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To deliver on a digital value proposition, companies must fundamentally re-architect. In other words, they must redesign their processes, systems, roles, data, and habits to allow them to iteratively create, enhance, an replace digital offerings. This briefing examines how Royal Philips is transforming its value proposition - and its entire company - to seize the opportunities presented by digital technologies.
As "the most international company on earth", DHL Express promised to deliver packages between almost any pair of countries within a defined time-frame. To fulfill this promise, the company had introduced a set of global business and technology standards. While standardization had many advantages (improving service for multinational customers, faster response to changes in import/export regulations, sharing of best practices etc.), it created impediments to local innovation and responsiveness in DHL Express' network of 220 countries/territories. Reconciling standardization-innovation tradeoffs is a critical management issue for global companies in the digital economy.
This case describes one large, successful company's approach to the tradeoff of standardization versus innovation.
In 2013, Royal Philips was two years into a daunting transformation. Following declining financial performance, CEO Frans van Houten aimed to turn the Dutch icon into a "high-performing Company" by 2017. This case study examines the challenges of the business-driven IT transformation at Royal Philips, a diversified technology company. The case discusses three crucial issues. First, the case reflects on Philips’ aim at creating value from combining locally relevant products and services while also leveraging its global scale and scope. Rewarded and unrewarded business complexity is analyzed. Second, the case identifies the need to design and align multiple elements of an enterprise (organizational, cultural, technical) to balance local responsiveness with global scale. Third, the case explains the role of IT (as an asset instead of a liability) in Philips’ transformation and discusses the new IT landscape with its digital platforms, and the new practices to create effective business-IT partnerships.
By 2019, German-based Kärcher, "the world's leading provider of cleaning technology", hat turned its professional cleaning devices into digital offerings. The data generated by these connected cleaning devices formed a key ingredient in the company's ongoing strategic shift in its B2B business: Kärcher was transforming from a seller of cleaning devices to a provider of consulting services in order to help professional cleaning companies improve their cleaning processes.
The case illustrates how the company learned to generate value from digital offerings. And it demonstrates how a family-owned company transformed its organization in order to be able to more effectively develop and provide digital offerings, while adding roles and developing technology platforms, as well as changing structures and ways of working.
The modern industrial corporation encompasses a myriad of different software applications, each of which must work in concert to deliver functionality to end-users. However, the increasingly complex and dynamic nature of competition in today’s product-markets dictates that this software portfolio be continually evolved and adapted, in order to meet new business challenges. This ability – to rapidly update, improve, remove, replace, and reimagine the software applications that underpin a firm’s competitive position – is at the heart of what has been called IT agility. Unfortunately, little work has examined the antecedents of IT agility, with respect to the choices a firm makes when designing its “Software Portfolio Architecture.”
We address this gap in the literature by exploring the relationship between software portfolio architecture and IT agility at the level of the individual applications in the architecture. In particular, we draw from modular systems theory to develop a series of hypotheses about how different types of coupling impact the ability to update, remove or replace the software applications in a firm’s portfolio. We test our hypotheses using longitudinal data from a large financial services firm, comprising over 1,000 applications and over 3,000 dependencies between them. Our methods allow us to disentangle the effects of different types and levels of coupling.
Our analysis reveals that applications with higher levels of coupling cost more to update, are harder to remove, and are harder to replace, than those with lower coupling. The measures of coupling that best explain differences in IT agility include all indirect dependencies between software applications (i.e., they include coupling and dependency relationships that are not easily visible to the system architect). Our results reveal the critical importance of software portfolio design decisions, in developing a portfolio of applications that can evolve and adapt over time.
The digital economy poses existential threats to — and game-changing opportunities for — companies that were successful in the pre-digital economy. What will distinguish those companies that successfully transform from those that become historical footnotes? This is the question a group of six researchers and consultants from Boston Consulting Group set out to examine. The team conducted in-depth interviews with senior executives at twenty-seven companies in different industries to explore the strategies and organizational initiatives they relied on to seize the opportunities associated with new, readily accessible digital technologies. This paper summarizes findings from this research and offers recommendations to business leaders responsible for digital business success.
