve
Digital Governance objectives.
To establish the appropriate level of governance, organizations should define measurable Digital Governance
control practices, which are aligned with the Digital Governance objectives for each of the following 8 Digital
Transformation and IT Governance disciplines:
• Digital Transformation Strategy
Governance
• Architecture Governance
• Project and Portfolio
Governance
• Application Lifecycle
Governance
• Vendor and Sourcing
Governance
• Infrastructure and Data
Governance
5
OBJECTIVE
Establish continuous tracking, monitoring, and improvement of the Digital
Governance Model.
Organizations should apply the Lean philosophy of Continuous Improvement. To ensure maximum benefits
from Digital Governance can be derived, companies should focus on continuous planning, monitoring, and
improvement of the Digital Governance Model.
• Service Lifecycle
Governance
• Digital Transformation
Technology Governance

17
Contents
 Overview
 Templates

18
To truly create and implement disruptive Digital Transformation,
organizations must overcome the Innovation Challenge
Particularly for larger, more mature organizations, this sense of startup mentality may lay
dormant.
Innovation Challenge – Overview
OVERVIEW
Digital Transformations should be disruptive in nature and must harness the entrepreneurial spirit of the organization to
drive breakthrough Innovation.
The Innovation
Challenge
DETAILS
 To drive Innovation as it relates to Digital Transformation, large organizations strategically invest in startup ventures
(both internal and external). This approach includes a variety of methods, including:
– Corporate Entrepreneurship Programs
– Innovation Hubs
– Accelerators
– Shark Tank Formats
– Think Tanks
– Related Centers of Excellence
 Through these methods, organizations are hoping to jumpstart or gain access to emerging disruptive technologies or
ideas that can be developed into their Digital Transformation Strategies.
 Numerous companies, such as Google and 3M, have found tremendous success in adopting Corporate
Entrepreneurship to foster the type of Innovation requisite to propel forward Digital Transformation.
Execution
CHALLENGE
CATEGORY

19
As alluded to, one of the most effective tools to foster Disruptive
Innovation is through to the pursuit of Corporate Entrepreneurship
For a more in-depth discussion on Corporate Entrepreneurship, refer to this framework:
https://flevy.com/browse/flevypro/corporate-entrepreneurship-primer-5398.
Innovation Challenge – Corporate Entrepreneurship (Overview)
DEFINITION
Corporate Entrepreneurship is defined as the process by which teams within an establish
organization conceive, develop, launch, and manage a new business that distinct from the
parent organization by leveraging the parent organization’s resources.
 Corporate Entrepreneurship encapsulates more than
just New Product Development. Its ventures also
includes Innovations in services, brands, channels, etc.
 Likewise, it can involve breaking from the existing
business model of the parent organization—i.e.
Business Model Innovation (BMI).
 Studies have shown Corporate Entrepreneurship helps
stimulate Innovation, revitalizes the organization,
increases employee productivity, propels growth
through disruptive offerings, and creates a superior
market advantage.
 Corporate Entrepreneurship is not Corporate
Venture Capital (VC). Many organizations have a VC
arm, which aims to invest in external companies.
– Although Corporate Entrepreneurship often engages
external partners and capabilities (including
acquisitions), the venture engages with internal
resources and is managed by internal team(s).
 Corporate Entrepreneurship is different from
spinouts. Spinouts are generally developed as stand-
alone organizations that don’t require continuous usage
of internal resources of the parent organization.
Let’s better define the concept of Corporate Entrepreneurship, so we can understand how best to leverage it.

20
There are 4 models of Corporate Entrepreneurship—the Opportunist, the
Enabler, the Advocate, and the Producer
Innovation Challenge – Corporate Entrepreneurship (Models)
Each of these operating models represents a distinct approach to fostering Corporate
Entrepreneurship.
There are 4 models of Corporate Entrepreneurship. The model an organization adopts is dependent on how
it’s positioned along 2 dimensions—organizational ownership and resource authority.
1
2
Source: The Four Models of Corporate Entrepreneurship, Wolcott, Lippitz, Sloan Management Review, 2007
Dedicated
Ad hoc
Resource
Authority
Diffused Focused
Organizational Ownership
The Enabler The Producer
The Opportunist The Advocate
 There are 2 dimensions under the
direct control of management.
These dimensions form a 2x2 and
determine how we end up
approaching Corporate
Entrepreneurship (i.e. which
quadrant we fall under).
 The 2 dimensions are:
Organizational ownership –
this addresses who within the
organization has primary
ownership for the creation of
the new venture.
Resource authority – this
addresses how the venture is
funded and resourced.

