Organisations from a range of sectors are successfully becoming "digital" and are reaping the rewards of this transformation. In this interview with Didier Bonnet (@didiebon), I investigate how these industry leaders are shaping and executing their digital visions to achieve greater success.
Didier has been working with MIT since 2009 to research how global organisations are managing - and benefiting from - digital transformation. Executives from 391 large global businesses were surveyed to gather benchmarks on digital practices. Didier is the Global Head of Practices at Capgemini Consulting and recently published the paper "The Vision Thing: Developing a Transformative Digital Vision".
David: For those who have yet to read your research, could you define exactly what a "digital vision" is?
Didier: Let me give you some background. When we started talking to companies that were succeeding at digital transformation one thing became very clear. Digital leaders had a very focussed vision. In all industries we studied, we found digital leaders, the people at the top - be it CEOs, CIOs or CDOs - those who were leading the transformation, were all able to clearly articulate their digital vision.
Everyone talks about vision, but it's not very well defined. So we attempted to understand what constitutes a good vision for these people. There's a lot of talk online about whether it is a digital strategy, a vision or something else. Actually what it came down to was that people were using digital, not as a strategy in itself, but as a filter through which they would implement their strategy better, faster, and cheaper.
The vision that they came up with was helping them to focus the organization on what they were trying to do. The next thing we wanted to understand was how do you craft a vision, what does it look like, and how do you use it?
We saw lots of very generic vision statements such as "We're going to be the most digital company" in manufacturing or in fashion. This generic vision really didn't help the organisation to focus at all. Whereas, the digital leaders were very clear about where they wanted to use digital technologies to guide the organisation.
The vision was either focused around the customer experience, like Burberry. So they would say we want to have an integrated experience across all our channels; mobile, social, stores and so on. Alternatively it could be very operational, like Proctor and Gamble, in the early days of its transformation. Focusing on creating some homogenisation of their global processes. Finally, the vision can centre around the business model. For instance, Boeing saw that the internet of things is a big opportunity because sensors are everywhere. But then they began to ask "how do we capture that as a company, how do we make use of the data?"
The second part to our research was to understand what constitutes a transformative vision. Very often people would say we're going to use digital to make our processes more efficient. But it ends up with fairly incremental improvements. A transformative type vision involves much more radical change. To give an example, there was an insurance company we talked to where they were really sticking technology in an existing process to achieve incremental gains. Whereas some other company roughly in the same area had started to completely revamp the way you sell insurance and equipped the front line sales people with tablets. They were starting with a blank piece of paper and asking what could the technology actually do to make their processes much more efficient. This is much more transformative in nature and leads to greater benefits.
So the first part of the vision was its focus on customer, operations, business model, or a combination of these. The second element was this notion of whether the vision is transformative or incremental? The final point of our research was to ask how they crafted the vision.
What we found was that good visions encompass both an intent and an outcome. So the intent was to have in integrated channel experience. The outcome would be that every customer, wherever they are in the world can access Burberry and have the same experience whether they're in the shops, online or on social media.
David: So in terms of the actual communication of that vision then, are people putting this into documents? I've seen a hundred page documents which try and set out of a digital vision. Typically they end up being filed away and never used.
Didier: What we found was when it was simple to understand, very focused, and when it was broadcast repeatedly the vision worked. People say that you cannot over-communicate, this is also true in a digital world. And, you are able to use technology to do it at scale. We found in most of the digital leaders [or Digiratis] that when you spoke to people three or four levels down in the organization, they understood what the vision was. That's the goal. To have everyone understand the vision.
This then helped them to make investment decisions. If all you're trying to integrate is your channel, they could assess whether an element of change in a process is a priority? If the answer was "no, it doesn't influence my integration of channel", they knew to de-prioritise it. So you can then prioritise better, as well as enriching the vision by making it much more operational.
Communication of vision is really important because we identified a marked difference between the Digiratis and the other segments. In the Digirati organisations the staff two levels down were clear that the leadership shared the vision constantly. It was like a drumming sound, every speech they made, every video you see, the vision's repeated and communicated. And I think that's very effective and it's not specific to digital. It's very important to keep the organisation engaged on the vision.
David: You've used the term Digirati a few times. For those of who are uninitated with the term, what/who are the Digirati?
Didier: We started by looking at what constitutes digital mastery, so people who are good at doing digital transformation. We found two dimensions. One, was what we call digital intensity, which is a measure of how much digital technology is being adopted by the organisation.
Having digital technology was not enough, the second dimension that made Digiratis, was how they transformed their organisations (transformation intensity). Vision is one part; have they got a clear vision that is well communicated and so on? There was also a lot of focus on governance and how the organization moves in sync. Finally we included the coordination around IT and the business, and the engagement of people carrying out that transformation Essentially they are the soft skills of transformation.
If you successfully combine the investment into the technology and the soft skills; that's what makes a leader. Digirati is just a term that we developed, although you can call them digital leaders or digital masters.
