1. Leading Digital Transformation
Harvard School of Public Health
February 1, 2017
Dr. George Westerman Principal Research Scientist
MIT Sloan Initiative on the Digital Economy @

2. For more info, see http://mitsloan.mit.edu/ide

4. Technology changes rapidly Organizations change much more slowly

5. Digital Transformation

6. Digital Masters, Not Digital Companies

7. Digital Masters excel on two dimensions
Digital Capability
The “What”
Customer experience
Operational processes
Business models
Digital Masters excel on two dimensions
Leadership Capability
The “How”
Vision
Engagement
Governance
Technology Leadership

8. The DNA of Digital Masters Fashionistas Digital Masters Beginners
Digital Capability
Fashionistas
Digital
Masters
The DNA
of Digital Masters
Leadership Capability
Beginners
Conservatives

9. Call Center + IT Systems: ERP, CRM, SCM
Service improvement
Advanced automation
Call Center + IT Systems: ERP, CRM, SCM

10. Digital Masters Outperform Their Peers
Digital Capability
Leadership Capability
REVENUE GENERATION
+6%
Basket of indicators:
Revenue/Employee, Fixed Asset Turnover
+9%
-10%
-4%
Digital Capability
Leadership Capability
PROFITABILITY
+26%
+9%
-24%
-11%
Basket of indicators:
EBIT Margin, Net Profit Margin
Note: Chart shows average 2012 performance difference for firms in each quadrant vs. average of all large public firms in the same industry for the 184 publicly-traded companies in our sample.

11. The DNA of Digital Masters The “What” The “What” The “What” The “How”
Digital Capability
The “What”
Customer experience
Operational processes
Business models
The “What”
Customer experience
Operational processes
Business models
The “What”
Customer experience
Operational processes
Business models
The DNA
of Digital Masters
Leadership Capability
The “How”
Vision
Engagement
Governance
Technology Leadership

12. Building Blocks of Digital Capability
Digital has informed and amplified customer expectations
Digital is removing traditional constraints in operations
Digital business models can reorder value chains and
create new opportunities
BUSINESS
MODEL
CUSTOMER
EXPERIENCE
OPERATIONS
Digitally-modified business
Customer understanding
Process digitization
New digital businesses
Top line growth
Worker enablement
Digital globalization
Integrated touch points
Performance management
DIGITAL PLATFORM

13. Digitally Transforming Customer Experience
CUSTOMER FOCUSED
Design customer experience
from the “outside-in”
DIGITAL
Increase reach & engagement with smart digital investment
SCIENTIFIC
Personalize targeting & experience through analytics
OMNI-CHANNEL
Seamlessly mesh the digital and physical experience
Digital is informing and amplifying customer expectations

14. Mobile-optimized web site.
“… recognized by peers for leading the casino industry in its efforts to track the spending habits of its gambling customers…”
Mobile-optimized web site.
Texpress: Text Check-in, bypass counter, get key at bell desk.
“Mobile Concierge” customized for each property.
Location-based promotions for inside and outside of the hotel
Fast-cycle, closed-loop learning customer-by-customer

15. Is this the future of healthcare?

16. Digital is removing constraints
Digitally
Transforming
Operational
Processes
Digital is removing constraints
of the pre-digital era
Paper
Location
Time
Coordination
Knowledge
Risk
Orchestrating
or AND
Unleashing
Controlling
Innovating
Standardizing
Empowering
Rethink
Your
Impossibilities

18. Core platform:
Kaiser Health Connect (Epic)
-- Initial rollout
-- Generation 2: cloud-based components and support staff.
-- “Be as easy as amazon”
Redesigning roles and workflows
-- Digital / interactions
-- Analytics-informed decisions
-- Care teams / roles
-- “For people recruited in the last years, it should be an expectation that you will work this way.”
Customer information
-- Online patient portal
-- Mobile app
-- Video
-- 70% of members active with digital channels
-- Half of all interactions by phone or digital
Extending the collaboration focused healthcare approach
-- Testing smart/connected home health devices
-- Examining appropriate balance of personalization and privacy
-- Helping patients understand financial implications of options

19. Digitally Transforming Business Models Challenge Your Business Model
Re-Inventing Industries
Substituting Products & Services
Digitally
Transforming
Business
Models
Crafting New Digital Businesses
Challenge Your
Business Model
Before
Someone Else
Does
Reconfiguring
Delivery Models
Rethinking
Value Propositions

22. Is this the future of healthcare?

23. “[T]echnology should really be invisible, it should go in the background. As a clinician, I should have technology feed me contextual information that is relevant so I can focus and have a conversation with the patient, and emphasize with the patient.
“In its current form, technology is an impediment because you are more focused with doing the task of documentation and ensuring that you put the right components in your notes so that the billing happens.
“…It was a big transformational change, so we purposely designed our systems to replicate the analog workflow. It was almost a necessary evil, but this is now where the opportunity lies. How do we leverage these digital assets to move to the next level of analytics and intelligent visualization?
Rasu Shrestha, UPMC

24. Building Blocks of Digital Capability
Digital has informed and amplified customer expectations
Digital is removing traditional constraints in operations
Digital business models can reorder value chains and
create new opportunities
BUSINESS
MODEL
CUSTOMER
EXPERIENCE
OPERATIONS
Digitally-modified business
Customer understanding
Process digitization
New digital businesses
Top line growth
Worker enablement
Digital globalization
Integrated touch points
Performance management
DIGITAL PLATFORM

