Transcription
4/4/17Dr. Jeanne RossPrincipal Research Scientistjross@MIT.eduResearch TeamIna SebastianCynthia BeathKate MoloneyBCG’s Technology AdvantagePractice is a partner in thisresearch.This research was madepossible by the support of MITCISR sponsors and patrons.Crossroads 2017Turning Digital Disruptioninto Competitive AdvantageTuesday, 4 April 2017 2017 MIT Sloan CISRMIT CISR gratefully acknowledges the support and contributions of its Research Patrons & SponsorsPatronsAlixPartnersL&T Infotech LimitedMicrosoft CorporationPricewaterhouseCoopersAdvisory Services LLCSAS Institute Inc.Tata Consultancy Services LimitedSponsorsAetna, Inc.Akamai TechnologiesAllstate Insurance CompanyAMP Services Ltd.APM TerminalsAustralia and New ZealandBanking Group Ltd.Australia PostAustralian Taxation OfficeAustralianSuperB2W Companhia DigitalBanco do Brasil S.A.Bank of QueenslandBarclaysBB&TBBVABemis Company, Inc.Biogen, Inc.BNP ParibasBNY MellonThe Boston Consulting Group, Inc.BPBritish Telecommunications PLCCardinal Health, Inc.Caterpillar, Inc.CEMEXCharles Schwab & Co., Inc.Chevron CorporationCHRISTUS HealthCIBCCochlear LimitedCommonwealth Bank of AustraliaCSBSDBS Bank Ltd.DentaQuestDeutsche Telekom AGEl Corte InglésEquifax PlcExxonMobil Global Services CompanyFairfax MediaFerrovial Corporacion, S.A.Fidelity InvestmentsGeneral ElectricGenworth FinancialHitachi, Ltd.Howden Joinery Group plcHuawei Technologies Co., Ltd.Insurance Australia GroupJohnson & Johnson (J&J)LKK Health Products Group Ltd.LPL FinancialMcGraw-Hill EducationNational Australia Bank Ltd.NDISNew Zealand Government GCIO OfficeNielsenNomura Holdings, Inc.Nomura Research Institute, Ltd.Systems Consulting DivisionNordea BankNorthwestern MutualOrange S.A.Org. for Economic Cooperationand Development (OECD)Origin EnergyOwens CorningPepsiCo Inc.Principal Financial GroupProcter & GambleQBERaytheon CompanyReserve Bank of AustraliaRoyal Bank of CanadaRoyal PhilipsSabadell BankScentre GroupSchindler Digital Business AGSchneider Electric Industries SASStandard Bank GroupState Street Corp.Suncorp GroupSwinburne University of TechnologySydney WaterTD BankTeck Resources LimitedTenet HealthTetra PakTrinity HealthUSAAWestpac Banking CorporationWorld Bankcisr.mit.edu1
4/4/17SMACIT:Disruptingyour IT StrategyHow companiesare inclined torespond ig Data&AnalyticsStrategyInternet ofThingsStrategyBlockchainStrategy1Social,Mobile, Analytics,Cloud, Internet of Things2
4/4/17Your Digital StrategyBusiness strategy inspired by the capabilities ofpowerful, readily accessible technologies (likeSMACIT), intent on delivering unique, integratedbusiness capabilities in ways that will improve yourcustomers’ livesA great digital strategy provides a grand visionSchindler: Providing urban mobility solutionsKaiser Permanente: Patient-provider collaborationUSAA: Ensuring the financial security of the U.S. militaryBMW: Enabling individual mobilitySchneider Electric: Intelligent energy management solutions3
4/4/17Digital Characteristics: What does digital mless across all channels and consistentacross sales and servicing›Responsive to changes in customer expectations›Engages customer in a personalized relationship,differentiated by customer segments,supported by deep insights›Connects customer with related community when desired›Differentiated from customer experience at ated› Integrated to provide a customer solution› Responsive to emerging opportunities in the market› Enriched with meaningful information and insights› Seamlessly includes partner products and serviceas appropriate› Differentiated from competitor productsCompanies tend to have neither or both of these sets of outcomes.Source: Survey of 171 senior executives, August 2016.Digital Business tizedSolutionsOperationalBackboneSource: Ross, J.W., Sebastian, I.M. and Beath,C.M., “How to Develop a Great Digital Strategy,”Sloan Management Review, Winter 2017, pp. 7-9.Operational Excellence/Integration4