The proliferation of convergence of digital technologies SMACIT (social, mobile, analytics, cloud, and Internet of Things) has created significant threats and opportunities to established companies. Business leaders must rethink their business strategies and develop what we refer to as a digital strategy. Our research shows four keys to successfully defining and executing a digital strategy:
1. zeroing in on a customer engagement or digitized solutions strategy to guide the transformation, 2. building operational excellence, 3. creating a powerful digital services backbone to facilitate rapid innovation and responsiveness, and 4. ensuring ongoing organizational redesign. A list of publications from the research is provided at the end of this document.
Established companies are facing two transformations involving digital technologies: becoming digitized and becoming digital. The platforms enabling these transformations are fundamentally different in their purpose, target state, success metrics — and especially, in the key responsibilities of senior leaders. Because of these differences, companies will need to apply new rules new roles, processes, metrics, and norms — to the new digital platform. To develop new rules leaders should (1) separate the teams working on the digital platform, (2) allow digital platform leaders to experiment with new rules, and (3) identify new leaders and coach them to succeed with new rules. Given the time it takes to establish new rules, companies need to start breaking old rules now.
Im Projekt wurden die wirtschaftliche Bedeutung und der Nutzen digital physischer Produkte in der Kreativwirtschaft untersucht, sowie sich bei der Herstellung digital-physischer Produkte ergebende Herausforderungen und Praktiken zu deren Überwindung. Hierzu wurden eine Literaturrecherche, qualitative Interviews und eine Umfrage durchgeführt. Abschließend wurden einzelne Firmen der Kreativwirtschaft fallstudienhaft untersucht.
Die Ergebnisse haben wir zu folgenden Kernbotschaften verdichtet:
Digital-physische Produkte sind derzeit noch nicht sehr weit verbreitet in der Kreativwirtschaft und nur wenige Firmen sind bereits an deren Erstellung beteiligt.
Für Firmen der Kreativwirtschaft, die bereits digital-physische Produkte herstellen, haben solche Produkte bisher eine geringe wirtschaftliche Bedeutung. Dagegen wird die strategische Bedeutung schon heute als hoch eingeschätzt und Firmen erwarten durchschnittlich eine Verdopplung der wirtschaftlichen Bedeutung (Anteil am Umsatz >50%) in den nächsten drei Jahren.
Firmen, die ihre digital-physischen Produkte als erfolgreich einschätzen, geben an, sich stark auf das physische Produkt zu fokussieren: Synergien werden zwischen physischen und digitalen Angeboten geschaffen, physische Produkte werden durch digitale Komponenten attraktiver gestaltet und die digitale Anreichung physischer Produkte dient als Marketing-Tool. Firmen geben an, dass dies zu einer Steigerung des Absatzes und der Zufriedenheit bestehender Kunden des bisher rein physischen Produktes führt.
Recent digital technologies like the Internet of Things and Augmented Reality have brought IT into companies’ core products. What were previously purely physical products are becoming hybrid or digitized. Despite receiving a lot of recent attention, digitized products have only seen a slow uptake in businesses so far. In this paper, we study the challenges that keep companies from realizing the desired impacts of digitized products and the practices they employ to address these challenges. To do so, we looked at companies from a set of industries that are highly affected by digital transformation, but at the same time hesitant to move to a more digitized world: the creative industries. Based on a literature review and twelve interviews in creative industries, we developed a conceptual model that can serve as a basis for formulating testable hypotheses for further research in this area.
In 2016, German car manufacturer the Audi Group (AUDI AG) was working on an expanding array of digital innovations. The goals of these innovations varied, and included strengthening customer- and employee-facing processes, digitally enhancing existing products, and developing new, potentially disruptive business models. Audi’s IT unit was critical to each of these efforts. Based on personal interviews with 11 IT- and non-IT executives at Audi, this case examines the different ways in which digitization can help to enhance and transform an organization’s processes, products, and business models. The case also highlights the challenges that arise as large companies “digitize.”
