Understanding Digital Transformation

Session 1
Session 1- MDT: Strategies, Leadership and Technologies

I. What ‘digital’ really means?

II. 3 Steps to Market-Driven Digital Transformation
III. Five Myths About Digital Transformation
IV. Digital Leadership
 I. What ‘digital’ really means?

To be meaningful and sustainable, it is believed that digital should be seen

less as a thing and more a way of doing things

To help make this definition more concrete, it is broken down into three
attributes:
• creating value at the new frontiers of the business world,
• creating value in the processes that execute a vision of customer
experiences,
• building foundational capabilities that support the entire structure.
(Karel Dorner and David Edelman, McKinsey Digital July
2015)
• Creating value at new frontiers
• Creating value in core businesses
Proactive decision making
Contextual interactivity
Real-time automation
Journey-focused innovation
• Building foundational capabilities
Mind-sets
System and data architecture
Creating value at new frontiers

• Digital requires re-examining and understanding the entire way of doing business knowing the
value of new frontiers
• Some companies, capture new frontiers by developing entirely new businesses
• Other companies may identify and go after new value pools in existing sectors
• Unlocking value from emerging growth sectors requires understanding the implications of
developments in the marketplace and evaluating the presence of opportunities or threats
• For example:
• Internet of Things opens opportunities for disrupters to use unprecedented levels of data precision to identify
flaws in existing value chains.
• In the logistics industry, the use of sensors, big data, and analytics has enabled companies to improve the
efficiency of their supply-chain operations.
• It encompasses the customer behaviors and expectations that develop inside and outside the
business sector
Creating value in core businesses
• Digital’s next element is rethinking how to use new capabilities to
improve how customers are served
• Each step of a customer’s purchasing journey regardless of channel and
thinking about how digital capabilities can design and deliver the best
possible experience across all parts of the business are recorded
• For example,
• The supply chain is critical to developing the flexibility, efficiency, and speed
to deliver the right product efficiently in a way the customer wants
• Data and metrics can focus on delivering insights about customers that in turn
drive marketing and sales decisions.
• It’s about implementing a cyclical dynamic where processes and
capabilities are constantly evolving based on inputs from the customers
An interconnected set of four core capabilities are required for the above
Proactive decision making
• Relevance is the currency of the digital age.
• This requires making decisions, based on intelligence, that deliver content and experiences that are personalized and relevant to the customer.
Remembering customer preferences is a basic example of this capability, but it also extends to personalizing and optimizing the next step in the
customer’s journey.
• Data providers such as ClickFox, for example, blend data from multiple channels into one view of what customers are doing and what happens
as a result
• In the back office, analytics and intelligence provide near-real-time insights into customer needs and behaviors

Contextual interactivity
• This means analyzing how a consumer is interacting with a brand and modifying those interactions to improve the customer experience.
• For example, the content and experience may adapt as a customer shifts from a mobile phone to a laptop or from evaluating a brand to making a
purchasing decision.
• The rising number of customer interactions generates a stream of intelligence that allows brands to make better decisions about what their
customers want.

Real-time automation
• To support this cyclical give-and-take dynamic with customers and help them complete a task now requires extensive automation
• Automation of customer interactions can boost the number of self-service options that help resolve problems quickly, personalize
communications to be more relevant, and deliver consistent customer journeys no matter the channel, time, or device
• Automating the supply chain and core business processes can drive down costs, but it’s also crucial to providing companies with more flexibility
to respond to and anticipate customer demand

Journey-focused innovation
• Serving customers well gives companies permission to be innovative in how they interact with and sell to them
• That may include, for example, expanding existing customer journeys into new businesses and services that extend the relationship with the
customer, ideally to the benefit of both parties.
• These innovations in turn fuel more interactions, create more information, and increase the value of the customer-brand relationship
Building foundational capabilities

