Destination DigitalKey questions to help define your transformation to a dynamic digital enterprise

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Traditional enterprises must do the same.

To learn how established companies are faring, DXC Technology commissioned

The Economist Intelligence Unit to survey more than 600 senior executives at large

organizations worldwide about their digital transformation progress. According

to the survey, 75 percent of companies say their digital strategy is central to their

business strategy. The figures run even higher in financial services, technology and

manufacturing. Yet it’s clearly still early days in scaling digital, as nearly 60 percent

of survey respondents said they’ve only had a strategy in place for 2 years.

These companies have not advanced to the next stage of a more significant overhaul

of their business model, and that won’t do. To survive, established enterprises

must break away from traditional 20th century hierarchical command-and-

control structures with a quarterly financial focus, and enter a new era of business

competition. Reaching what management consultant Geoffrey Moore refers to

as “escape velocity” takes more momentum than incrementally digitizing current

activities, investing only slightly ahead of the cost of capital. That’s the business

strategy of a more stable past.

Implementing relentless business model innovation requires energy, ideas, a new

culture of continuous change, a unified strategy and a modernized capability

framework — in short, a dynamic enterprise.

To accelerate digital transformation, achieve escape velocity and move toward the

goal of becoming a dynamic enterprise, traditional enterprises are faced with big

decisions.

The starting point? Not technology. Your customers.

Are you doing the right things for your customers?

Customers are in control. It really is as simple as that. If you are not creating

differentiated value for your customers and are instead relying solely on conventional

wisdom about what’s important to them, you are missing opportunities and operating

at some level of business risk. Many companies already understand this. Sixty-

four percent of survey respondents say their company is likely to be disrupted by

competitors with superior customer-centric digital transformation strategies.

Digital natives draw daily headlines with their soaring market capitalization and enviable prospects. New market entrants garner attention for the way they exploit digital to create a “winner’s advantage,” building value leadership on all fronts and real competitive differentiation over incumbents. They never rest, constantly modifying and diversifying their business models.

Digital technology is no longer simply a good idea. It’s critical to survival in the 21st century.

60%Percentage of survey

respondents who say they’ve

only had a strategy in place

for 2 years

“2019: The year of digital decisions,” January 2019

75%Percentage of companies

who say their digital strategy

is central to their business

strategy

“2019: The year of digital decisions,” January 2019

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Doing the right things for customers means turning a company’s traditional inward

gaze toward the outside. A relentless focus on customer outcomes begins to unlock

potentially huge sources of economic value. First and foremost, considering what

customers value and how they prefer to interact shapes the way we think of and

engage with them.

Auto manufacturers, for example, are contending with customer preferences in a way

they could not have foreseen a decade ago. Multiple trends are influencing not only

what customers want in a vehicle, but also how they buy and use it. Megatrends such

as wealth concentration, urbanization and environmental concerns are transforming

attitudes about car ownership. In some areas of Paris, for instance, it is considered

uncool to own a car.

Even traditionally staid industries such as insurance are being entirely reinvented to

reflect customer needs, offering products that are simpler to understand and easier

to buy. Insurance company Lemonade’s artificial intelligence bot Maya automatically

configures your policy. The company processes claims in seconds rather than weeks.

Significantly, Lemonade adds an element of what it calls “social good” to its business

model, promising to cap its profits and return any excess to charitable causes of your

choice. This trust-based model reduces fraud and drives down the operational costs

of claims — leading to lower premiums.

Winners increasingly align and flex their corporate and business strategies based on

the dynamics of digital and invest more to keep ahead of the curve. Over 80 percent

of our survey respondents expected to increase investment in digital in the following

12 months, with nearly 75 percent expecting that investment to increase profits in the

subsequent 3 years. In prior analysis, we discovered that half of firms we interviewed

were looking to significantly overhaul their portfolio of technology partners in order

to better support digital transformation.

Winners increasingly align and flex their corporate and business strategies based on the dynamics of digital and invest more to keep ahead of the curve.

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Understanding what the right thing is for your customers informs an honest outside-

in analysis of the potential relevance of digital as well as the next big digital

transformation decision: what you intend to do about it.

How will you deliver value and differentiation?

Many enterprises understand the need to embrace uncertainty and complexity and

are increasingly building portfolios of both experimentation and optimization. Our

survey indicated that companies across industries, geographies and size groups

intend to greatly ramp up their efforts.

