Digital Transformation
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The document provides an extensive overview of digital transformation, its implications for businesses, and a framework for implementation. It emphasizes the evolving role of technology in reshaping operational processes, customer experiences, and business models while highlighting the significance of digital maturity in achieving better financial outcomes. Key concepts discussed include digital governance, the rise of digital leaders, and the imperative for companies to adapt rapidly to technological advancements.
Digital Transformation
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- 3. Digital Transformation ‐ AGENDA 1. The Basics 2 Digital Transformation framework2. Digital Transformation framework 3. Digital Maturity 4 Digital Governance4. Digital Governance 5. The Roadmap 6 Some relevant Technology Trends6. Some relevant Technology Trends all credits
- 6. … leading to several important insights … 2011 2012 2013 “Digital Transformation k” “Digital Transformation f ” “Digital Transformation i ” Research themes Framework” Performance” Execution” Research 160 in‐depth interviews in 50 companies (15 countries) 400 companies surveyed in 30 countries (5 continents) 11 industry sectors > 2,500 companies surveyed Europe (54%), NA (35%), APAC (16%) 11 industry sectors benchmarked Global scope Understand the digital Establish link between digital leadership and Establish how digital Objectives g phenomenon in $ billion global organizations Define a “digital maturity” framework financial performance Understand digital maturity at sector level Define “DNA” of digital leaders g transformation is managed in practice Understand execution challenges Outputs The Execution f DT leaders Deep dive on governance Digital leaders cases Deep dive on digital vision and engagement all credits of DT g g Digital leaders cases
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- 8. DIGITAL TRANSFORMATION IS THE USE OF DIGITAL TECHNOLOGIES TO RADICALLY IMPROVE PERFORMANCE ORT CHNO OGI S TO RA ICA Y IMPROV P RFORMANC OR REACH OF ENTERPRISES all credits
- 9. We are in midst of the third industrial revolution powered by digitization 3rd Industrial Revolution2nd Industrial Revolution1st Industrial Revolution Electricity Steam Engine Digitisation Shift to an economy based on Centralised manufacturing Machine‐based manufacturing Driving agent Shift to an economy based on information Fuelled by advances in computer miniaturisation, mobile, and Internet Centralised manufacturing Revolved around steel, railroads, electricity and chemicals Machine based manufacturing Centred on iron, steam technologies and textile production Technical Innovation PC Internet and mobile networks Smart devices Internal combustion engine Diesel engine Telephone and telegraph Cotton spinning Fossil fuel Large scale production of chemicals Innovation S i Explosion in ICT‐enabled productivity Massive economic growth I t i li i t d d Creation of factory system and trade unionsSocio‐ Economic Impact productivity Globalisation of markets and workforce Growing income inequality Improvement in living standards Rising unemployment Greatly increased international trade trade unions Increased life expectancy Massive urbanisation all credits Source: Capgemini Consulting‐MIT Analysis
- 11. … a powerful combination of technology forces … Social Internet of Things Big Data Cloud Mobile all credits
- 13. … making it a major challenge on CXOs’ agendas “People have a tendency to overestimate technology in the short term, and underestimate it in the long term.” – (Bill Gates, Microsoft) “I can’t think of any industry sector or company which is immune from Digital p y g Transformation.” – (Andrew McAfee, MIT) all credits
- 15. … taking advantage of digital innovations to oust traditional companies … Example: Blockbuster’s lack of adaption Market valuation (million USD) Blockbuster (established in 1985) (established in 1999) 8.400 Value Proposition DVD rental through brick and mortar stores and online Launched online DVD rental business in 2004 Started as an online DVD rental company in 1999 Launched personal movie recommendation system in 2000 8.400 Proposition Introduced streaming service in 2007 More than 6,000 stores in 2010 No physical presence Operations/ Customers 48,000 employees as of Jan. 2010 2 million online subscribers in 2006 Decreasing physical customer base 900 employees 26 million streaming members as of Dec. 2011 24 Bankrupt in 2010Bankrupt in 2010 base Valuated at $4.9 billion as of April 2012 Valuated at $4.9 billion as of April 2012 24 1994 2010 all credits Quelle: Capgemini Analysis; Company Websites, Annual Reports as of April 2012as of April 2012
- 19. Digging deeper: In a joint study with the MIT we achieved a better understanding how companies leverage Digital Transformation Digital transformation study 157 Interviews 50 Companies 15 Countries Billi D ll C i IT d B i E i all credits Billion‐Dollar Companies IT and Business Executives
