Digital Transformation : Just a Buzzword or Real Transformation

Digital Transformation :
Just a Buzzword or Real Transformation?
Association for Information Technology Professionals (AITP)
St. Louis
11/17/2016

Digital Transformation
The term ‘digital transformation’ has been used to
describe anything from creating a fully responsive
mobile website to developing a social media strategy,
but in reality true transformation needs to involve
much more than just the end product.
https://www.marketingweek.com/2016/04/14/what-does-digital-transformation-really-mean/

Digital Transformation is Confusing – What Exactly Is It?
Business Innovation
Digital Strategy
Disruptive Innovation
Disruptive Technologies
Business Innovation
User Experience
Digital Marketing
Digital Experience
Digital Disruption

Digital Transformation is Confusing – So Many Voices

Digital Transformation is Confusing – Who is Responsible?
CEO CTO
CEO
CLO
COO CDO
CFO
CMO
CIO

Digital Transformation is Confusing - So Many Decisions

Terms
• Business Innovation
• User Experience
• Digital Experience
• Digital Strategy
• Digital Marketing
• Digital Disruption
• Disruptive Innovation
• Disruptive Technologies

Business Innovation
• Business innovation is an organization's process for introducing new
ideas, workflows, methodologies, services or products.
• Business innovation should enable the achievement of goals across
the entire organization, with sights set on accomplishing core
business aims and initiatives.
• Innovation often begins with idea generation, wherein ideas are
narrowed down during brainstorming sessions after which leaders
consider the business viability, feasibility and desirability of each
idea.

User Experience
• User experience (UX) refers to a person's emotions and attitudes
about using a particular product, system or service.
• It includes the practical, experiential, affective, meaningful and
valuable aspects of human–computer interaction and product
ownership.
• Additionally, it includes a person’s perceptions of system aspects
such as utility, ease of use and efficiency.
• User experience may be considered subjective in nature to the
degree that it is about individual perception and thought with
respect to the system.

Digital Experience
• A digital experience is the way in which a user interacts with content
on the web and how a user can achieve a goal on the web.
• Digital experience not only means reading and consuming content
but interacting with web content.
• A good digital experience is when a user feels connected to the
content and tools that they use on the web. Also, nowadays digital
experiences are spread across a multitude of devices and platforms.

Digital Strategy
• A digital strategy is a form of strategic management and a business
answer or response to a digital question, often best addressed as part
of an overall business strategy.
• A digital strategy is often characterized by the application of new
technologies to existing business activityand/or a focus on the
enablement of new digital capabilities to their business.
• Formulation often includes the process of specifying an organization's
vision, goals, opportunities and related activities in order to maximize
the business benefits of digital initiatives to an organization.

Digital Marketing
• Digital marketing is an umbrella term for the marketing of products or
services using digital technologies, mainly on the Internet, but also
including mobile phones, display advertising, and any other digital
medium.
• The way in which digital marketing has developed since the 1990s
and 2000s has changed the way brands and businesses utilize
technology and digital marketing for their marketing.
• Digital marketing campaigns are becoming more prevalent as well as
efficient, as digital platforms are increasingly incorporated into
marketing plans and everyday life, and as people use digital devices
instead of going to physical shops.

Digital Disruption
• Digital disruption is the change that occurs when new
digital technologies and business models affect the value proposition
of existing goods and services.
• The rapid increase in the use of of mobile devices for personal use and
work, has increased the potential for digital disruption across many
industries.
• A powerful example is the way Amazon, Netflix and Hulu Plus have
disrupted the media and entertainment industries by changing how
content is accessed by customers and monetized by advertisers.

A disruptive innovation is an innovation that creates a new market and
value network and eventually disrupts an existing market and value
network, displacing established market leading firms, products and
alliances.
The term was defined and phenomenon analyzed by Clayton M. Christensen beginning in 1995

• Not all innovations are disruptive, even if they are revolutionary. For
example, the first automobiles in the late 19th century were not a
disruptive innovation, because early automobiles were expensive
luxury items that did not disrupt the market for horse-drawn vehicles.
• The market for transportation essentially remained intact until the
debut of the lower-priced Ford Model T in 1908.
• The mass-produced automobile was a disruptive innovation, because
it changed the transportation market, whereas the first thirty years of
automobiles did not.