But exactly how they go about creating new value and differentiation depends

heavily on factors such as industry, size and location. Companies can derive value

from various aspects of digital transformation, including new, connected products or

services; digital marketing and sales; intelligent business process automation; and

supply chain transformation.

One global energy supplier’s first focus, for instance, has been to enhance the

efficiency of its operations. Uniper is providing a platform that can expand in

different directions, creating tools that help its distribution companies intelligently

manage the risk of balancing demand and supply. On the other hand, an oil and gas

giant with a different business model has to manage digital diversity ranging from its

exploration business to a retail operation that has more fuel stations than Starbucks

has coffee shops.

Company cultures have dictated whether companies tend to pioneer, look for first-

mover advantages or be fast followers. Now, however, the fast-follower strategy

seems risky. Markets are now being disrupted by newer, more agile digital entrants,

and traditional enterprises may not be able to respond quickly enough.

Regional cultures also influence strategy — companies based in developing regions in

particular are realizing that digitally enabling more of their business could help them

leapfrog their European and North American rivals.

A spectrum of potential digital plays emerges, including launching new brands and

diversification, acquiring new entrants, radically optimizing operations and even

partnering with traditional competitors. Ironically, digital platforms may open up a

flood of new entrants and make an industry less attractive, indicating it could be time

to gracefully exit.

Everything is possible, but not all at once. Successful enterprises develop a critical

perspective on where to play and how to win. They embrace a new culture of

continuous change, continually adapting their journeys and shaping an overall route

to value.

How can you best enable agility and innovation?

The route to transformation involves becoming more dynamic, building unity around

a shared purpose, generating energy and new ideas, and constantly evolving.

Dynamic enterprises continually sense and respond to the changing environment,

innovating and adapting at macro and micro levels and in real time. They break

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down traditional hierarchical command-and-control structures that stifle agility and

innovation through organization layers — and become flatter, more networked and

more focused on capability and collaboration.

Dynamic enterprises cultivate these five key attributes:

1. Laser focus on creating customer-first value via simple, intuitive and

compelling lifestyle and business experiences

2. Fluid, adaptive front offices with small, multiskilled business and technology

teams able to sense, respond and adapt to outside-in environmental change

3. Highly effective and efficient core operational processes supported by a

connected, intelligent, secure and fault-tolerant backbone

4. Robust back offices providing foundational stability and services that enable

flexibility in core and front-office execution

5. Operational and digital service platform integration based on next-generation

delivery and service management

In a dynamic enterprise, decision-making and value-creation responsibilities are more

distributed and ecosystem engagement is a core competency. Based on the right

digital metrics, the organization continuously reviews results, fails fast where it must,

learns quickly and adapts nimbly. After all, digital is not chaos.

A large insurance company, for example, has recognized that control needs to be

turned into trust and empowerment. To be fast and to create better outcomes, Zurich

is moving to a flatter organization, working together as global communities of experts

both within the company and throughout the partner ecosystem. The global insurer

is collaborating through strategic alliances, InsurTechs and startups to continue to

experiment with new opportunities.

The dynamic enterprise is built on a digital core — a set of adaptable capabilities

that deliver the expected value for both customers and the enterprise. The core

encompasses culture, people, processes, technology and data — underpinned by

next-generation delivery and service management.

A strong digital core is built around a nucleus of digital integration and the key

constructs of orchestration, intelligence and automation. It connects customers,

partners and employees, bringing information into the fabric of every interaction. It

features complex event detection, data exchange and applied learning, all within a

trusted, secure and robust operational framework. Critically, the digital core provides

the ability to scale new digital solutions and integrate them with existing mainstream

enterprise IT — avoiding further technology debt.

A multinational networking and telecommunications company, for example, has

established the cornerstone systems and data for its enterprise core: enterprise data,

processes that are common across the company and the connected information

for those processes. This foundation enables the company to provision new digital

platforms that people can use to innovate and scale.

If you’ve made the commitment to develop the foundational enablers for business

model innovation and agility, the next big decision is how to drive the necessary

culture of continuous change.

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What cultures do we need to infuse in our teams?

There may not be a worse digital epitaph than: “We failed due to political inertia.”