The final element of our definition of digital is about the technological and organizational processes that allow
an enterprise to be agile and fast.
This foundation is made up of two elements:
Mind-sets
Digital is about using data to make better and faster decisions, devolving decision making to smaller teams, and
developing an iterative and rapid ways of doing things
It should incorporate how companies operate, including creatively partnering with external companies to extend
necessary capabilities
A digital mind-set institutionalizes cross-functional collaboration, flattens hierarchies, and builds environments
to encourage the generation of new ideas.
Incentives and metrics are developed to support such decision-making agility.
System and data architecture
Digital in the context of IT is focused on creating a two-part environment that decouples legacy
A key feature of digitized IT is the commitment to building networks that connect devices, objects, and people.
This approach is embodied in a continuous-delivery model where cross-functional IT teams automate systems
and optimize processes to be able to release and iterate on software quickly
Digital Transformation: Smart Cities
Source: Anthony Jnr, B. (2020). Managing digital transformation of smart cities through enterprise architecture–a review and
research agenda. Enterprise Information Systems, 1-33.
Digitisation
• Development of methods and tools for exploring the collection of data in order to improve
operational, tactical, and strategic decision making.
• Information dissemination between citizens and stakeholders for strategic partnerships.
• Creates active participation of citizens to facilitate more accurate data flows for service
optimisation.
• Implement new tools to process to analyse data to prevent information overload for
scalability.
Source: Anthony Jnr, B. (2020). Managing digital transformation of smart cities through enterprise architecture–a review and research
agenda. Enterprise Information Systems, 1-33.
Digitalisation
• Deploying cloud computing to enable city scale up or down of IT infrastructure to better fit
the dynamic requirements of the city.
• Provide real-time information sharing to support collaborations and increasing citizens
awareness of environmental impacts.
• Provide real-time contextual information for more efficient collaboration and coordination
between urban community.
• Deploy data-driven decision making systems for valuable information flows and efficient
urban operations.

Source: Anthony Jnr, B. (2020). Managing digital transformation of smart cities through enterprise architecture–a review and research
agenda. Enterprise Information Systems, 1-33.
Digital transformation
• Installation of actuators and sensors to improve control and management of urban
infrastructure and equipment as well as transport vehicles during transit (e.g. Electric Vehicles
(EV)).
• Assessment of environmental effects from urban infrastructures.
• Integration of city and external IT systems in a scalable cloud environment to facilitate
constant flow of pertinent information.
• Enhancement of the accessibility of data by aiding different devices, installing wireless
network access, and mounting information services (e.g. self-service citizens registration
services, electronic road traffic IS).
• Deploy the potentials of growing velocity and growth of big data for improved decision
making.
• Improve accuracy and availability of contextual data to improve the coordination between
stakeholders
Source: and
Anthony Jnr, B. timely
(2020). initiate
Managing remedial actions
digital transformation in through
of smart cities case of system
enterprise errors. review and research
architecture–a
agenda. Enterprise Information Systems, 1-33.
 II. 3 Steps to Market-Driven Digital Transformation

• STEP 1: Interpret Market Forces

• STEP 2: Ensure Digital Commitment
• STEP 3: Execute At The Right Speed
3. Execute At The Right Speed
3.1. Culture and Talent
3.2. Processes
2. Ensure Digital Commitment 3.3. Digital Assets
2.1. Leadership 3.4. Data & Analytics
2.2. Strategy 3.5. IT/Business Alignment
2.3. Innovation Mindset
2.4. Investment
1.Interpret Market Forces
1.1. Competition
1.2. Collaborators
1.3. Context
(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)
STEP 1: Interpret Market Forces
COMPETITION
To set the urgency and pace of digital transformation, the board and the top
management team should judge market forces in terms of competitive threats and
opportunities, as well as predict the expected speed of market change

Some firms will see more threats than opportunities and also expect change to be
fast
 Others may be just as concerned, but the changes, for them, will be slower: banking
could be an example
Some companies will be optimistic about the changes ahead

Being able to grasp the threats and opportunities is important, but the speed of change
is critical, because if the changes are going to accelerate, you had better start running
fast. (Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)
The travel sector has already been significantly disintermediated by metasearch
engines, online travel agencies and hotel room resellers, so incumbents in that
sector have a pretty good idea of where the changes are occurring and at what
speed.