- 20. The MIT study shows that organisations are digitally transforming three key areas: customer experience, operational processes and business models Building blocks of Digital Transformation showing customer’s key challenges Customer Operational i d l Customer understanding Digitally‐modified businessesProcess digitisation Customer Experience e Operational Process e Business Model g Analytics‐based segmentation Socially‐informed knowledge Product / service augmentation Transitioning physical to digital Digital wrappers g Performance improvement New features New Digital Businesses Digital products Reshaping organisational boundaries Worker enablement Working anywhere anytime Broader and faster communication Community knowledge sharing Top line growth Digitally‐enhanced selling Predictive marketing Streamlined customer processes Digital Globalisation Enterprise Integration Redistribution decision authority Shared digital services Customer touch points Customer service Cross‐channel coherence Self service Performance management Operational transparency Data‐driven decision‐making Shared digital servicesSelf service Digital Capabilities Unified Data & Processes Analytics Capability Business & IT Integration Solution Delivery all credits Source: Capgemini Consulting‐MIT Analysis
- 22. Digital maturity is a combination of two separate but related dimensions: Digital Intensity and Transformation Management Intensity Digital Intensity is investment in technology‐enabled initiatives to change how the company operates – its customer engagements, internal operations, and even business modelsbusiness models. Location‐based marketing Customer Service in Social Media Transformation Management Digital Design Connected Products Mobile sales Intensity consists in creating the leadership capabilities necessary to drive digital transformation in the organization. Digital Design … Digital Vision Cross‐silos coordination New skills Cultural change … all credits
- 23. The two dimensions spell out four different types of digital maturity • Beginners do very little with advanced digital capabilities, although they may be mature with more traditional applications such as ERP or electronic commerce Although nsity applications such as ERP or electronic commerce. Although companies may be Beginners by choice, more often than not they are in this quadrant by accident.FASHIONISTAS F hi i DIGIRATI Digital Inten BEGINNERS • Fashionista have implemented or experimented with many sexy digital applications. Some of these initiatives may create value, but many do not. While they may look good together, they are not implemented with the vision of gaining synergies among the items.CONSERVATIVES Transformation Management Intensity BEGINNERS among the items.CONSERVATIVES • Conservatives favor prudence over innovation. They understand the need for a strong unifying vision as well as for governance and corporate culture to ensure investments are managed well. However, they are typically skeptical of the value of new digital trends, sometimes to their detriment. • Digirati truly understand how to drive value with digital transformation. They combine a transformative vision, careful governance and engagement, with sufficient investment in new opportunities. all credits
- 24. Codelco Revolutionizing Mining Through Digital Technologies “Shifting from a physical‐intensive model to a knowledge and technology‐ intensive one”intensive one Codelco, the largest copper producer in the world, has its t b k i th 1800 Today, four mines in • Developed a radical digital vision (“envision the future of mining”) roots back in the 1800s. Owned by the Chilean State, it operates internationally and employs over 18,000 people. Chile are operated automatically: trucks drive themselves, operations are controlled remotely • Invested in cultural change (innovation challenges) • Developed new skills • Constantly monitor, assess and controlled remotely, information is shared in real‐time, and so on y , coordinate initiatives “Our company is very conservative, so changing the culture is a key h ll W t d i t l i ti d t tchallenge. We created internal innovation awards to promote new ideas and encourage our workers to innovate” Marco Antonio Orellana Silva, CIO all credits
- 25. We quantified the digital maturity of 391 companies and analyzed their financial performance We analyzed financial data from all the publicly‐traded companies in our sample*companies in our sample* Digitally‐mature companies are achieving statisticallyare achieving statistically significantly better financial performance** * Of the 391 companies in our sample, 184 were publicly traded all credits ** Industry adjusted FY2011 financial performance for 184 publicly traded firms, controlling for geography
- 26. Digital Intensity and Revenue Generation Companies that are mature on the digital intensity dimension are better at driving revenue through their existing assetsbetter at driving revenue through their existing assets +6% +9% Basket of indicators: • Revenue / Employee ‐4% ‐10% / p y • Fixed Assets Turnover (Revenues / Property, Plant & Equipment) all credits
- 27. Transformation Management Intensity and Profitability Companies that are mature in the transformation management intensity are more profitableintensity are more profitable ‐11% +26% Basket of indicators: • EBIT Margin ‐24% +9% g • Net Profit Margin all credits
- 28. Digital Intensity and Market Valuation Companies that are mature in the transformation management intensity achieve higher market valuationsintensity achieve higher market valuations ‐12% +12% Basket of indicators: • Tobin’s Q Ratio ‐7% +7% • Price / book ratio all credits
- 29. Digital transformation is moving more rapidly in some industries than in others… Digital maturity, by industry, for our survey Each dot represents the average maturity of industries for hi h h 20 d i Hi hT h l Telecomm Travel and hospitality which we have 20 or more data points. BankingRetail High Technology Banking Consumer Packaged Goods Pharmaceuticals Retail Insurance Utilities Manufacturing all credits
