Post on 06-May-2015
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Digital Transformationian overview
Ron TolidoRon TolidoCTO Capgemini Application Services – Continental Europe16 September 2013
Transform to the power of digital
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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
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1. Digital transformation: The BasicsgHow digitization fundamentally transforms businesses
A multi‐year research project with MIT …
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… 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
gphenomenon in $ billion global organizations
Define a “digital maturity” framework
financial performance Understand digital maturity
at sector level Define “DNA” of digital
leaders
gtransformation 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
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of DTg g
Digital leaders cases
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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
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We are in midst of the third industrial revolution powered by digitization
3rd Industrial Revolution2nd Industrial Revolution1st Industrial Revolution
ElectricitySteam 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
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Source: Capgemini Consulting‐MIT Analysis
As opposed to previous industrial revolutions Digital Transformation is mainly driven by consumer behaviour and demands …
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… a powerful combination of technology forces …
SocialInternet of ThingsBig Data
Cloud
Mobile
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… and catalogs full of inspiration …
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… 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 gTransformation.” – (Andrew McAfee, MIT)
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This trend is intensified by new entrants …
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… 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
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Quelle: Capgemini Analysis; Company Websites, Annual Reports
as of April 2012as of April 2012
… with new business models …
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… that are changing the game …
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2. Digital Transformation FrameworkgDigging Deeper
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
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Billion‐Dollar Companies IT and Business Executives
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 Operationali d l
Customer understanding Digitally‐modified businessesProcess digitisation
Customer Experience
eOperational
Processe 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
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Source: Capgemini Consulting‐MIT Analysis
3. The Digital Advantageg gDigital Leaders Outperform their Peers in Every Industry
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 skillsCultural change
…
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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 traditionalapplications such as ERP or electronic commerce Although
nsity
applications such as ERP or electronic commerce. Althoughcompanies may be Beginners by choice, more often than notthey are in this quadrant by accident.FASHIONISTAS
F hi i
DIGIRATI
Digital In
ten
BEGINNERS
• Fashionista have implemented or experimented with manysexy digital applications. Some of these initiatives may createvalue, but many do not. While they may look good together,they are not implemented with the vision of gaining synergiesamong the items.CONSERVATIVES
Transformation Management Intensity
BEGINNERS among the items.CONSERVATIVES
• Conservatives favor prudence over innovation. Theyunderstand the need for a strong unifying vision as well as forgovernance and corporate culture to ensure investments aremanaged well. However, they are typically skeptical of thevalue of new digital trends, sometimes to their detriment.
• Digirati truly understand how to drive value with digitaltransformation. They combine a transformative vision, carefulgovernance and engagement, with sufficient investment innew opportunities.
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CodelcoRevolutionizing Mining Through Digital Technologies
“Shifting from a physical‐intensive model to a knowledge and technology‐intensive one”intensive one
Codelco, the largest copperproducer in the world, has its
t b k i th 1800Today, four mines in
• Developed a radical digital vision (“envision the future of mining”)
roots back in the 1800s.Owned by the Chilean State, itoperates internationally andemploys 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
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We quantified the digital maturity of 391 companies and analyzed their financial performance
We analyzed financial datafrom all the publicly‐tradedcompanies in our sample*companies in our sample*
Digitally‐mature companiesare achieving statisticallyare achieving statisticallysignificantly better financialperformance**
* Of the 391 companies in our sample, 184 were publicly traded
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** Industry adjusted FY2011 financial performance for 184 publicly traded firms, controlling for geography
Digital Intensity and Revenue Generation
Companies that are mature on the digital intensity dimension arebetter 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)
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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
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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
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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 forhi h h 20 d i
Hi hT h l
TelecommTravel and hospitality
which we have 20 or more data points.
