Creating a digital transformation vision

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Information about Creating a digital transformation vision
Business & Mgmt

Published on June 12, 2013

Author: bengilchriest



Digital technologies are having a pervasive impact on businesses and yet many organizations fail to capture the full potential of digital technologies because their leaders lack a transformative vision. Some insights from Capgemini on the importance, structure, and value of a #DigitalT vision.

101011010010101011010010101011010010A major research initiative at the MIT Sloan School of Management“The Vision Thing”: Developing aTransformative Digital Vision

2We had a vision, andthe vision was to be thefirst company to be fullydigital end to end.- Angela Ahrendts,CEO BurberryIntroduction“We had a vision, and the vision was tobe the first company to be fully digitalend-to-end. The [resulting] experiencewould be that a customer will haveaccess to Burberry across all devices,anywhere in the world.”1With this vision, CEO Angela Ahrendtsdrove a digital transformation withinBurberry,a155-year-oldfashioncompanyand an iconic UK brand. Burberry’sexecutive team used the power of digitaltechnologies to reinvigorate the brand,create a consistent customer experienceon a global scale and deliver consistentlyhealthy financial results.Digital technologies are having apervasive influence on business,transforming the customer experience,enhancing productivity in operationsand improving the way employeescollaborate. Yet, many organizationsfail to capture the full potential of digitaltechnologies because their leaders lacka transformative vision. Executives withan incremental vision get what they aimfor – incremental improvement. Thosewho realize the transformative power ofdigital can achieve much more.A bottom-up approach does not deliversuccessful digital transformation.Only the top layer of a company cancreate a compelling vision of the futureand communicate it throughout theorganization. Often, the real benefitsof transformation come from seeingpotential synergies across silos, and thencreating the conditions through whicheveryone can begin to unlock that value.Only senior executives are positioned todrive this level of change.Over the last three years, CapgeminiConsulting and the MIT Center forDigital Business have been researchingthe impact of digital technologieson the reach and the performanceof organizations. We identified twokey dimensions for successful digitaltransformation: the “What” and the“How.” The “What” represents digitalintensity, a measure of the strengthof digital activities of an organization.The “How” represents transformationmanagement intensity, a measure ofan organization’s vision, governance,and skills. Companies that are strongin digital intensity conduct numerousdigital initiatives, but only effectivetransformation management helps themidentify and deliver digital investmentsin a powerful and well-coordinated way.We call companies that excel in bothdimensions the “Digirati” (see Figure 1).

3Executives with anincremental vision getwhat they aim for– incrementalimprovement.Source: Capgemini Consulting and MIT Center for Digital Business – “Digital Transformation: A roadmap for billion-dollar organizations”1Transformation Management IntensityDigitalIntensityBeginners Management sceptical of the business value ofadvanced digital technologies May be carrying out some experiments Immature digital cultureDigirati Strong overarching digital vision Good governance Many digital initiatives generating businessvalue in measurable ways Strong digital cultureConservatives Overarching digital vision exists, but may beunderdeveloped Few advanced digital features, though traditionaldigital capabilities may be mature Strong digital governance across silos Taking active steps to build digital skills and cultureFashionistas Many advanced digital features (such as social,mobile) in silos No overarching vision Underdeveloped coordination Digital culture may exist in silosDigital intensity measures how advanced digitalinitiatives are within an organization. This includesinvestments in customer experience, operationalprocesses, business model transformation, as wellas digital capabilities.Transformation management intensity measuressenior executives’ capability to drive changethroughout the organization. This includes creatingand communicating a clear vision, establishinggovernance mechanisms, facilitating cross-silocoordination, and building a digital-ready culture.While executives within the Digiratihave integrated the power of digitaltransformation into their vision andstrategies, too few organizations todayunderstand what it means to have atransformative digital vision. Therefore,we set out to answer three criticalquestions: Are executives paying increasingattention to digital technologies? How are executives expressing theirdigital visions? How can executives frame atransformative digital vision?Figure 1: Four levels of Digital Mastery

