How to Capitalize on Disruption

Transcription

1 webinar summary How to Capitalize on Disruption Featuring Jeanne Ross October 12, 2017 sponsored by

2 webinar summary How to Capitalize on Disruption Presenter: Jeanne Ross, Principal Research Scientist, Center for Information Systems Research (CISR), MIT Sloan School of Management Moderator: Angelia Herrin, Editor, Special Projects and Research, Harvard Business Review Overview Companies around the world anticipate massive changes over the next five years as digital permeates all aspects of their business, according to a new global survey by Harvard Business Review Analytic Services. Business leaders expect the pressure of digital disruption to intensify, and they are worried their organizations aren t ready to meet the challenge. For four years, the Center for Information Systems Research (CISR) at MIT has been studying how companies design themselves to succeed in the digital economy. CISR has identified best practices that include developing an operational backbone, creating a digital offerings platform, and adopting an empower and partner philosophy. For companies that aren t ready to make large-scale organizational changes, pilot projects are a proven way to begin the transformation to digital and digitized Context Jeanne Ross discussed how to choose the right digital strategy and lead change through the organization. She highlighted the importance of cross-functional teams, as well as the need to build agility into new systems. Key Takeaways Successful companies are designing themselves to be digital and digitized. Companies are striving to succeed in today s digital economy. As they navigate these waters, there are two terms people find confusing: 1. Digitization. This relates to operational success. Digitization instills discipline around core transactions and back office processes. 2

3 2. Digital. This relates to rapid business innovation. Digital companies define a value proposition that is inspired by the capabilities of digital technologies such as social, mobile, analytics, cloud, and the Internet of Things (IoT). Both digital and digitization are requirements for business success. The transformation to digitization requires a shift from business silos to an operational backbone. Operational backbones often begin with an ERP or CRM system, but companies find that these don t fundamentally change the organization s processes. To change processes, organizations must discipline themselves. Unfortunately, everyone wants new technology, but no one wants to impose discipline. Among established companies: 28% have real value-adding operational backbones and are digitized 40% are making real progress 32% haven t started The goal is to move from silos to end-to-end transaction processing by implementing standard processes around back office functions. Figure 1: The Transformation to Digitized To become digital, companies must rethink their business processes. They must decide what value proposition to create in a world where digital technologies have eliminated constraints. Digital offerings are information-enriched customer solutions delivered as seamless, personalized customer experiences. Simply putting a mobile front end on a customer interaction doesn t make a company digital. Figure 2: Designing Digital Offerings 3

4 This is by far the most exciting time to be thinking about the design of your company as we rely more on technology to work with people and processes and to respond to customer demands. Companies will not succeed by accident. They will succeed by designing themselves to be digital. Jeanne Ross Schneider Electric illustrates the challenge of defining and evolving digital offerings. Schneider Electric has been in business for around 100 years. It started selling electrical equipment. As the company has recognized the power of analytics and the IoT, however, it has started moving into automation of electrical management services. Schneider Electric is exploring how to enhance customers worlds by bringing data together from numerous sensors and managing energy more efficiently. This evolution hasn t been easy. It requires a shift from selling products to selling energy management services. This means selling to different decision makers at different price points. Schneider Electric has had to change its customers mindsets and its entire organization to deliver what customers want and are willing to pay for. Figure 3: Schneider Electric s Evolution to Digital Offerings To thrive in the digital economy, companies need both an operational backbone and a digital offerings platform. The first step to succeeding in today s digital economy is building an operational backbone. Without this, companies cannot play in the digital game. A good first step is to map the target state for the organization. This is a high-level view of the basics of doing business, and the management team must agree on it. The map of the target state is valuable because it highlights where companies are struggling and what interventions would make the biggest difference. 4