Seventy-two percent of our survey respondents agree that a change in culture is

necessary to digitally transform any organization.

Culture change, however, remains a topic that is difficult to quantify. Everybody

wants a cool culture where highly engaged employees deliver outstanding results

as part of high-performing teams. But what does that mean in the context of digital

transformation? Fortunately, digital culture is actually very tangible. It is the culture

of continuous change — new ways of thinking, behaving and working that require

us to unlearn a lot of what has gone before. Critical approaches in a digital culture

include:

• Focus relentlessly on customer value. This means having a passion for customer

outcomes and a less-myopic view of everything you do, proactively engaging with

customers to co-develop the brand.

• Adopt an entrepreneurial attitude that challenges accepted wisdom and

embraces new ideas. Governance is designed to clear out roadblocks rather

than create them. This spirit encourages bolder investments and digital business

moonshots.

• Create one plan for everyone’s benefit. A top-down approach creates a

congruent set of rewards based on customer outcomes and fosters a “one-team”

approach where personal politics have no place.

• Design for change. Elon Musk once observed that the problem with most large

enterprises is that the answer to every problem is a process. Organizations have to

unlearn some of this thinking and embrace new models for designing teams and

more flexible, task-oriented collaboration.

• Emphasize products over projects. Think roadmaps and flight plans where

change is part of the ongoing cost of business rather than traditional programs and

projects with fixed IT costs — a big shift for chief financial officers. Think dedicated,

cross-functional teams where resource management is an exception process rather

than the usual juggling act. Think of continuous delivery and operations where you

create just enough documentation, promote continuous communication, eliminate

unnecessary activities and reward reuse.

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• Embrace partners. Collaborate with others for a share of the economic profit

potential as opposed to perpetuating a zero-sum warfare culture. A philosophy

DXC calls “Connect and Grow” requires an ecosystem-player mind-set: new trust-

based partnering and cocreation skills, increased orchestration, and distributed

decision making that enables innovation at the edge.

• Create the right blend of business and technical skills. Many large enterprises’

business and IT functions are not as well integrated as they could be, perpetuating

division and prejudice. Driving new digital ways of working requires a doubling

down and high degree of literacy in both business and technology — fostering an

environment where data scientists, experience designers, creative technologists

and social marketing specialists work as one to create platforms that appeal to

consumers.

How will you orchestrate continuous change?

A digital-oriented culture of continuous change is a critical ingredient of successful

digital transformation and emphasizes a bias for action. Overanalyzing every option

didn’t always help in the past, and now companies may not have the luxury.

But how do you introduce the required cultural changes to create a more dynamic

enterprise while executing your digital strategy? Should you hothouse new ideas

and capabilities? Incubate within a selected business unit? Establish a shared digital

factory? Or go all-in and drive extensive business-unit change?

Traditional top-down digital transformation planning approaches are heavy on

upfront analysis and design, and low on risk tolerance or uncertainty. Organizational

boundaries often complicate and lengthen the time from strategy to execution. We

can overestimate results yet underestimate effort and expense. Bottom-up planning

does not promote the required unity either — it often dilutes strategic outcomes

through budget cuts, internal politics and/or discretionary spending.

A new digital change life cycle embraces real-world uncertainty, complexity and

risk — favoring action and increased customer engagement. It emphasizes four E’s:

Explore the big picture. Elaborate on concepts and solutions. Then scale to Execution,

all the time Evolving the enablers and our ecosystem of partners: delivery specialists,

platform players, go-to-market channels and more.

A playbook for digital transformation supports the culture of continuous change and

articulates how to successfully execute digitally enabled business change. Here are

some key elements:

Understand how the dynamics of digital affect the management of your

corporate strategy. Strategy must become increasingly fluid. You need a strong

sense of purpose and a roadmap for change that describes how the delivery of

core capabilities, competencies or assets realizes the desired outcomes. You must

frequently review these top-down plans based on business context, with a significant

emphasis on testing and experimentation. It isn’t the Wild West, though. Even

experiments are constrained by resources, time and results. Zombie projects that

never end must be killed off.

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The top-down approach promotes strategic unity. In addition, reallocating

resources and approaching CAPEX allocation and budgeting more dynamically

can drive significant savings from your current operations and promote successful

transformation.