4We analyzed the annual reports of theForbes Global 100 companies from2009-2011. Based on our analysis,we found that awareness of “digital”has grown by 19% between 2009and 2011 (see appendix on researchmethodology). In 2011, 43% of Forbes100 companies referenced “digital” intheir annual reports, compared with 36%in 2009 (see Figure 2). This growth indigital awareness shows that executivesare paying increasing attention to thepotential impact of digital transformation.Digital awareness also differs bygeography. More than half of FortuneGlobal 100 companies in North Americaemphasized “digital” in their annualreports while fewer companies in therest of the world were digitally aware (seeFigure 3).But, awareness of the digital trend isnot sufficient to drive transformationalchange. The true question is “how manyorganizations have encapsulated thistrend within a transformative vision fortheir company?” Among the Digirati,82% of respondents agreed that theirsenior leaders shared a common visionof digital transformation. A majority alsonoted that leaders’ visions involve radicalchange and that a roadmap existsto turn that transformative vision intoreality (see Figure 4). The picture is quitedifferent in the other categories. Lessthan half of respondents agreed thattheir senior leaders shared a commonvision for digital transformation and only17% stated that a roadmap existed.Are digital technologies gainingincreased attention from large-companyexecutives? Yes, and North Americanfirms appear to be ahead of the curve.But only the Digirati are distinguishingthemselves from their peers by translatingthat awareness into a transformationalvision of the future.Are executives paying increasing attentionto digital technologies?Source: Capgemini Consulting analysis, Forbes, Company annual reportsSource: Capgemini Consulting analysis based on 2011 Forbes Global 100 list,Company annual reports36%2009 201040%201143%55%43%30%North America Europe Rest of worldFigure 2: Percentage of Digitally-Aware Companies: Measured by Mentionof “Digital” in Annual Reports, Forbes Global 100 Companies, 2009-2011Figure 3: Percentage of Companies in key Geographies that are DigitallyAware, Forbes Global 100 Companies, 2011

5Among the Digirati, 82% of respondents agreed that their senior leaders shared acommon vision of digital transformation. For other firms, this figure is less than half.Senior executives share acommon vision of howthe business shouldchange through digitaltechnologiesDigiratiNon-Digirati*Senior executives have adigital transformation visionthat crosses internalorganizational unitsSenior executives have adigital transformation visionthat involves radicalchanges compared to theway we have traditionallydone businessSenior executives andmiddle managers share acommon vision of digitaltransformation18%82%25%67%26%71%47%25%28%15%82%51%24%25%57%25%18%62%21%17%Agree Neutral DisagreeSource: Capgemini Consulting – MIT Center for Digital Business Research, Survey of 391 firms, 2012*Fashionistas, Conservatives and BeginnersFigure 4: Having a transformational vision distinguishes the Digirati from their peers

6How are executivesexpressing their digital visions?In our research, we interviewed over 150executives to understand how they wereintegrating digital transformation into theirstrategic visions. Our results showedthat leaders typically express a digitalvision from one of three perspectives:digitizing operational processes,digitizing customer experience or acombination of the two. These differentapproaches reflect both the prioritiesof the organization and the nature ofcompetition in a given industry.Digitizing OperationalProcessesOrganizations whose fortunes areclosely tied to the performance of theirsupply chain and core operations oftenstart with this approach. The businessdrivers of such digital visions are oftenproductivity/efficiency and the needto integrate disparate operations.The intent is to increase visibility anddecision-making speed or to collaborateacross silos.For example, Boeing crafted a vision thatis focused on operational excellence andhow digital technologies and data canhelp the company improve:“Boeing believes the future of theaviation industry lies in ‘the digital airline.’To succeed in the marketplace, airlinesand their engineering and IT teamsmust take advantage of the increasingamount of data coming off of airplanes,Boeing believes the futureof the aviation industrylies in “the digitalairline.”using advanced analytics and airplanetechnology to take operational efficiencyto the next level.”2Boeing goes one step further by clearlydefining what a “digital airline” means inpractice:“The key to the digital airline is deliveringsecure, detailed operational andmaintenance information to the peoplewho need it most, when they need itmost. That means that engineering willshare data with IT, but also with thefinance, accounting, operational andexecutive functions.”3Designing a vision based on operationalexcellence is by no means limitedto manufacturing and engineeringcompanies. For instance, in 2009,Procter & Gamble put operationalexcellence at the center of its digitalvision:“Centralization and digitization willimprove productivity and createdeeper, more sustainable organizationalcapabilities. Digitizing P&G will enableus to manage the business in real timeand on a demand-driven basis. We’llbe able to collaborate more effectivelyand efficiently, inside and outside thecompany.”4Digitizing CustomerExperienceMany organizations have chosen thecustomer experience as the focal pointof their digital transformation. Theseorganizations focus their digital effortson improving understanding of customerbehavior through better use of analyticsand digital channels. There are three keydrivers for a customer experience-drivendigital vision: delivering an integratedcustomer experience, using digitalto establish a better connection withconsumers and using digital tools tounderstand customer behavior.Organizations that focus on deliveringan integrated customer experience tendto focus on multi-channel coherenceand a personalized experience for thecustomer. For instance, an executiveat an apparel company states that adigital customer experience will impact,“the way that the consumer accessesour brand, gives us feedback on it andexpects a tailored experience…ourproducts, where they buy them, howthey buy them – I think it’s going to be arevolution.”5The second driver is to use digital as ameans to establish stronger connectionswith consumers. For instance, AdamBrotman, Chief Digital Officer ofStarbucks, shared this vision:“Digital has to be the way we can tellour story, build our brand and have arelationship with our customer.”6Digital has to be the waywe can tell our story,build our brand and havea relationship with ourcustomer.- Adam Brotman, ChiefDigital Officer, Starbucks