David: If Digirati are the winners; the Beginners segment are the strugglers. In terms of people who are failing to harness digital, what are they to do next in terms of becoming Digirati? What's the process?
Didier: So Beginners are to some extent, not in the worst position. That is as long as you realize that you are a Beginner and know the particular path you want to take.
Burberry started as a beginner in 2006 and moved very quickly to Digirati. They wanted to become a digital organisation very quickly. However a lot of people go through a more conservative approach. This is defined as doing something extremely well in both dimensions, but in a very limited area. So it could be the supply chain guy saying we're going to automate our supply chain end-to-end. It doesn't permeate the rest of the organization, it just stays in supply chain. Their task is to convince senior management to create momentum so you can do it across the rest of the organization.
The really interesting model, where we see people to some extent failing more, is the one we call Fashionistas. These are the people that do a lot with digital already. They invest everywhere. You've got mobile apps; you've got new websites; you've got ecommerce and collaboration platforms. You've got everything being invested in various business units or brands, but nothing that is coordinated.
The difficulty is that it's a little bit like advertising in that 50% is probably good, 50% is probably wasted, and you don't know which. Also you can never get the return on your investment, because you cannot calculate investment across the various silos of the organization. For example, we saw banks that had seven or eight mobile apps that were doing roughly the same thing but they developed one in Australia, the other one in America, and a third in Europe. Different platforms, different technology, and they didn't communicate with each other. There was no learning on best practice.
So that's probably the most difficult place to be because first you have to rationalise, put a very clear vision around what you're trying to do in an effort to re-centre.
David: So you're trying to say that the Beginners are almost in a better place than some of the Fashionistas?
Didier: To some extent, yes. I think the Beginners have got to move fast if they want to get to a leadership position, but you're not encumbered with any legacy. The difficulty for Fashionistas is that you have to tell people to stop doing things, and that's always hard in an organization. And the reason why it's important is, when we computed the numbers on profitability, we found that the profitability gap between Digirati and Fashionistas was enormous.
Digiratis were 26% more profitable. Part of the reason why they're more profitable is because of this soft skills (governance specifically). So in other words, if I invest X amounts of pounds into one particular app, lets make sure we roll it out across all of the organization, a different division, so everybody benefits from that investment. Clearly, your return on investment will be much better.
David: One of the things that fascinated me in the report was the case of Boeing and the digital airline. Tell me some more about that.
Didier: Okay, Boeing is interesting because their vision was to create the first "digital airline". It appears at face value to be a very operational statement. If you look at Boeing further, they're one of these companies where the internet of things is going to have a big impact because sensors are everywhere in airplanes. They then start to work on envisioning "what could this data mean when we get it back into Boeing from engines and thousands upon thousands of pieces of equipment" and then they ask "how can we monetise this data and how can we create new business around that?" Boeing went from a very operational vision, to defining what the next business model is going to look like. That's very powerful and very mature for a company.
David: It shows the stages as well.
Didier: And it's one of the points we make about vision, some companies where the industry is slightly more stable can have a vision that's very lasting. Asian Paints, for example, has a very clear vision that lasted and drove the company through various stages of evolution. Other industries are moving so fast that you need to revamp your vision to some extent, to iterate your vision, as you learn more from your operation, as the competition changes and so on. This notion of evolving the vision, is important. Not every day, but you need to evolve as the environment changes.
David: Is this move to digital happening in specific industry sectors? Or are you seeing that there are some industries that are very behind the curve such as mining?
Didier: Digital transformation's happening in every industry we looked at, which is one of the fascinating things we found. Before starting we'd assumed that there would be some differences by sector, but the key findings were that there are digital leaders in every sector who are outperforming their peers. Codelco is a Chilean, Government-owned mining company. They do copper extraction, and you wouldn't think that this is a starting place for digital leadership, and yet the company's doing tremendously using digital. The answer is you can have digital leadership, if you want to, in any industry.
Having said that, there are industries that are motoring faster than others. Some are obvious like high-tech. Cisco's been doing this kind of stuff for years, so we kind of anticipated that. Industries that are moving fast right now are retail, and banking. A few conservative industries like insurance are starting to move extremely fast into the digital world. Utilities are a bit more conservative, but they are starting to move. Manufacturing is still in the Beginner segment for most of them, but manufacturing is such a broad sector. Life sciences we found to be lagging a little bit in digital.
David: We talked about organisations being conservative in their approach. Is speed of transformation a big factor factor in achieving success?
Didier: It depends. One of the things I'm careful about is that a lot of the stuff you read in newspapers states “you have to go digital immediately or die”. The truth is it's not that black and white, you have to decide at what pace you change. If you're in a highly disrupted competitive environment, you have to move extremely fast. To take an extreme example, I worked in music for a long time. If you don't move in music, you die. The whole industry probably moved too late.
If you're in insurance today, or in some element of manufacturing, you can probably decide on your pace, and I think it's really important as part of your digital transformation to control your pace. This is based on what your industry dictates, your competitors, your customers, and the ability of your organization to change.