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

COLLABORATORS
When a market is going through a transition, new collaborators emerge.
Going back to the travel example, sites like Booking.com are only digital versions of
traditional agencies.
Online travel agencies change the rules of the game and also shift the balance of power in the
channel. They are much more powerful than traditional agencies, because they capture a
significantly higher percentage of customers and, together with metasearch engines like
TripAdvisor, add transparency to the market. As such, consumers have more information,
which usually results in more price competition, and intermediaries gain more market power.
• Social media sites and online influencers are increasingly strategic partners for building
brand awareness and liking.
• Companies need to learn how to manage these collaborators.
• Consider Vodafone Spain.
• To capture the youth market, it launched Vodafone Yu, which it promotes via its own radio program and
a TV program on Comedy Central featuring popular YouTubers.

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

CONTEXT
The context (economic, cultural, political, legal, etc.) in which a firm
operates is the final piece to understand the market forces of change
For example, the protections afforded to taxi drivers in cities and countries
around the world have greatly conditioned the development of Uber and
Cabify, and in some cases, slowed their progress
Banking is another highly regulated industry that has conditioned the pace
at which fintechs have been able to grow
• One should use the competitive advantage to move up the Stairway, so as
to closely monitor the evolution of the market context
• Markets can suddenly pivot, so as to anticipate the future and thus
executives should regularly engage in scenario planning

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

STEP 2: Ensure Digital Commitment
LEADERSHIP
• CEOs, with the support of their boards of directors, must be capable of
communicating their digital vision to their companies
• In organizations where digitalization runs the very real risk of
cannibalizing existing revenues, this may be a hard sell
• For other organizations where the digitalization trend is not as pronounced,
leaders will have to convince others of the need for change
• A good leader who understands market trends and can imagine the future
and will be able to set the direction and speed of transformation

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

STRATEGY
• The digital dimension inevitably affect any strategy
For Ex: The CEO of a major seed producer explained how farmers were
using new technologies to control their crops. They would get information
about new varieties of seeds online, watch tutorials on YouTube, and
monitor weather forecasts and control irrigation using their smartphones.
• The company have to change its distribution strategy, increasingly
connecting directly with end consumers rather than relying entirely on
an extensive network of distributors

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

INNOVATION MINDSET

•Digital transformation will involve innovation in products and services,

pricing models, distribution channels, communication strategies, processes
and/or the supply chain.
•In sectors where stability is the norm, innovating fast will be especially hard
• Does the senior management have the right mindset for digital innovation?
There has been much research done on “design thinking,” dating back at
least 40 years but given fresh impetus in recent years by companies like
IDEO. Essentially, it is a form of creative problem-solving that, instead of
using observable facts to postulate a solution, starts with needs and works
backwards in an iterative process to arrive at various possible solutions.
•Recognizing the need for speed, responsiveness, adaptability and delivering
on multiple fronts at once, researchers also talk of “ambidexterity” or
(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)
“multimodal” approaches
INVESTMENT

• Leadership, strategy and innovation are not sustainable without monetary

investment.
• Many companies have executives who are capable of understanding market trends
and are good at designing a roadmap to digital transformation, but then invest
timidly, perhaps because their boards are too cautious and reactive.
• Transformation cannot happen if the emergency brake is left on.
Moreover, how can a mid-sized hotel chain compete in capturing leads for its
locations against a company like The Priceline Group, which invests a
disproportionally higher amount in Search Engine Marketing (SEM), Search Engine
Optimization (SEO) and user experiences for its websites?
• Sometimes the gap between the desired and available funds is just too big
• Companies need to allocate appropriate investment to proceed
(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)
STEP 3: Execute At The Right Speed
CULTURE & TALENT

• Adapting to the appropriate pace of transformation can only happen with a cultural
change and the right talent is in place
• This involves more than just breaking down the silos that predominate in many
organizations, or hiring in a few technology experts
• It’s about getting key people in the organization to become agents of change
• For this to happen, people must work together well as a team and must resist inertia
and complacency with a constant desire to innovate, experiment and adapt to new
realities, as the business is exposed to an exponential series of changes
• People must be allowed to make mistakes and they must be humble enough to admit
them
• When people fall short, they must be quick to make amends

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

Contd.
• A 2016 study by MIT Sloan found that over half of employees at companies in the
early stages of digital transformation said they were planning to leave their
organizations in the next three years, while 1 in 5 said they would be gone within
the year, including around a third of senior vice presidents, vice presidents and
directors, owing to a lack of digital development opportunities. It doesn’t have to
be so, if companies would make digital talent development a priority.
• A lot of talent can be nurtured by focusing on competency development inside the
firm, it says, rather than always recruiting technical specialists from outside
• Companies also need to get creative with training
• McKinsey cites an initiative whereby Procter & Gamble and Google swapped
employees so they could learn from each other about SEO and SEM.