25. Internal Collaboration
Social Media
Mobile Channels
Internal Collaboration
Process Digitization
Digital
Platform
Customer Experience
Analytics Capability
A strong
digital platform is essential for all successful digital transformation
© 2016 George Westerman

26. The DNA of Digital Masters
Digital Capability
The “What”
Customer experience
Operational processes
Business models
The DNA of Digital Masters
Leadership Capability
The “How”
Vision
Engagement
Governance
IT/Business Relations
The “How”
Vision
Engagement
Governance
IT/Business Relations

27. Building Blocks of Leadership Capability
Create a shared transformative vision of the digital future
Vision
Technology
Leadership
Governance
Engagement
Establish strong digital governance to steer the course
Engage employees
at scale to
make vision a reality
Link IT & business communities to build digital skills & transform technology platforms

29. Transformative Vision Must Come from the Top
Evolve The Vision Over Time
Identify Strategic Assets
Define A Clear Intent And Outcome
Create A Transformative Vision

30. Rethink Your Impossibilities
Assumptions from the pre-digital age may no longer be valid.
We’ve reached the limit of how far we can automate our operational processes
Our customers really value the human touch
Working as an integrated company will slow us down and stifle innovation.
Strategic assets that brought us success in the physical world will still be valuable in the digital economy
Source: George Westerman and Didier Bonnet, “Revamping Your Business Through Digital Transformation” Sloan Management Review, Spring 2015

31. Engagement Makes Vision a Reality
CONNECT THE ORGANIZATION
CREATE WIDER
CONVERSATIONS
FOSTER NEW WAYS OF WORKING
Wikis
Blogs
Social Networks
Knowledge sharing
Solving issues
Innovation contests
Executive modeling
Digital champions
Reverse mentoring

32. Digital Governance Steers the Course
KEY MECHANISMS
Chief Digital Officer
Digital liaisons
Shared digital units
Governance committees
DESIGN GOVERNANCE TO ENCOURAGE NECESSARY SHARING AND COORDINATION
SHARED DIGITAL UNIT
Unit/
Region/
Brand

33. Leadership capability
Digital capability
Social Media
Digital Product Design
Customized Manufacturing
FIRM-LEVEL DIGITAL TRANSFORMATION
Leadership capability
Digital Division: Nike Digital Sport
Digital marketing
Digital product innovation/design
Digital commerce (e/m-commerce)
Digital technologies (GPS, mobile, etc.)
Customer analytics

34. Engagement from the top:
Continuous communication from CEO on
-- vision:
-- “us vs them” without a “them”
-- continuous improvement
-- data-based decision-making and cost improvement
Extending the collaboration focused healthcare vision
-- Testing smart/connected home health devices
-- Examining appropriate balance of personalization and privacy
-- Helping patients understand financial implications of options
Governance
-- Central services, local usage choices
-- CxO level committees
-- Working groups on key topics
-- Innovation group
Changing IT:
-- Generation 2: cloud-based components and support staff.
-- “Be as easy as amazon”
-- Self-service apps
-- New services delivered in as little as one day

35. IT Business Relationship
Business and IT Leaders Drive Transformation Better Together Than They Do Apart
IT Business Relationship
New ways of working
Digital
Platform
Digital Skills
Rethinking infrastructure / replatforming
Digital IQ program

36. Leadership capability
Where are you on the 2x2?
Digital capability
Fashionistas
Many advanced digital features (such as social, mobile) in silos
No overarching vision
Underdeveloped coordination
Digital culture may exist in silos
Digital Masters
Transformative digital vision
Strong digital governance
Many digital initiatives generating business value in measurable ways
Strong digital culture
Leadership capability
Beginners
Management skeptical of the business value of advanced digital technologies
May be carrying out some experiments
Immature digital culture
Conservatives
Digital vision exists, but may be underdeveloped
Few advanced digital features, but possibly strong traditional capabilities
Strong governance across silos
Very cautious approach to innovation
Source: Westerman, G. Bonnet, D. and A. McAfee, Leading Digital: Turning Technology Into Business Transformation. Harvard Business Review Press 2014

37. The Leader’s Playbook for Digital Transformation
Assess your current state:
2x2, business performance, threats
Create your digital vision:
Engaging, transformative
Get started:
Pilot projects
Governance roles and mechanisms
Improving the platform
Building Digital skills and capabilities
Iterate:
What else can we do now?

38. Technology is the Endless Agitator of the Business World

39. Key Opportunities for Digital Transformation
DIGITAL CAPABILITY
Transform operations, not just customer experience
Change business models through new or integrated info
Fixing the digital platform is essential
LEADERSHIP CAPABILITY
Transformation must be led top-down
Establish digital governance (leaders, rules, resources)
This is not just an IT challenge. Must cross org boundaries.
Leadership Capability
OVERALL
Rethink your impossibilities
Get started now: Vision, quick wins, longer-term investments

40. MIT Initiative on the Digital Economy http://ide.mit.edu
Thank You! George Westerman,
MIT Initiative on the Digital Economy
Leading Digital: Turning Technology Into Business Transformation
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