You also have customers that force the pace of change. One of the reasons that retail is moving pretty fast and banking is moving pretty fast is that customers are demanding that they be served digitally, because that's what they use every day.
So it depends on these things, but I wouldn't say that everyone has got to move at a hundred miles an hour today. There are industries where you need to be faster, and there are others where you can take a little bit longer. What's important to note is that we found that there is a digital leader in every industry that we studied. This means that somebody in your sector is getting a 26% profitability advantage year on year. Doing nothing for a few years or taking a wait and see position won't lead you to a leadership position soon.
Transforming any organisation digitally takes time. It's not a six months exercise, so you have to plan for that and start now at the right pace.
David: In terms of the starting point then, if I'm in the Beginner or Fashionista segment as an organisation, and I want to move to become a Digirati, what's my first step in digital vision setting?
Didier: The first step is exactly that. It's an awareness of what digital technology is going to do for business. Not necessarily understanding technology, but understanding what the performance implications are for businesses. Where are the financial gains and the productivity benefits you can expect? There's a whole awareness phase that I see happening with my clients. Sometimes boards, (other than the CIO who obviously will know about technology) are not so switched on to new digital innovations. So you need to get people on board with what this transformation really means for the business and the operations.
The second part is really trying to understand what is my starting point. Am I starting from zero, or am I actually a fashionista? Because there's loads happening in the various business units that I didn't know about. Let’s capture that information and discover what the initiatives are. So there's this stage of understanding your own digital maturity, and your starting point.
The last stage is to craft a vision which is focused enough that you can start to exert change. So it's clear what you are really trying to do. Being digital for digital's sake doesn't mean much. Are we moving because we've got tremendous customer pressure as they are now wanting to shop on their mobile phone? Or are we moving because our main competitor is 22% cheaper on their processes and on their delivery and therefore we have to put more digital stuff into our operations to get a cost advantage?
That visioning bit is what really drives the next step which is, let’s put in a program that starts changing customer experience and operations. So those would be three things; the awareness of your understanding and your positioning; your starting point and your assets and so on; and then the visioning. And when I say visioning, it's also putting some focus in terms of your intervention.
David: In terms then of who owns that vision, there's a lot of debate at the moment. Is it the CEO, CMO, CIO, CDO, CCO? The list keeps on growing.
Didier: First of all, there are cases like Burberry where it was a CEO. In the case of Codelco it was actually the CIO who was driving the vision. Asian Paints, the CIO was also the strategy director, and the CDO to some extent. I would say is that it doesn't matter who is in charge, it matters more how you communicate and how you allow the team to execute the vision. I know right now the debate is whether it should be the CDO or CIO and I don't think it really matters that much, as long as it's very clear who's leading, who's in charge. That is as long as the rest of the leadership team are supportive and encouraging everyone to follow the vision.
David: The final question is for any cynics who may be reading this article. Consulting firms have a long standing criticism of selling an idea or a concept that is so elusive to get to that it won't deliver shareholder value or business value to customers. What would your response be to people who are digital cynics?
Didier: We get that a lot. People saying, "Is that just another type of ecommerce, or is that just another internet bubble, or is it that or the other?" The fact is, I firmly believe that we're looking at a new phase of managerial innovation driven by digital technology. And, it is going to accelerate and be long lasting. In some of the early papers we talked about this being as big as electrification. I do believe that is the case.
I want to be careful in saying that because it doesn't happen in a couple years. Electrification happened over decades and it'll be the same with digital. But I think companies have to be prepared these days, because what's happening is really changing the fundamentals of how we run businesses. Whether it's at the customer end or at the operational end - or the way people work.
If you put all that together – plus the data we have gathered today - it clearly shows that companies that actually embrace digital get more profits and are better valued by the market.
Robert Solow said back in the 90s "you can see the computer age everywhere but in the productivity statistics". Ten years later, you see this huge jump. I think we're probably going to see the same thing with digital. It will take time for the real benefit to come through in the productivity statistics at the national level. From what I've seen from all the economists who are spending time looking at the data from MIT and the work I do with clients, this is a trend that's going to accelerate.
The reason is that when compared to what we saw in the dot-com-bubble, is that it was all about technology. It was using the internet to do online stuff, ecommerce, selling, showing. Today, many technologies have matured at the same time, so cloud, analytics, mobile, social, smart devices, sensors etc. All this is really going to accelerate tremendously over the next few years, and that's why when I coach our clients, I say, "get prepared now with the technology that's available today, because what's coming up in the next few years is going to be exponential in terms of what you can do with it as an organization." Think about robotics, artificial intelligence and so on, we’re only seeing the tip of the iceberg.
But, again for me the focus should not be on the technology itself, but on the fantastic potential that it creates to run our businesses more efficiently, more globally, more data-driven etc. It's going to be radically different and exciting.
Didier Bonnet was interviewed by David Sealey, a blogger on digital business. David also works for Capgemini as a marketing technology consultant. A full copy of the report can be downloaded at: The Vision Thing: Developing a Transformative Digital Vision.