BankingRetail
High Technology
Banking
Consumer Packaged Goods
Pharmaceuticals
Retail
Insurance
Utilities
Manufacturing
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…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"
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3. Digital GovernancegWhat Digital DNA looks like
Digital Leaders show common patterns: the Digital DNA
FocusInvestments 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
Digitallymanagement
Digital
management and digital capability. There is
something inherently different about Digirati
Combine Digital Use Digital
T h l i t
Leadersff gDNA that separates them from the rest"
gCapabilities to
Exploit Synergies
Technologies to Transform their Business Models
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Common Digital Governance Mechanisms
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NikeConnecting Digital Silos to Create Synergies
“From Separate Initiatives to Firm‐Level Transformation”
Nike is the world’s leadingmaker 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
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The rise of the Chief Digital Officer
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How Starbucks did it…
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A CDO may be relevant to any sector…
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5. The RoadmappGet Digital Transformation started
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
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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 warehouseSupplier
collaboration platforms
Online product blog
Rapid manufacturing
analysis sales mgt
Mobile service field Mobile service field workforce solution
Social mediaKnowledge library
E ecommerce
NewCustomerE i
CostManagement
ProductivityImprovement
NewProducts / S i
blogMass
customisation
Crowd sourcing
E‐ ecommerce (multiple channels)
Personal recommendation
solutions
CustomerInsights
Experience Services
NewPlatformsCustomer
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
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course of Digital Transformation technical innovations should be selected to actively shape the target picture.
How Burberry did it…
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Burberry’s Digital Transformation approach has resulted in top‐line and bottom‐line benefits
Total revenue, 2006‐2010, GBP million1 Vision: Focus on all aspects of the business
Better revenue
GBP million
850 995 1.202 1.1851.501
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 220301
Investment in digital innovations Better profit3 185 206 181
2006 2007 2008 2009 2010
Communication of the vision
Better share price
Share price, 2006‐2011, GBP4
591 556160
569
1.033 1.234
KPIs and ROI: Measuring success of digital initiativesp
52006 2007 2008 2009 2010 2011
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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
5. Some Relevant Technology TrendsgyA few minutes on Capgemini’s TechnoVision 2014
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 for g p p ( gDigital) 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
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DESIGN FOR DIGITAL
Overview: 7 Design Principles and 30 Trends
Design For Digital Invisible Infostructure Thriving On Data We CollaborateDesign For Digital1. Born In The Cloud2. Build Social3. SMAC It Up
Invisible Infostructure1. Virtual Lego
2. What Would Amazon Do?
3. Bon Risk Appetite
Thriving On Data1. My Data Is Bigger Than Yours
2. Intelligence Inside
3. Real Real Time
We Collaborate1. Social Is The New Oil
2. Profile As A Currency
3. Social Workers
4. Business, Mon Amour5. No Requirements6. From Train to Scooter7 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 Service1. Vanilla Tastes Good
2. Enterprise Candy Store
3. Elastic Business
Process On The Fly1. Shades Of Process
2. Process Is The New App
3. No Process
You Experience1. 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
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The Cloud has set a new benchmark for how quick flexible cost‐effective and
Born In The CloudThe 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 , yparticularly 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 gmanageability.
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Social is not something to be added at the end on top it is a ubiquitous design
Build SocialSocial 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 andmobilizing the social network around you is all a matter of creating tangible value for it.
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Although the drivers of Social Mobile Analytics (or ‘Big Data’) and Cloud all have
SMAC It UpAlthough 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 yconsider a solution in one of these areas, systematically look in the other areas as a default for synergetic inspiration.
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Business, Mon AmourThe 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 gtestify 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 gtransformation approach.
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Too much focus on requirements creates an artificial boundary between the Business
No RequirementsToo 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 , qfrom 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
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The next generation of Business Technology solutions have a short time to market are
From Train to ScooterThe 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 ythe right rhythm and start to explore new, flexible ways to build solutions, applying agile approaches such as SCRUM and rapid development tools.
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‘Digital’ now is a synonym for the use of IT to create new ways to engage with
Think DesignDigital 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 ycreativity and good analytical skills.
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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
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Digital Transformationian overview
Ron TolidoRon TolidoCTO Capgemini Application Services – Continental Europe16 September 2013
Transform to the power of digital
all credits