In its 100+ years of company history, IBM reinvented itself multiple times. In the last 20 years, IBM had shifted from individual products to integrated solutions and moved to become a globally integrated enterprise with standardized processes. In 2014, the expanding adoption of social, mobile, analytics, and cloud (SMAC) technologies generated excitement in the industry. IBM believed these technologies presented a huge growth opportunity. Simultaneously, management viewed SMAC technologies as disruptive forces demanding transformative changes to how IBM worked. And introducing new ways of working to 400,000 employees in 175 countries was a daunting task.
Based on personal interviews with 17 IBM business and IT executives, the case illustrates organizational challenges of introducing current technologies that even providers of these technologies face – in other words, when they “eat their own cooking.” It demonstrates the difficulties large companies face when implementing technologies that students use daily and take for granted.
In 2016, German car manufacturer the Audi Group (AUDI AG) was working on an expanding array of digital innovations. The goals of these innovations varied, and included strengthening customer- and employee-facing processes, digitally enhancing existing products, and developing new, potentially disruptive business models. Audi's IT unit was critical to each of these efforts. This case examines the different ways in which digitization can help to enhance and transform an organization's processes, products, and business models. The case also highlights the challenges that may arise as organizations attempt to expand and diversify their portfolio of digital innovations.
Started as a mono-line focused purely on savings, in late 2012 ING Direct Spain was becoming a full-service bank. To this end, the bank had substantially increased its product- and channel-portfolio. ING Direct Spain originally provided "simple", "good value for money" products in an "easy to deal with" way at low cost supported by a direct model. But with the growth in its product portfolio during the previous decade and the ambitious goal of becoming a full-service bank, an increase in complexity seemed inevitable. Like many businesses in the global, digital economy, ING Direct Spain found it needed to decide which complexity created value for its customers and which one not. It also learned that IT can contribute to complexity and/or help manage complexity.
This case offers a close look at challenges of growing a company by increasing product complexity to provide comprehensive yet simple services.
AUDI AG has historically focused on producing and selling premium vehicles but has begun to experiment with providing mobility services, built around car sharing. Its response to the so-called sharing economy addressed strategic and transformational challenges. Strategically, the company pursued additional sources of revenue from targeted, premium mobility services, rather than the less segmented services provided by competitors such as BMW and Zipcar. AUDI AG also transformed its organizational structure, processes and architecture to balance autonomy for innovation and integration for competitiveness.
New digital technologies present both game-changing opportunities for—and existential threats to—companies whose success was built in the pre-digital economy. This article describes our findings from a study of 25 companies that were embarking on digital transformation journeys. We identified two digital strategies—customer engagement and digitized solutions—that provide direction for a digital transformation. Two technology-enabled assets are essential for executing those strategies: an operational backbone and a digital services platform. We describe how a big old company can combine these elements to navigate its digital transformation.
How companies use digital technologies to enhance customer offerings - summary of survey findings
(2019)
Digital technologies are transforming how companies do business. Social, mobile, analytics, cloud, and the Internet of Things - which together we refer to as SMACIT - along with artificial intelligence, blockchain, and an ongoing procession of new technologies create new capabilities : specifically, ubiquitous data, unlimited connectivity, and massive, affordable processing power.
Recent MIT CISR research found that an obsessive focus on innovation is a characteristic of CIOs of top-performing firms. There are now more ways than ever that a firm can be disrupted by and disruptive with digital innovations. Indeed, a growing number of firms and individuals are using increasingly powerful digital technologies and figuring out ways to develop better products and services, better customer and employee experiences, and new business models. The new digital imperative is to compete with more types of digital innovations - and IT units must refine approaches to producing them. Based on an in-depth caste study, this briefing takes a look at how German car manufacturer AUDI AG has expanded its portfolio of digital innovations.
The variety and interdependencies of enterprise systems that digitize large organizations’ processes have grown significantly, resulting in complex enterprise systems landscapes. Avoiding such complexity requires addressing the IT-business engagement gap between (inadvertent) producers of complexity in the business and those in IT who have to manage it. We identify mechanisms for tackling three components of this gap: 1) bridging the awareness gap through information sharing, 2) narrowing the incentive gap through shared goals, and 3) closing the authority gap by evening out power differentials through empowerment.