Disruptive Technologies
• Term coined by Harvard Business School professor Clayton M. Christensen
to describe a new technology that displaces an established technology
• A disruptive technology is one that displaces an established technology and
shakes up the industry or a ground-breaking product that creates a
completely new industry.
• Here are a few examples of disruptive technologies:
• The personal computer (PC) displaced the typewriter and forever changed the way
we work and communicate.
• The Windows operating system's combination of affordability and a user-friendly
interface was instrumental in the rapid development of the personal computing
industry in the 1990s. Personal computing disrupted the television industry, as well
as a great number of other activities.
• Email transformed the way we communicating, largely displacing letter-writing and
disrupting the postal and greeting card industries.

• CapGemini Consulting was one of the first to come up with
the concept of digital transformation and a digital
transformation framework.
• They did so in collaboration with the ‘MIT Center for Digital
Business‘ during a three-year study which defined an
effective digital transformation program as one that looked
at the what and the how.
http://www.i-scoop.eu/digital-transformation/

Digital transformation is rapidly reshaping the landscape
Sources:
1McKinsey, How IoT Can Support A Dynamic Maintenance Program, 2016
2IDC, 2016
~80%
margin1
driven by apps,
analytics, and
services in 2020
Average increase in
income for the most
digitally transformed
enterprises
$100M
2020
2009
30B
Things
Income
Intelligence
“Every business will become
a software business, build
applications, use advanced
analytics and provide
SaaS services.“
Satya Nadella
2
2

Digital transformation is the profound and accelerating
transformation of business activities, processes,
competencies and models to fully leverage the changes
and opportunities of digital technologies and their
impact across society in a strategic and prioritized way.

“To be clear, investing in technology to stay current or ahead of the curve isn't
the same thing. Pretty much every company is putting money into new tools,
platforms, and services. And, doing so is a matter of becoming tech-enabled,
which doesn’t mean companies are actually changing to compete in a digital
economy. With digital transformation, however, technology is driven by
purpose, and that purpose is meant to reshape business.” (emphasis mine)
I define it this way...
The realignment of, or new investment in, technology, business models, and
processes to more effectively compete in an ever-changing digital economy.
Brian Solis, Principal Analyst, Altimeter Group

• Digital transformation may be thought of as the third stage of
embracing digital technologies: digital competence → digital
usage → digital transformation, with usage and transformative
ability informing digital literacy.
• The transformation stage means that digital usages inherently enable
new types of innovation and creativity in a particular domain, rather
than simply enhance and support the traditional methods.
Digital literacies: concepts, policies and practices By Colin Lankshear, Michele Knobel, 2008, p. 173

• Some authors have posited that rapid advances in six primary areas
have converged to create the “era of digital transformation”:
• Hardware
• Software
• Networks (cables, wireless and social)
• Commercial and consumer comprehension
• Democratization of technology at scale (low costs & mass adoption)
• Moving beyond human time to digital time

• The evolutionary path to digital transformation followed a timeline
that included the invention and development of the following:
• Computers
• Memory and data storage
• Mass adoption of PCs and laptops
• Local Networks
• ERPs
• The internet
• Mobile networks and mobile phones
• GPS
• Mass global adoption of wireless devices (laptops, mobile phones, tablets, smartphones,
wearables, sensors)
• Proliferation of websites and online activity
• Rapid adoption and expansion of online and mobile databases and search
• Rapid adoption and expansion of online marketplaces and reviews

• “Disruptions” and digital (business) transformation can be caused by
numerous factors:
• Technological innovations (technology-induced), which are more impactful than
ever before. However, it’s not the technology that drives the disruption or
transformation. It’s how it is used and adopted by customers, partners,
competitors and various stakeholders.
• Customer behavior and demands. This so-called customer-induced transformation
and disruption is not necessarily related to technology. Technology often enables
or, as just mentioned, causes it, when adopted and turned into business
challenges.
• Ecosystem-induced: economical changes, demands from partners who want you to
adapt, regulatory changes, the list is endless.

Five Domains of Digital Transformation
• Customers
• Competition
• Data
• Innovation
• Value
Across these five domains, digital technologies are redefining many of the
underlying principles of strategy and changing the rules by which companies
must operate in order to succeed. Many old constraints have been lifted, and
new possibilities are now available.
Rogers, David L.. The Digital Transformation Playbook: Rethink Your Business for the Digital Age (Columbia Business
School Publishing) (pp. 5-6). Columbia University Press. Kindle Edition.