- 30. …but every industry has firms that have already begun to gain the benefits of digital transformation Percentage of firms in each industry by quadrant. “Digital Beginners in any industry areany industry are several years from gaining the digital maturity that their Digirati competitors already possess" all credits
- 32. Digital Leaders show common patterns: the Digital DNA Focus Investments on where they Invest 100% in transformation “Digirati status is more than simply a combination of sound t d di it l choose to Excel Digitally management Digital management and digital capability. There is something inherently different about Digirati Combine Digital Use Digital T h l i t Leaders ff g DNA that separates them from the rest" g Capabilities to Exploit Synergies Technologies to Transform their Business Models all credits
- 34. Nike Connecting Digital Silos to Create Synergies “From Separate Initiatives to Firm‐Level Transformation” Nike is the world’s leading maker of athletic shoes, l i t d • Strong presence in social media – usages include open innovation and customer service • Created a dedicated unit – Nike Digital Sports – to provide skilled resources, budget, and coordination across the enterpriseapparel, equipment, and accessories. customer service • Offers mass customization • Brand dedicated to digitally enhanced enterprise. • The unit leads most customer‐facing digital projects, and releases products under the Nike+ brand. • IT and business people work togetherdigitally‐enhanced products • Strongly developed digital design • IT and business people work together in the unit, developing new products “Connecting used to be, ‘Here’s some product, and here’s some d ti i W h lik it ’ C ti t d i di l ”advertising. We hope you like it.’ Connecting today is a dialogue” Mark Parker, CEO all credits
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- 40. The starting point: Formulate a vision of your digital company and outline clear business objectives Vision Business objectives (examples) Get smarter ‐ make better use of digitally available informationdigitally‐available information Get closer to clients ‐ gain better insights from customers and build a strong relationship Get leaner ‐ establish efficient globally integrated operations through utilising state‐of‐the‐art technology Get more innovative ‐ facilitate knowledge exchange and communication all credits
- 41. Identify and select digital innovations which help you achieve your digital vision and business objectives Digital transformation radar and innovations Live data analysis Automated online Online bidding Digital warehouse Supplier collaboration platforms Online product blog Rapid manufacturing analysis sales mgt Mobile service field Mobile service field workforce solution Social media Knowledge library E ecommerce New Customer E i Cost Management Productivity Improvement New Products / S i blog Mass customisation Crowd sourcing E‐ ecommerce (multiple channels) Personal recommendation solutions Customer Insights Experience Services New PlatformsCustomer Operational Product Co‐innovation l f Online design Online design and testing forums After sales mobile and online services Order status Insights PlatformsCustomer Product platformstracking In traditional business transformation technical innovations help realising an organisation’s defined target picture. In the all credits course of Digital Transformation technical innovations should be selected to actively shape the target picture.
- 43. Burberry’s Digital Transformation approach has resulted in top‐line and bottom‐line benefits Total revenue, 2006‐2010, GBP million 1 Vision: Focus on all aspects of the business Better revenue GBP million 850 995 1.202 1.185 1.501 2006 2007 2008 2009 2010 1 Top‐Down approach: Driven by top executives Better Adjusted operating profit, 2006‐2010, GBP million 2 185 206 181 220 301 Investment in digital innovations Better profit 3 185 206 181 2006 2007 2008 2009 2010 Communication of the vision Better share price Share price, 2006‐2011, GBP4 591 556 160 569 1.033 1.234 KPIs and ROI: Measuring success of digital initiatives p 5 2006 2007 2008 2009 2010 2011 all credits Sources: Capgemini Consulting Analysis;; Company Websites; Company Annual Reports; Yahoo Finance; Note: Share prices as on 10 / 17 / 2011, 11 / 15 / 2010, 11 / 16 / 2009, 11 / 17 / 2008, 11 / 19 / 2007, 11 / 20 / 2006
- 45. Digital Transformation is driven by emerging technologies .. • TechnoVision categorizes technology trends in 6 distinct clusters aiming to better understand anddistinct clusters, aiming to better understand and position an abundance of new technologies • In the 2013 edition, each cluster consists of 5 technology trendstechnology trends • Each trend is described through actions to take, tools to consider and insights to gather • There are also 7 design principles (Design forg p p ( g Digital) that should be considered and applied throughout • Depending on the challenge an enterprise wants to address, relevant building blocks are selected and woven together in Digital Transformation story lines DESIGN FOR DIGITAL • These story lines can be used to discuss, test, validate and strategize all credits DESIGN FOR DIGITAL