5 Figure 4: PepsiAmericas Operational Backbone Map Having an operational backbone alone, however, isn t enough. Companies also need a digital offerings platform. This takes a company from digitized to digital. A digital offerings platform grows organically. It starts with understanding the company s offerings. The next step is to build the technology and process bases, as well as the database, that are needed to deliver those offerings. Digital offering platforms grow organically like a coral reef. They are composed of: A constantly expanding set of API-enabled common business services Analytics engines with a growing set of data repositories and dashboards A developer platform which enables an increasing number of partners offerings MIT CISR research has found that just 5% of established companies have a digital offerings platform in use. Figure 5: The Two Platforms Needed to Support Digital 5

6 One of the challenges of building and maintaining both an operational backbone and a digital offerings platform is that organizations must develop diverse skills across areas like funding, quality control, data, key roles, and key processes. Digital offerings platforms require a completely different approach to management and organizational design. Figure 6: Skills Required for Operational Backbones and Digital Offerings Platforms The digital economy requires organizations to architect for speed and innovation. In the pre-digital economy, organizations architected for efficiency using a divide and conquer philosophy. In contrast, the digital economy requires organizations to architect for speed and innovation, using an empower and partner philosophy. A major organizational challenge is scaling in an agile way. Spotify has taken a cross-functional approach to empowering every product owner to succeed. The company has created squads that are responsible for products. These groups are very organic. They reshape often, but also have chapters and guilds that enable them to work across squads. Squads are grouped into larger teams called tribes. Figure 7: Spotify s Organizational Structure 6

7 Spotify also has established a set of principles that underpin this new way of working: Mission, not structure Metrics, not standards Experiments, not directives Trust, not control Transparency, not need to know Collaboration, not hierarchy Continuous release, not big projects Products, not projects These same concepts can be adopted by larger, established companies to work in a more agile way. The key steps to becoming digital are defining digital offerings, establishing operational capabilities, building reusable services, and constantly redesigning the business. If organizations don t take proactive steps to become digital, they will confuse employees, become consumed with fire-fighting, create non-value-adding complexity, and become obsolete. Jeanne Ross Other Important Points Demos and Pilots. For companies that aren t ready for a complete digital redesign, demo projects or pilots can be valuable. The goal of a pilot should be to learn and accelerate, rather than make money. Start with a small concept. It is a low-investment, high-payback way to get going. Artificial Intelligence. Ross believes AI is overhyped. It will become important over time, but adoption will be slow because AI forces organizations to rethink their processes and imagine how to use intelligent algorithms to make them better. The use of AI in the business world will be similar to the ERP adoption cycle. 7

8 Jeanne W. Ross directs and conducts academic research that targets the challenges of senior level executives at CISR s more than 80 global sponsor companies. She studies how firms develop competitive advantage through the implementation and reuse of digitized platforms. Her work has appeared in major practitioner and academic journals, including MIT Sloan Management Review, Harvard Business Review, The Wall Street Journal, MISQ Executive, MIS Quarterly, the Journal of Management Information Systems, IBM Systems Journal, and CIO Magazine. She is co-author of three books: IT Savvy: What Top Executives Must Know to Go from Pain to Gain (2009), Enterprise Architecture as Strategy: Creating a Foundation for Business Execution (2006) through Harvard Business School Press, and IT Governance: How Top Performers Manage IT Decision Rights for Superior Results (2004). She has served on the faculty of customized courses for a number of major corporations, including PepsiCo, McKinsey, General Electric, TRW, Pfizer, News Corporation, Commonwealth Bank of Australia, IBM, and Credit Suisse. She regularly appears as a speaker at major conferences for IT executives. Jeanne earned a BA at the University of Illinois, an MBA from The Wharton School at the University of Pennsylvania, and a PhD in Management Information Systems from the University of Wisconsin Milwaukee. She is a founding senior editor and former editor in chief of MIS Quarterly Executive. Angelia Herrin is the editor for special projects and research at Harvard Business Review. Her journalism experience spans 25 years, primarily with Knight-Ridder newspapers and USA TODAY, where she was the Washington editor. She won the Knight Fellowship in Professional Journalism at Stanford University in She has taught journalism at the University of Maryland and Harvard University. Prior to coming to HBR, Angelia was the vice president for content at womenconnect. com, a website focused on women business owners and executives. 8