Digital transformation hinges on four imperatives
Engage your
customers
Empower your
employees
Optimize your
operations
Transform
your products
Systems of
Intelligence

Four digital transformation realities to emphasize:
• Business/IT relationship is key (closing the gap between both, focusing
on the same goals and NOT overlooking the role of IT).
• There is a common DNA among digital leaders and the path to digital
transformation shows common traits (even if context matters).
• As said, each industry is impacted, including your industry. Customers,
employees, partners, nor competitors or new, disruptive players, will wait
for business to catch up, regardless of industry.
• Digital transformation is led from the top (or at least requires firm buy-in
from the top – and all stakeholders).

Myths vs. Facts
Myth Reality
Digital is primarily about the customer
experience
Huge opportunities exist also in effeciency,
productivity and employee leverage
Digital primarily matters only to technology
or B2C companies
Opportunities exist in ALL industries,
NO exceptions
Let a thousand flowers bloom; bottom up
activity is the right way to change
Digital transformation must be led
from the top
If we do enough digital initiatives we will
get there
Transformation management intensity
is more important for driving overall performance
Digital transformation will happen despite
our IT
Business / IT relationships are key, and in
many companies they must be improved
Digital transforamtion approaches are different
for every industry and company Digital leaders exhibit a common DNA
In our industry, we can wait and see how
digital develops
There are digital leaders outperforming
their peers in every industry today

The Path to Digital
The path to digital transformation is less about capitalizing on new
technology; it requires business leaders to embrace a different way of
bringing together people and processes with those technology tools as
well as an openness to re-envisioning traditional business models and the
mindset of a digital company in terms of how you engage your
customers, empower your employees and optimize your operations to
reinvent products and business models.
-Microsoft

Digital Transformation Maturity Models

Digital Transformation Maturity Model

The Path to Digital Transformation
• There is no one way to pursue digital transformation, but without
human-centered input, direction, or best practices, companies can be
led astray.
• This squanders time, resources, and potential ROI. Change agents must
step outside of their departments and collaborate with other functional
and executive leaders to foster real change.
• Digital transformation takes a modern, human, market perspective to
guide cross-functional research, collaboration, and innovation in how
organizations compete for tomorrow … today.
“Six Stages of Digital Transformation” Altimeter Group

• A common imperative for digital transformation leaders is
understanding digital customers and their differences,
expectations, behaviors, and predilections.
• By concentrating on digital, companies can examine how it
affects or alters the connected customer’s journey, and
influences
their decision-making at large.
• Digital transformation is more than just digital; it’s about
remodeling businesses to be agile, innovative, and customer-
centric at their core.

• The Six Stages of Digital Transformation reflect the state and progress of
an organization in motion.
• The stages are defined by the digital transformation elements that are
present in an organization’s current position or its immediate roadmap.
• Although presented as six distinct steps, companies may not migrate
through each step on a linear path or at the same speed.
• Depending on which groups or change agents are leading specific
efforts, and in which departments, elements of digital transformation
occur in pockets across the stages.

STAGE 1: CUSTOMER OPERATIONS MAINTAIN THE STATUS QUO, “BUSINESS AS
USUAL”
• Business as Usual: Companies in this phase are incredibly risk-averse, and the
culture of the organization inhibits ideation, experimentation, and inside
entrepreneurship (“intra-preneurship”).
• In specific situations, compliance and regulation also deflate innovative
thinking. As such, a lack of urgency exists and any need to change is largely
rebuffed or dissuaded by leadership.
• Organizations operate with a familiar legacy perspective of customers,
processes, metrics, business models, and technology, believing that it
remains the solution to digital relevance

STAGE 2: NEW TECHNOLOGY SPARKS IMAGINATION AND EXPERIMENTATION AS
COMPANIES BECOME “PRESENT AND ACTIVE”
• These companies are evolving because of change agents who recognize new
opportunities and fight to lead experiments within their respective domains.
• New trends in digital, mobile, social, Internet of Things (IoT), etc., inspire
early adopters to experiment with new possibilities
• Pockets of experimentation are driving digital literacy and creativity, albeit
disparately, throughout the organization while aiming to improve and amplify
specific touchpoints and processes.

STAGE 3: A SENSE OF URGENCY ACCELERATES CHANGE WITH “FORMALIZED”
RESULTS
• Early adapters become change agents and lead each area and also
collaborate with others. Insights lead to early development of digital
transformation roadmaps to prioritize and optimize areas of opportunity and
deficiency.
• Strategic investments in people, processes, and technology solve for current
work and set the stage for a more unified digital transformation effort.
• Experimentation becomes intentional while executing at more promising and
capable levels. Initiatives become bolder, and as a result, change agents seek
executive support for new resources and technology.

