Future ready
- 1. #CIOEdge #ADAPT @ADAPT Ventures Global Guest Keynote Future Ready? The 4 pathways to digital business transformation Peter Weill Senior Research Scientist & Chairman
- 2. Future Ready?: Four Pathways to Digital Business Transformation Dr. Peter Weill Chairman and MIT Senior Research Scientist MIT Center for Information Systems Research (CISR)
- 3. Future Ready?: Four Pathways to Digital Business Transformation ADAPT CIO Edge Experience 2018 Dr. Peter Weill Chairman & MIT Senior Research Scientist pweill@mit.edu Research Team Dr. Stephanie L. Woerner Dr. Ina M. Sebastian Dr. Nick van der Meulen This research was made possible by the support of MIT CISR sponsors and patrons. © 2018 MIT Sloan CISR Wednesday, February 21, 2018 http://cisr.mit.edu/
- 4. MIT CISR gratefully acknowledges the support and contributions of its Research Patrons & Sponsors Patrons AlixPartners LLP Avanade BT Huawei Technologies Co., Ltd. ISACA LTI Microsoft Corporation PricewaterhouseCoopers Advisory Services LLC Sponsors Aetna, Inc. Akamai Technologies Allstate Insurance Company ANZ Banking Group Ltd. Australia Post Australian Securities & Investments Commission (ASIC) Australian Taxation Office AustralianSuper B2W Companhia Digital Banco Bradesco S.A. Banco do Brasil S.A. Bank of Queensland Barclays BBVA Bemis Company, Inc. Biogen, Inc. BMW Group BNP Paribas BNY Mellon The Boston Consulting Group, Inc. Canadian Imperial Bank of Commerce Cardinal Health, Inc. Caterpillar, Inc. CEMEX Chevron Corporation CHRISTUS Health Cochlear Limited Commonwealth Bank of Australia CPPIB CSBS DBS Bank Ltd. DentaQuest El Corte Inglés Equifax ExxonMobil Global Services Company Fairfax Media Ferrovial Corporacion, S.A. Fidelity Investments FrieslandCampina General Electric Genworth Financial GlaxoSmithKline Hanover Insurance Group Heineken International B.V. Hitachi, Ltd. Insurance Australia Group Iron Mountain Johnson & Johnson (J&J) LKK Health Products Group Ltd. LPL Financial Marathon Oil Corporation Markel Corporation McGraw-Hill Education National Australia Bank Ltd. National Disability Insurance Scheme New Zealand Government— GCIO Office Nielsen Nomura Holdings, Inc. Nomura Research Institute, Ltd. Nordea Bank Northwestern Mutual OCP S.A. Orange S.A. Org. for Economic Co-operation and Development (OECD) Origin Energy Owens Corning PepsiCo Inc. Pioneer Natural Resources USA Inc. Principal Financial Group Procter & Gamble QBE Raytheon Company Reserve Bank of Australia Royal Bank of Canada Scentre Group Schindler Digital Business AG Schneider Electric Industries SAS Standard Bank Group State Street Corp. Suncorp Group Swinburne University of Technology Sydney Water TD Bank, N.A. Teck Resources Limited Tenet Health Tetra Pak Trinity Health USAA Westpac Banking Corporation WestRock World Bank
- 5. MIT CISR Mission Founded in 1974 and grounded in the MIT tradition of rigorous field-based research, MIT CISR helps executives meet the challenge of leading dynamic, global, and information-intensive organizations. We provide the CIO and other digital leaders with insights on topics such as business complexity, data monetization, and the digital workplace. Through research, teaching, and events, the center stimulates interaction among MIT CISR Mission and 2017 & 2018 Research Project Agenda 2017 Research Projects What Types of Digital Business Transformations Require Organizational Surgery? AutoData 2.0: Answering Hard Questions About Your Customers Using Your Own Data and Comparables What Are the Different Types of Digital Ecosystem Drivers… and How to Get There Cognitive Computing: Developing the Human/Machine Partnership Designing Digital Organizations for Integration, Innovation, and Agility Exploring Blockchain Data Wrapping: How Companies Effectively Use Data to Create Competitive Products and Services Re-thinking Talent Management for Digital Orchestrating the Digital Workplace for Business Value Getting Digital Innovation Right 2018 Research Projects What is a Modular Producer and Why Should My Company Care? Partnering for a Successful Ecosystem Creating Competitive Products and Services with Analytics How to Make Analytics Your Business Investing in the Digital Workplace for Agile@Scale Becoming Digitally Savvy Creating a Digital Innovation Toolkit Managing Organizational Explosions During Digital Transformation Designed for Digital: How Established Companies Are Reinventing Themselves Digital Imperatives for Boards of Directors Mapping the Future IT Unit