7Burberry’s CEO Angela Ahrendts has asimilar vision with a focus on ubiquitousaccess to the brand:“To create a company where anyonewho wanted to touch the brand couldhave access to it.”7Equally, cosmetics giant L’Orealdescribes how digital capabilitiescan enhance the emotional link withconsumers:“The digital world multiplies the waysour brands can create an emotion-filledrelationship with their customers.”8The third driver for a customerexperience-driven vision is using digitaltools to understand and influencecustomer behavior. For instance,Novartis says in its annual report:“The technologies we use in our dailylives, such as smartphones and tabletdevices, could make a real differencein helping patients to manage their ownhealth. We are exploring ways to usethese tools to improve compliance ratesand enable healthcare professionals tomonitor patient progress remotely.”9Similarly, Commonwealth Bank ofAustralia sees new digital technologiesas a key way of integrating customerinputs in its co-creation efforts:“We are progressively applying newtechnology to enable customers to playa greater part in product design. Thathelps us create more intuitive productsand services, readily understandable toour customers and more tailored to theirindividual needs.”10Changing Business ModelsA third category combines visionsfocused on operational process andcustomer experience to create newbusiness models. Organizationswith this approach embrace digitaltransformation, even if it representsa fundamental departure from theircurrent mode of operation. There arebroadly two motivations for transformingbusiness models.The first is often defensive, focused onpreserving long-term survival. Servicesand information-based industriesare now going through fundamentalstructural changes. The rapid pace ofchange in these industries is forcingcompanies to redesign their businessmodels.Take the case of the French directoryservices provider, Pages Jaunes. Facinga 10% annual decline in its core markets,the company was reliant on a dyingbusiness model based on thick yellowbooks. Pages Jaunes’ CEO articulated aclear vision of how the company wouldtransform its business model throughdigital. The company was not in thebusiness of producing paper directories;it was in the business of connecting smalland medium-sized businesses to localcustomers. Paper is just an outdatedtechnology; digital is a better one.11This vision set the stage for a radicalredesign of the company and itsproducts. The company’s strategic focusis now on digital advertising, websitedesign and mobile directories, not thickpaper books.Opportunity – not crisis – is the seconddriver of business model change.Companies with this type of vision seekto use digital technologies to extend theirreach. Banco Santander, for instance,highlights a vision for how digitaltechnologies can help it break into newmarket segments:“Our objective for the coming years isto exploit the growth opportunities insegments where the bank has a lowpresence, such as companies, insuranceand cards. Specifically, we are makingsignificant investments in IT systemsand staff to be able to take advantage ofthese opportunities.”12Others go one step further, seeing digitalvisions as a way to prepare a companyfor the next long term shift in theirindustry. General Electric, for instance,focuses its vision on the coming wave ofsmart connected devices.“I don’t see GE as a software company.However, we will lead in the productivityof our installed products and theirecosystems. This will require leadershipof the ‘Industrial Internet,’ makinginfrastructure systems more intelligent.”13According to our research, there is no oneright way to express a vision for digitaltransformation. Executives articulateda vision based on the existing corecapabilities of their organizations, and/orthe specific industry context they faced.Nevertheless, our research shows thatdigirati craft an inspiring vision of thefuture in which digital technologies playa fundamental role.