STAGE 4: THE STRIVE FOR RELEVANCE ESCALATES, AND COMPANIES FORMULATE
“STRATEGIC” APPROACH TO CHANGE
• Change agents have successfully created a sense of urgency, earned executive
sponsorship, and now have the attention of the C-suite.
• Efforts in digital transformation become a company priority. The roadmap becomes
focused and refined by specific short- and long-term goals that necessitate changes
and produce key outcomes.
• This work is supported by dedicated investments in infrastructure and operations.
New skillsets are also brought in to manage/execute against the roadmap.
• Technology is purposeful and implemented to drive goals rather than basing
processes around technological capabilities.

STAGE 5: TRANSFORMATION IS IN THE DNA AS COMPANIES ARE OFFICIALLY “CONVERGED” IN
THEIR APPROACH
• The path toward digital transformation is now underway.
• New operating models and teams are created to unify disparate, repetitive, or competitive
roles and processes while streamlining operations to deliver integrated, consistent, and
holistic customer experiences.
• Technology is purposeful both in customer-facing and back-office integration.
• Digital transformation expands beyond DCX and is now enterprise wide affecting all facets
of business¬ — by function and focus, lines of business, et al. — at scale
• A dedicated digital transformation team forms to guide strategy and operations based on
business and customer centric goals. The new infrastructure of the organization takes shape
as roles, expertise, models, processes, and systems to support transformation are solidified.

STAGE 6: CULTURE OF INNOVATION BECOMES TOP PRIORITY AS COMPANIES BECOME
“INNOVATIVE AND ADAPTIVE”
• Digital is no longer a state; instead, it is part of how a business competes, with work in
transformation continuing as technology and markets evolve.
• Innovation becomes part of the company DNA with the establishment of formal teams and
efforts to track customer and technology trends.
• These activities feed into a variety of programs that range from test-and-learn pilots to the
introduction of new roles/ expertise to partnerships with and investments in startups.
• Programs then permeate deeper functions within the enterprise to continually advance key
processes. Investments in people, processes, and tech are tied to business, employee, and
customer experiences.
• Digital transformation becomes a way of business as executives and strategists recognize
that change is constant. A new ecosystem is established to identify and act upon technology
and market trends in pilot and, eventually, at scale.

Digital transformation maturity is focused on the following elements in
the organization:
Governance and Leadership
People and Operations
Customer Experience
Data and Analytics
Technology Integration
Digital Literacy

Three Imperatives
• Most companies that have started to transform are still in the early
stages, so optimal organizational designs for large transformed digital
companies are not yet clear.
• MIT Sloan and CISR research has defined three clear imperatives for
transformational change, that can move you aggressively toward digital
redesign:
• Define how you will change the world
• Identify critical business components
• Develop human-machine partnerships
MIT CISR

Three Imperatives
Define how you will change the world
• Boldly articulate a grand new vision
• Redesign, redefine or rethink an industry
• Rethink industry boundaries
• Reformulate products as components of solutions
• Reimagine customer relationships
MIT CISR

Three Imperatives
Identify Critical Business Components
• May need to redesign your company to encourage collaboration and
coordination
• Smaller units, less heirachy
• Nimble units
• Replace current functional structures with smaller, loosely coupled business
components
• Structure business activity around business components
MIT CISR

Three Imperatives
Human Machine Partnerships
• Resist temptation to search for digital experience
• Encourage people to leverage machines and technology
• Encourage use of more sophisticated technology solutions and business
solutions around analytics, big data, IOT to free up human resources to
do other work of envisioning
MIT CISR

Summary
DIGITAL TRANSFORMATION IS A JOURNEY, NOT A DESTINATION
• Technology has empowered consumers to become more mobile, social, and
connected than ever. This has changed how they interact with each other and
with products, services, and businesses.
• Digital transformation is your organization’s internal equivalent of external
consumer evolution. It opens the door to new opportunities for innovation in
how to design, integrate, and manage customer (and employee) experiences.
• But, digital transformation and change at large is daunting. As digital
transformation involves many departments, leaders, and an overall cultural
shift of an organization, there is no set prescription for its strategy and
implementation.
• Like the imminent customer journey you will develop, the path from phase to
phase is not a linear experience. Use these best practices as your guideposts.

Digital Transformation : Just a Buzzword or Real Transformation

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