21
Contents
 Overview
 Templates

22
Insert headline
Insert bumper.
9 Key Challenges of Digital Transformation – TEMPLATE
Legacy
Challenge
Governance
Challenge
Innovation
Challenge
Resource Alloca-
tion Challenge
People
Challenge
Functional
Identity Challenge
Agility
Challenge
Ambidexterity
Challenge
Connectivity
Challenge
CHALLENGES
 Insert filler text,
filler text, filler text.
Insert filler text,
filler text, filler text,
filler text.
filler text. Insert
filler text.

23
Insert headline
Insert bumper.
9 Key Challenges of Digital Transformation – TEMPLATE ALTERNATE
Legacy
Challenge
Governance
Challenge
Innovation
Challenge
Resource Allocation
Challenge
People
Challenge
Functional Identity
Challenge
Ambidexterity
Challenge
Agility
Challenge
Connectivity
Challenge
Execution
Challenges
Resource
Challenges
Organization and
Change Challenges

24
Execution
Challenges
Resource
Challenges
Organization and
Change Challenges
Insert headline
Insert bumper.
9 Key Challenges of Digital Transformation – TEMPLATE ALTERNATE
Ambidexterity
Ambidexterity
Challenge
Connectivity
Connectivity
Challenge
Legacy
Challenge
Governance
Challenge
Agility
Challenge
Innovation
Challenge
Functional
Identity
Challenge
Resource
Allocation
Challenge
People
Challenge
 Insert filler text, filler
text, filler text. Insert
text, filler text, filler
text. Insert filler text,
text, filler text.

25
Complete Business Ecosystems Framework – TEMPLATE ALTERNATE
Insert bumper.
Insert headline
Customer Solutions ecosystem
Operations ecosystem
Technology
ecosystem
People
ecosystem
Source: Digital Champions, PwC, 2018

26
Insert headline
Insert bumper.
Chief Digital Officer (CDO) Functional Profile – TEMPLATE
FUNCTIONS
 Strategy (S)
 Communication (C)
 Information
Technology (IT)
 Operations (O)
 Marketing (M)
 Innovation (IN)
 Human Resources
(HR)
 Organizational
Development (OD)
Serve as Digital
Advisor to the board
(S)
Create awareness
about digital trends
in the competitive
space (S,C)
Leverage digital
technology to
optimize internal
processes (IT, O)
Leverage digital
technology for
customer centricity
(IT, M)
Help create an
overall digital vision
for the company (S)
Drive innovation via
hackathons,
incubators, start-up
hubs etc. (IN)
Foster digital
skills, culture and
mindset within the
organization (HR)
Drive cross-
boundary
collaboration within
and beyond the
enterprise (OD)
CDO
Insert filler text,
filler text.
filler text. Insert
filler text.

27
Insert headline
Insert bumper.
4 Models of Corporate Entrepreneurship – TEMPLATE
Source: The Four Models of Corporate Entrepreneurship, Wolcott, Lippitz, Sloan Management Review, 2007
Dedicated
Ad hoc
Resource
Authority
Diffused Focused
Organizational Ownership
The Enabler The Producer
The Opportunist The Advocate
text, filler text. Insert
filler text, filler text, filler
text, filler text.
text, filler text, filler text.
Insert filler text, filler
text, filler text.
text, filler text.

28
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Want to achieve Excellence in Digital Transformation?
Become your organization’s resident expert on Digital Transformation by
leveraging our best practice frameworks.
Our frameworks are based on the thought leadership of leading consulting firms, academics, and
recognized subject matter experts.
Learn implementation approaches to directly link core concepts to execution.
Digital Transformation is being embraced by organizations of
all sizes across most industries, as the role of technology
shifts from being a business enabler to a business driver.
In the Digital and COVID-19 Age today, technology creates
new opportunities and fundamentally transforms businesses
in all aspects—operations, business models, strategies. It
not only enables the business, but also drives its growth and
can be a source of Competitive Advantage.
Digital Transformation Stream
https://flevy.com/browse/stream/digital-transformation
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Want to achieve Excellence in Innovation Management?
Become your organization’s resident expert on Innovation Management by
leveraging our best practice frameworks.
Our frameworks are based on the thought leadership of leading consulting firms, academics, and
recognized subject matter experts.
Learn implementation approaches to directly link core concepts to execution.
To be competitive and sustain growth, we need to constantly
innovate.
Ironically, the more we grow, the harder it becomes to
innovate. Large organizations are far better executors than
they are innovators. To effectively manage the Innovation
process, we need to master the art and science of Innovation.
Adopt and adapt our best practices frameworks to help drive
and manage Innovation.
Innovation Management Stream
https://flevy.com/browse/stream/innovation
Click Here

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for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
just to learn.
Contact Us
Please contact us with any questions you may have
about our company.
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Digital Transformation: Challenges in Execution

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