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

PROCESSES
• A milk company may not be able to digitize its cows, but it can take
numerous processes digital.
• A good customer relationship management (CRM) solution is required
for its sales force, or use GPS devices in its trucks, and leverage that
data to establish new delivery routes.
• For example the customer’s historical margin and preferred visiting hours are
important factors
• A growing number of companies are using IBM’s artificial intelligence
application, Watson, to crunch data and even substitute for many human
decisions, helping to increase the efficiency of their existing processes.

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

DIGITAL ASSETS
• Digital assets has become an imperative, and should broaden the
definition beyond the marketer’s understanding.
• A digital asset could be anything from a website, to an app, to a
proprietary algorithm to optimize SEM, to a facial recognition system,
to a GPS device
• They are tools to change processes and improve customer
relationships

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

DATA & ANALYTICS
• Data mastering is must
• There are a number of cloud-based or Software as a Service (SaaS)
tools available that simplify the process of analyzing data
• However, as the amount of data grows exponentially, some sectors such
as banking, supermarkets and telecommunications face endless
possibilities.
• Companies find talent at the analytical and business level to live with
this abundance of information and are able to integrate its use into the
corporate strategy

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

IT/BUSINESS ALIGNMENT
When things go wrong, IT department frequently gets blamedfor slowness or subpar
execution, with the CIO

Problems arise when IT and business speak two different languages. It is

impossible to achieve digitalization in due time and form if there is no
alignment between IT and those responsible for strategic business objectives.

The technological infrastructure that supports the current business has to be aligned
with a new, more dynamic and flexible IT structure that conforms to the new
business requirements

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

 Note: Refer to Exhibit 1, Exhibit 2, Exhibit
3

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

• Once Steps 1, 2 and 3 are undertaken, one can combine them to form
the final shape, which a new business proposition
• Further it requires monitoring progress, reviewing market
opportunities/threats and the speed of change in a continuous feedback
loop yields fresh insights
• Based on research, it is believed the Stairway to Digitalization
provides an extremely useful framework to help business get started
on the journey to transform and adapt organization to the new era

(Source: IESE Insight FIRST QUARTER 2017 ISSUE 32)

Highlights
Many companies have executives who are good at designing a
roadmap to digital transformation, but then invest timidly.
Transformation cannot happen if the emergency brake is left on.
(Source: IESE Insight FIRST QUARTER 2017
ISSUE 32)

Problems arise when IT and business speak two different languages. It

is impossible to achieve digitalization if there is no alignment between
IT and those responsible for strategic business objectives.
(Source: IESE Insight FIRST QUARTER 2017
ISSUE 32)
 III. Five Myths About Digital Transformation

• MYTH #1: Every company should digitally transform

• MYTH #2: Digital transformation leverages emerging or disruptive
Technologies
• MYTH #3: Profitable companies are the most likely to launch
successful digital transformation projects
• MYTH #4: We need to disrupt our industry before someone else does
• MYTH #5: Executives are hungry for digital transformation