- 6. Agenda 1. What is digital business transformation? 2. How much have firms transformed and how do they perform? 3. What are the pathways to transformation? Which is best? 4. Exercise: What is your pathway 5. Examples: Audi, BBVA, Flex, ING Direct, Nielsen, Schneider 6. Twists on the pathway
- 7. Stories of digital transformation—different pathways Make customers’ mobile the remote control for the bank Created a new company and now merging… Real time advice on which client ads are working for cross channel planning “Sketch to scale” with 8 centers of excellence (e.g., power, positioning) New company ABI - mobility services outside of car ownership Customer experience & cross selling, then automation… repeat
- 8. TransformedTraditional What is digital business transformation? Operational Efficiency Improving operating margin CustomerExperience IncreasingNPS TransformedTraditional Source: MIT CISR 2015 CIO Digital Disruption Survey (N=413 and 2016 interviews) and 2016 company interviews. Customer Experience=effectiveness on customer knowledge+omnichannel capability+customer experience projects+customer experience performance. Operational Efficiency=effectiveness on automation and employee productivity projects+% of core capabilities with APIs+cost of operations performance. Quadrants are splits at 2/3 along each axis. Future Ready • Both innovative and low cost • Great customer experience • Modular and agile • Data is a strategic asset • Ecosystems ready Integrated Experience • Customer gets an (simulated) integrated experience despite complex operations • Strong design and UX • Rich mobile experience including purchasing products Industrialized • Plug and play products/services • Service enabled ‘crown jewels’ • One best way to do each key task • Single source of truth Silos and Spaghetti • Product driven • Complex landscape of processes, systems and data • Perform via heroics
- 9. TransformedTraditional Future-ready firms have the best margins compared to competitors Operational Efficiency Improving operating margin CustomerExperience IncreasingNPS TransformedTraditional Source: MIT CISR 2015 CIO Digital Disruption Survey (N=413) and 2016 company interviews. Customer Experience=effectiveness on customer knowledge+ omnichannel capability+customer experience projects+customer experience performance. Operational Efficiency=effectiveness on automation and employee productivity projects+% of core capabilities with APIs+cost of operations performance. Quadrants are splits at 2/3 along each axis. Net Margin is relative to industry average. Future ReadyIntegrated Experience IndustrializedSilos and Spaghetti 15% % firms Percentage points above or below industry average net margin | -3.6 23% | 16.0 51% | -5.1 11% | 4.6
- 10. TransformedTraditional The four pathways to Future Ready Operational Efficiency Improving operating margin CustomerExperience IncreasingNPS TransformedTraditional The lines are the transformation pathways. Explosions are major changes in decision rights and organizational surgery. Quadrants are splits at 2/3 along each axis. Customer Experience= effectiveness on customer knowledge+ omnichannel capability+customer experience projects+customer experience performance. Operational Efficiency =effectiveness on automation and employee productivity projects+% of core capabilities with APIs+cost of operations performance. Sources: Quadrants are derived from data from MIT CISR 2015 CIO Digital Disruption Survey (N=413) and 2016 company interviews. Future ReadyIntegrated Experience IndustrializedSilos and Spaghetti • Customer gets an (simulated) integrated experience despite complex operations • Strong design and UX • Rich mobile experience including purchasing products • Both innovative and low cost • Great customer experience • Modular and agile • Data is a strategic asset • Ecosystems ready • Product driven • Complex landscape of processes, systems and data • Perform via heroics • Plug and play products/services • Service enabled ‘crown jewels’ • One best way to do each key task • Single source of truth 2 4 3 1
- 11. Discussion questions Which pathway(s) are you on and what percent of your transformation is complete? Please prepare a one- sentence summary to share. What is the key lesson you have learned?