8Digital transformation is a tectonic shift,causing companies to rethink how theystructure themselves and compete in themarket. Leaders can help negotiate thistransition by proactively defining what aradically different, digital future will looklike. To begin crafting this vision, leadersmust first identify the benefits they wantto gain through digital technologies, andwhich strategies will engage customers,employees and investors.Creating a vision is never a completelylinear process. However, our researchshows that Digirati companies gothrough three distinct steps to formulatetheir digital visions: Define a clear target Engage the organization Evolve the vision over timeHow can executives framea transformative digital vision?Define a Clear Target:First, executives need to lay out clearlythe intent of the vision (what needs tochange) as well as the outcome (theresulting benefits for the company, itscustomers and its employees). Thiswill help employees visualize what thefuture of the organization will look like.Here, leaders should strive to be asindustrialization, the second on creatinga customer-centric organization, andthe third on automation. The originalvision remains a key inspiration behindimprovements in operations and thecustomer experience, even as thecompany has extended its vision throughsuccessive waves of capability.Evolve the Vision Over Time:Organizations in all industries are stillstruggling to understand the long-term impact of digital technologies.Moreover, the vision of the changedorganization will evolve in concert withthe new possibilities created by technicaladvances and improved capabilities.In 2009 Procter & Gamble started witha vision to be completely digitized. By2010, the company evolved its visionto create a real-time operating anddecision-making environment.“We are accelerating innovation by usingdigital technology to create visibility frommolecule-creation to the store shelf.”15A company’s digital vision is not thesole responsibility of its senior leaders.Nor should that vision remain staticover time. Executives need to provide adirection that is clear enough to mobilizetheir organization, but that also allowsemployees to actively participate in itsrefinement. In that way, the vision willevolve in concert with the implementationof the company’s digital transformation.Leaders need to keepthe vision specific enoughto give employees a cleardirection, while givingthem the flexibilityto innovate and buildupon it.specific as possible. For instance, PagesJaunes’ CEO clearly stated his intentto move beyond thick paper directorieswhile retaining the company’s valuablerole in connecting small to mediumbusinesses with local customers. Hecoupled that intent with a concreteoutcome: the company would earn75% of its revenues from digital serviceswithin the next 3 to 5 years. Thiscombination of intent and outcome giveseveryone in the organization a clear setof guidelines to envision new ways ofworking. It also ensures that the focusof the transformative vision is not onthe technology itself but on differentways of operating – identifying newways for digital technology to improveperformance and customer satisfaction.Engage the Organization:After articulating the intent and outcomeof a digital vision, the next step is toengage the organization in achieving thatoutcome. While they have the importanttask of sketching out a clear picture of thefuture, executives should let the broaderorganization fill in the details. Leadersneed to keep the vision specific enoughto give employees a clear direction, whilegiving them the flexibility to innovate andbuild upon it.Asian Paints, India’s largest paintcompany, formulated a vision thatcombined operational efficiency withdeveloping new ways to serve itscustomers.14This vision did not defineevery step of the transformation. Itprovided a clear mandate for changewhile enabling people throughout thecompany to refine the details overtime. The company embarked on itsdigital transformation several years agoand has been through three waves oftransformation - each building on topof the other. The first wave focused on