- 46. Overview: 7 Design Principles and 30 Trends Design For Digital Invisible Infostructure Thriving On Data We CollaborateDesign For Digital 1. Born In The Cloud 2. Build Social 3. SMAC It Up Invisible Infostructure 1. Virtual Lego 2. What Would Amazon Do? 3. Bon Risk Appetite Thriving On Data 1. My Data Is Bigger Than Yours 2. Intelligence Inside 3. Real Real Time We Collaborate 1. Social Is The New Oil 2. Profile As A Currency 3. Social Workers 4. Business, Mon Amour 5. No Requirements 6. From Train to Scooter 7 Think Design 4. Let’s Get Physical 5. Orchestrate for Simple S t A A S i 4. Data Art 5. Data Apart Together P O Th Fl 4. No Work 5. Friend Your Vending Machine Y E i7. Think Design Sector As A Service 1. Vanilla Tastes Good 2. Enterprise Candy Store 3. Elastic Business Process On The Fly 1. Shades Of Process 2. Process Is The New App 3. No Process You Experience 1. Object Of Desire 2. Zen Of The Task 3. Sweat The Assets 4. Close To The Edge 5. No Apps Apps 4. String of Silos 5. Co‐Process 4. Bring Your Office Device 5. End User, End Producer all credits
- 47. The Cloud has set a new benchmark for how quick flexible cost‐effective and Born In The Cloud The Cloud has set a new benchmark for how quick, flexible, cost effective and scalable solutions should be available. This has a transformative impact on the demand and supply sides, as expectations shift. Many organizations are not ready to get all their solutions from the Cloud, but the new normal is already there and g , y particularly the expectations at the business side have considerably changed. For new solutions, the Cloud should be the default scenario, only then to be ‘softened’ by pragmatic considerations around integration, security, legislation and y p g g y g manageability. all credits
- 48. Social is not something to be added at the end on top it is a ubiquitous design Build Social Social is not something to be added at the end on top, it is a ubiquitous design principle that should be applied from the very beginning of creating solutions. If you start designing your processes and applications as social by default you’ll see that solutions are likely to become more flexible, connected and user/team‐centered. You y , / unleash the power of outside by thinking outside‐in. But privacy and trust are key and mobilizing the social network around you is all a matter of creating tangible value for it. all credits
- 49. Although the drivers of Social Mobile Analytics (or ‘Big Data’) and Cloud all have SMAC It Up Although the drivers of Social, Mobile, Analytics (or Big Data ) and Cloud all have powerful transformation impact as themselves, the real breakthroughs are created by bringing them all together. In this powerful melting pot, the drivers amplify each other, creating something much more compelling than the sum of the parts. So whenever you g g p g p y consider a solution in one of these areas, systematically look in the other areas as a default for synergetic inspiration. all credits
- 50. Business, Mon Amour The consumerization of IT and the availability of Cloud solutions has brought technologyThe consumerization of IT and the availability of Cloud solutions has brought technology closer to the business than ever before. True Digital Transformation creates a fusion between digital capabilities and business change, rather than just aligning it. The IT function in an organization is successful if the business side happily takes the stage to g pp y g testify about its benefits, also takes the lead in business/IT projects and holds a significant part of the budget for innovation. A continuous dialogue is crucial for this, together with an architected platform to enable digital change and a shared, end‐to‐end g p g g transformation approach. all credits
- 51. Too much focus on requirements creates an artificial boundary between the Business No Requirements Too much focus on requirements creates an artificial boundary between the Business and IT sides of an organization. It’s a bridge, but one that cannot be crossed. Instead, IT should be providing a flexible, scalable catalogue of secure and compliant enterprise services and solutions. It inspires the business to assemble their own, unique solutions p , q from it. Such a catalogue is the foundation and inspiration for business solution ‘hypotheses’ that can quickly be validated, turned into executable plans and deployed. Think Catalogue First!g all credits
- 52. The next generation of Business Technology solutions have a short time to market are From Train to Scooter The next generation of Business Technology solutions have a short time to market, are created and delivered in an agile way and are developed and owned in the nearest proximity of the business. They are much like Scooters and Cars, where the current applications landscape is populated with Trains and Buses. Think about when to apply pp p p p pp y the right rhythm and start to explore new, flexible ways to build solutions, applying agile approaches such as SCRUM and rapid development tools. all credits
- 53. ‘Digital’ now is a synonym for the use of IT to create new ways to engage with Think Design Digital now is a synonym for the use of IT to create new ways to engage with customers, optimize operations and completely transform business models. It brings fresh options to connect to better informed customers, using a variety of volatile channels and much closer to the dynamics of business. To fully reap the benefits, the y y p , Business Technology landscape needs to be designed from the integrated, end‐to‐ end, outside‐in perspective of the customer. Creating this experience requires ‘Design Thinking’, which is all about finding the right mix between empathy, g g g g p y creativity and good analytical skills. all credits
- 54. Digital Transformation ‐ AGENDA 1. The Basics 2 Digital Transformation framework2. Digital Transformation framework 3. Digital Maturity 4 Digital Governance4. Digital Governance 5. The Roadmap 6 Some relevant Technology Trends6. Some relevant Technology Trends all credits
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