Source: Stephen J. Andriole ; ISSUE- MIT SLOAN MANAGEMENT REVIEW SPRING 2017
MYTH #1: Every company should digitally transform
REALITY: Not every company, process, or business model requires digital
transformation.
• Digital transformation is not a software upgrade or a supply chain improvement
project
• For example, to launch a digital transformation of business processes, it’s
necessary to purposefully model those processes with tools that enable creative,
empirical simulations
• Company can create digital models that simulate the nuances inherent in its
procedures
• The impact of any initiative is ultimately defined by market share, revenue, and
profit.
• Over time, the efficiency of rules, processes, models, and systems may diminish
and when that happens, company’s need for digital transformation could grow
• The digital transformation will successfully streamline some key processes
Source: Stephen J. Andriole ; ISSUE- MIT SLOAN MANAGEMENT REVIEW SPRING 2017
MYTH #2: Digital transformation leverages emerging or disruptive technologies
REALITY: Most short-term transformational impact comes from “conventional”
operational and strategic technology — not from emerging or so-called
“disruptive” technology.
• Most transformational leverage comes from tried-and-true
operational technology (networking and databases) and
strategic technology (such as enterprise resource planning or customer
relationship management software)
emerging technology (such as augmented reality)
disruptive technology (such as machine learning)
• Why is that? Many business processes and models are outdated
• For example, consider the manner in which Uber Technologies Inc. and Airbnb Inc.
have, by degrees, supplanted taxis and hotels respectively with the help of mobile
phones, apps, and websites optimized for quick transactions and location tracking.
• Achieving impact with technologies is easier that is already in widespread than it is
with emerging technologies
Source: Stephen J. Andriole ,ISSUE- MIT SLOAN MANAGEMENT REVIEW SPRING 2017
MYTH #3: Profitable companies are the most likely to launch successful digital
transformation projects
REALITY: If things are going well —defined crassly as employee and shareholder
wealth creation — then the chances of transforming anything meaningful are quite
low.
• Failing companies are much more motivated to transform themselves, simply because
they need to change something
• Successful companies, especially if they’re public companies, are understandably
cautious about change
• Change is expensive, time-consuming, inexact, and painful
• Transformation efforts are often constrained
• Yes, resistance to change can disappear quickly when a company begins to fail

Source: Stephen J. Andriole ,ISSUE- MIT SLOAN MANAGEMENT REVIEW SPRING 2017
MYTH #4: We need to disrupt our industry before someone else does
REALITY: Disruptive transformation seldom begins with market leaders whose
business models have defined their industry categories for years.
• Market leaders pay only lip service as innovators and disruptors,
• They are usually champions of change until their profits begin to fall and
their shareholders scream for transformation.
• Industry disruptors have often been startups making bold bets on old
industries.
• Examples include Airbnb (hospitality), Uber and Lyft (transportation),
Amazon (books, retail), and Netflix (entertainment).

Source: Stephen J. Andriole ,ISSUE- MIT SLOAN MANAGEMENT REVIEW SPRING 2017
MYTH #5: Executives are hungry for digital transformation

REALITY: The number of executives who really want to transform their companies is relatively small,
especially in public companies

• Digital transformation requires strong support from upper management.

• Transformations require continuous support from the senior management team to succeed.
• Many executives are suspicious of risky change efforts that might affect their status in the company.
• Many executives are also challenged by the sheer complexity of digital transformation projects, especially
when they learn how long they take.
• They are reluctant to tweak existing business models that are consistently generating wealth for themselves
and their shareholders.

Source: Stephen J. Andriole ,ISSUE- MIT SLOAN MANAGEMENT REVIEW SPRING 2017
 IV. Digital Leadership

An interview with Manish Choksi-Head of Strategy and chief Information Officer of Asian Paints

Assignment:

• Capgemini Consulting Q1: Could you describe Asian Paints and its main strategic
challenges?
• Capgemini Consulting Q2: How is digital changing Indian society and consumer
behavior?
• Capgemini Consulting Q3: How is this digital phenomenon transforming business
practices in India?
• Capgemini Consulting Q4: What are the main roadblocks to an economically progressive
digital society in India?
• Capgemini Consulting Q5: So coming back to Asian Paints, how has the digital
revolution speeded up the transformation and development of your company?
• Capgemini Consulting Q6: Being both Head of Strategy and CIO is a pretty unique
combination. What do you see as the main benefits it brings to your organization?
References:

1. Karel Dorner and David Edelman, McKinsey Digital July 2015

2. Anthony Jnr, B. (2020). Managing digital transformation of smart cities through enterprise
architecture–a review and research agenda. Enterprise Information Systems, 1-33

3. IESE Insight FIRST QUARTER 2017 ISSUE 32)

4. Stephen J. Andriole ; Issue- MIT SLOAN MANAGEMENT REVIEW SPRING 2017

5. Digital Leadership: An interview with Manish Choksi-Head of Strategy and Chief

Information Officer of Asian Paints; Capgemini Consulting
End of Session 1