9An inspiring digital vision is thecornerstone of successful digitaltransformation. Though many executivesappear to be aware of its impact on theirbusiness, few have incorporated digitalinto a compelling strategic vision of thefuture. These visions do not focus simplyConclusionon implementing new technologies.Instead, they illustrate how organizationscan enhance the experience of theircustomers, streamline their operationsor transform their business models. Thisis no small task, and it should not be leftto senior leaders alone. Crafting a visionfor digital transformation is a journey.Executives plant the seed at the top,but then they must engage people at alllevels in the company to make the visionlive and grow.Research MethodologyThis research is part of a three-year collaboration between the MIT Center for Digital Business and Capgemini Consulting aimedat investigating the ways in which large traditional companies around the world are managing – and benefiting from – digitaltransformation. In Phase 1, we spoke to over 150 senior executives from large enterprises around the globe. For further detailsand insights from this research, please refer to Digital Transformation: A Road-Map for Billion-Dollar Organizations.16This led toour insights about the importance and characteristics of transformative digital vision. In Phase 2, we extended our research tobenchmark digital practices around the globe. We gathered surveys from 469 senior executives in 391 large companies aroundthe world. For further details on the insights from this phase, please refer to The Digital Advantage: How digital leaders outperformtheir peers in every industry.17To gauge awareness of the digital phenomenon, we analyzed organizations in the Forbes Global 100 list. Using the 2012 list, wemeasured digital awareness as the number of times that an organization used the word ‘digital’ in its annual report in the period2009-2011 in the context of industry trends, company initiatives or the CEO/Chairman’s letters to shareholders.

101 Angela Ahrendts video uploaded by, August 2011 Company website - Company website - P&G CEO Robert McDonald in Annual Report 2011, Page 55 Capgemini Consulting – MIT Center for Digital Business Research, 20126 Venture Beat, “How Starbucks is turning itself into a tech company,” June 20127 CNN, “Burberry’s Angela Ahrendts: High tech’s fashion model,” June 20128 Capgemini Consulting Digital Leadership Series, An interview with Marc Menesguen, Managing Director, Strategic Marketingfor L’Oreal Novartis CEO Joseph Jimenez in Annual Report 2012, Page 1410 Commonwealth Bank of Australia CEO Ian Narev in Annual Report 2012, Page 511 Capgemini Consulting and MIT Center for Digital Business – “Digital Transformation: A roadmap for billion-dollarorganizations” Banco Santander CEO Alfredo Saenz in Letter from CEO 2012, Page 1713 GE Chairman and CEO Jeffrey Immelt in Annual Report 2011, Page 714 Capgemini Consulting Digital Leadership Series, An interview with Manish Choksi, Head of Strategy and Chief InformationOfficer of Asian Paints P&G CEO Robert McDonald in Annual Report 2011, Page 516 Capgemini Consulting and MIT Center for Digital Business – “Digital Transformation: A roadmap for billion-dollarorganizations” Capgemini Consulting and MIT Center for Digital Business –“The Digital Advantage: How digital leaders outperform theirpeers in every industry”

Rightshore®is a trademark belonging to CapgeminiCapgeminiConsultingistheglobalstrategyandtransformationconsulting organization of the Capgemini Group, specializingin advising and supporting enterprises in significanttransformation,frominnovativestrategytoexecutionandwithan unstinting focus on results. With the new digital economycreating significant disruptions and opportunities, our globalteam of over 3,600 talented individuals work with leadingcompaniesandgovernmentstomasterDigitalTransformation,drawing on our understanding of the digital economy andour leadership in business transformation and organizationalchange.Find out more at: more than 125,000 people in 44 countries, Capgeminiis one of the world’s foremost providers of consulting,technology and outsourcing services. The Group reported 2012global revenues of EUR 10.3 billion. Together with its clients,Capgemini creates and delivers business and technologysolutions that fi t their needs and drive the results they want. Adeeplymulticulturalorganisation,Capgeminihasdevelopeditsown way of working, the Collaborative Business ExperienceTM,and draws on Rightshore®, its worldwide delivery model.Learn more about us at Capgemini and theCollaborative Business ExperienceCapgemini Consulting is the strategy and transformation consulting brand of Capgemini Group. The information contained in this document is proprietary.© 2013 Capgemini. All rights reserved.George WestermanResearch Scientist at MIT Center forDigital Businessgeorgew@mit.eduMichael WelchVisiting Scientist at MIT Center forDigital Businessmichael.welch@capgemini.comDidier BonnetGlobal Head of Practices atCapgemini Consultingdidier.bonnet@capgemini.comAuthorsDigital TransformationResearch Buvat and Subrahmanyam KVJ from the Digital Transformation Research Institute worked on this paper.

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