Develop the capacity to manage continuous business change. Many enterprises

have already embraced the concept of a digital office. But this is not a program

office, a reporting function or where digital “sits.” The digital office has a strategic

mandate to orchestrate the overall portfolio of change and ideation, sensing and

responding to environmental events and driving continuous business change and

value.

The digital office acts as an investment steward, driving change through the digital

change life cycle and providing lean governance and assurance on key topics such

as information strategy, architecture and security. It drives the development of the

necessary transformation enablers and delivery capabilities, as well as helping to

foster talent, skills, teams, coaches, communities, knowledge and collaboration.

A key enabler is the emerging concept of a “digital business twin” — a digital model

of the proposed business environment that can test the implications of change.

Top-down management of strategy execution has been hard until now due to a

lack of tools to manage the complexity of an enterprise roadmap. A digital business

twin helps address this by linking product teams, finance, continuous delivery and

operations, and by leveraging modeling, visualization, machine learning and more.

Deliver continuous change and develop the enablers. In a dynamic enterprise,

delivery shifts from combined program and project approaches to focused product

approaches led by product owners seeking to minimize costs but maximize learning.

Product owners with end-to-end ownership of outcomes have influence, a strong

sense of purpose, and hybrid business and technology skills. Teams are agile,

self-managing and performance-oriented. They embrace the digital culture, use

iterative approaches, and emphasize transparency of information and continuous

communication.

Activate and nurture your partner network. A critical success factor in digital

transformation is the ability to activate or engage in appropriate ecosystems.

Partners can provide access to markets, innovations, technology skills, data or

enabling platforms. Ecosystem participation can come in many guises — from

orchestrator to simple supplier — but a clear value proposition and ability to

monetize ecosystem participation is vital. This context requires new approaches

to collaboration and engagement. Traditional supplier procurement models are no

longer appropriate.

Beyond ‘one and done’

After years of observing the impact of digital transformation happening around them,

business and technology leaders are now embarking on the most rapid, dramatic and

sophisticated pursuit of progress in decades.

If you’re among them, you’ve decided where to play and how to win, where you need

to experiment and test. You know which capabilities you need to deliver to increase

agility and innovation, and you’ve committed to the foundational investments in

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a new digital core. You’ve identified the core competencies of your new digital

culture and how these need to be implemented via a playbook for continuous

transformation.

You’re done — right? Wrong.

Destination Digital means constant change. It is not something you determine once

and are then done with. It’s something you do all the time.

Digital transformation depends on people, cultural change and investment. It can’t be

a headlong process. Yet digital adoption is progressing quickly; your competitors are

already looking for the next move.

Meaningful progress means making big digital decisions — the ones that can truly

help you achieve escape velocity. They include setting the direction of travel, making

key leadership decisions, managing key stakeholders, determining how to experiment

and test new customer journeys and capabilities, activating ecosystem participation,

measuring change, rapidly allocating funds, revising budgets and reducing legacy

investments where required.

Technology is an enabler, but it all starts with your customers, meeting their needs

and establishing the building blocks that allow them, their organizations and their

communities to realize their full potential.

Learn more at www.dxc.technology/digitaltransformation

About DXC Technology

As the world’s leading independent, end-to-end IT services company, DXC Technology (NYSE: DXC) leads digital transformations for clients by modernizing and integrating their mainstream IT, and by deploying digital solutions at scale to produce better business outcomes. The company’s technology independence, global talent, and extensive partner network enable 6,000 private and public-sector clients in 70 countries to thrive on change. DXC is a recognized leader in corporate responsibility. For more information, visit www.dxc.technology and explore thrive.dxc.technology, DXC’s digital destination for changemakers and innovators.

© 2019 DXC Technology Company. All rights reserved. June 2019

Get the insights that matter.www.dxc.technology/optin

Destination Digital means constant change. It is not something you determine once and are then done with. It’s something you do all the time.

About the author

Andy Sollis is a Digital Transformation Knowledge Manager

with DXC Technology. He has extensive experience helping

digitally-enabled business transformation with a specialization

in Customer Value Management. Over the course of his

career, he has worked in business development, consulting

and programme management capacities across multiple

regions, and industry sectors across the value chain. Sollis

is co-architect of the DXC Digital Transformation Playbook

which is applied to shape continuous digital transformation

partnerships with our clients.

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