- 12. TransformedTraditional The four pathways to Future Ready Operational Efficiency Improving operating margin CustomerExperience IncreasingNPS TransformedTraditional The lines are the transformation pathways. 5% of firms have not yet started and 2% are not transforming Source of quadrants: MIT CISR 2015 CIO Digital Disruption Survey (N=413) and over fifty conversations with executives in 2016 about their goals for digital business transformation. Source of transformation pathways (lines): MIT CISR 2017 Digital Pathways Survey (N=400). Explosions represent significant organizational disruption such as changes in decision rights. Future ReadyIntegrated Experience IndustrializedSilos and Spaghetti 4 18% 41% 20% 14% 3 1 234% 38% 33% 48% % complete
- 13. The four pathways to transformation (Global and Australia) Source: MIT CISR 2017 Digital Pathways Survey (N=400) and February 2018 ADAPT Survey (N=103). 5% (Aus 5%) of firms have not yet started and 2% (Aus 2%) are not transforming Pathway Global % Complete Australia % Complete Operational Excellence New Organization Customer Experience Stair Steps 20% 41% 18% 14% 15% 52% 15% 11% 33% 34% 38% 48% 19% 26% 26% 37%
- 14. Digital business transformation in Australia Source: February 2018 ADAPT Survey (N=103) and MIT CISR 2017 Digital Pathways Survey (N=400). 5% of firms have not yet started and 2% are not transforming. Radicalness is measured on a 5-point scale (1=No change to 5=Significant enterprise-wide change). Effectiveness is measured on a 4-point scale (1=Not effective to 4=Effective). Differences between the MIT CISR global survey and the ADAPT survey are noted when they are +/-5% or greater. *Automation was not measured on the MIT CISR survey . Pathway Australia % Complete Radicalness Effectiveness Operational Excellence New Organization Customer Experience Stair Steps 15% 52% 15% 11% 19% 26% 26% 37% 58% 70% 75% 80% 58% 80% 68% 86% % Automation in 2020* 38% 35% 37% 51% Below the global average Above the global average
- 16. Explosions and results at BBVA Source: P. Weill, S.L. Woerner, Future Ready? Pick Your Pathway for Digital Business Transformation, MIT CISR Research Briefing, Vol. XVII, No. 9, September 2017. Decision Rights Need the right people in key 5 or 6 positions, e.g., customer experience Must get entire organization onboard New Ways of Working 200+ agile teams Mobile is remote control for the 71M customers 25% of revenues are digital Amplify customer voice (NPS up 20 points) Organizational Surgery New management structure separating “Execution and Performance from New Core Competencies” (e.g., Engineering) Platform Mindset Replace spaghetti with scalable, standardized platforms that service-enable the ‘crown jewels’ Internal and external API initiative “World’s best banking app” (90% of products)
- 17. Choose your pathway(s) to Future Ready Choose a Pathway 1. Where are you today? What is the digital disruption threat level? 2. Path 1 if your customer experience is ok and threat is not high. 3. Can’t wait to improve your customer experience or new scary competitors. Path 2. 4. Can’t wait to improve customer experience but a few initiatives will make a big difference (e.g., a great app). Start with those and then focus on operations and repeat in small steps. Path 3. 5. High threat and can’t see a way to change the culture, customer experience and operations fast enough. Path 4. And manage the explosions
- 18. Thank you