4/4/17Nordstrom Inc. focuses on customer engagement50% sales increase since 2009;10-year total shareholder returnof 14% (compared to 8% forS&P 500)Fashion specialty retailer known for outstanding customer serviceDisrupted by increasing popularity of online shopping options and discount retailers50% sales increase since 2009; 10-year total shareholder return of 14% (compared to 8% for S&P 500)OFF-PRICEDisrupted by increasingpopularity of online shoppingoptions and discount retailersFULL-PRICEFashion specialty retailer knownfor outstanding customerserviceSTORESONLINESource: Nordstrom Investor presentation, June 2015Nordstrom’s digital strategy is to provide aseamless, empowered customer experienceSource: Nordstrom Investor presentation, June 2015Operational backbone5
4/4/17Nordstrom is continuously enhancing customerengagementCreating customerexperience aroundPinterestRecognizingopportunities to sellthrough Instagram2011Source: Nordstrom Investor presentation, June 2015LEGO’s Digital Strategy:Developing the Builders of Tomorrow2015 RevenueUSD5.3B2015 ProfitUSD1.4BRevenue from newproducts (12 mos)60%Employees14,000Source: WWW.LEGO.com6
4/4/17To become digital, Lego’s platformsexpanded beyond operational excellenceOPTIMIZATIONINNOVATION(Operational Backbone)(Digital Services Platform)Supply ChainOpen IT 06200720082009201020112012201320142015Source: Andersen and Ross, “Transforming the LEGO Group for the Digital Economy,”MIT CISR Working Paper No. 407, March 2016.To succeed digitally,an operational backbone is not enoughAgility and tizedSolutionsOperational Excellence/IntegrationSource: Ross et al, “Designing Digital Organizations,”MIT CISR Working Paper No. 406, March 2016.7
4/4/17PeopleSoftERPPricingSystemBig oldcompaniesknow howto architect OrderSystemMaster DataMaster DataDeals, PricingInvoicesMaster Master DataCall Map the targetstate!Source: C.M. Beath and J.W. Ross,“PepsiAmericas: Building an Information SavvyCompany,” MIT CISR Working Paper, No. 378,February 2010.OrderManagementand mandPlanningA digital services platform grows organicallyThe digital services platform islike a coral reef› Constantly expanding set of APIenabled common businessservices› Analytics engines with growing setof data repositories anddashboards› Developer platform enabling anincreasing number of partnerofferings8
4/4/17How to achieve operational excellence, agility, andinnovativeness: Two management environmentsManagementObjectiveFundingQuality ControlDataArchitecturePrinciplesKey RolesKey ProcessesOperational BackboneDigital Services PlatformEfficiency, Scale, Security and ReliabilityInnovation and AgilityMajor project/program investmentsLocalized fundingby product/capability ownersRelease management;thorough Q&ATest, learn, enhance or discardSingle source of truthfor operating dataSensor/social/purchased data repositoriesSTP and workflow management;transparent view of dataIsolate common functionalityfrom productsProcess and data ownersProduct and service ownersRoadmapping; architecture reviewsCross-functional development;User-centered, iterative designSource: Ross, Sebastian, and Beath, “Digital Design: It’s a Journey,”MIT CISR Research Briefing,” Vol. XVI, No. 4, April 2016.Some first steps to competitive advantageCommit to adigital visionCreate criticaloperationalcapabilitiesExperimentwith digitalservicesAdopt andcontinuouslyimprove agilemethodologies9
Nordstrom Inc. focuses on customer engagement Fashion specialty retailer known for outstanding customer service Disrupted by increasing popularity of online shopping options and discount retailers 50% sales increase since 2009; 10-year total shareholder return of 14% (compared to 8% for S&P 500) Source:
