Lecture 3 - Digital Transformation Flashcards
Digital transformation is about …
- New business models
- New types of products/services
- New types of customer experiences
A product/service can be considered as part of the new digital economy if it includes one or more of four base technology areas
- Ubiquitous data collection and network connectivity
o Consumer (IoT) and industry (IIoT) generated data flows from ubiquitous sensors and video monitoring, clickstreams, location data, “smart” products, and machinery, etc.
o Vertical and horizontal network connectivity within and across organizations and geographies (connected organizations, factories, supply chains, and people) - Cloud computing
o Centralized storage and software-as-a-service with on-demand and mobile access
o Distributed (“edge”) data collection and application processing
o Constant and automated updating of software and systems - Big data analytics
o Data mining based on multivariate analysis techniques
o Huge sample sizes leading to more robust results, new insights, and high fault tolerance - Artificial intelligence (AI)
o From neural networks to machine learning, autonomy, prediction, replication, and self-maintenance and regulation
Linear business model
Buy resource, transform into product, sell product
- Selling products or services to consumers
- Value is created upstream
- Products have inherent value (e.g. gold)
- Value comes from owning one side of transaction
- Focus on converting shoppers into buyers
Platform business model
Buyers and sellers find each other, you support transactions
- Facilitating transaction between parties
- Value is co-created on the spot
- Platforms create network value
- Value comes from owning infrastructure that facilitates transaction
- Focus is on attracting both producers and consumers
Digital economy business model elements
- Modularity: Discrete elements can be added or subtracted without redesigning entire systems
o Three aspects of modularity: a property (in the design of products and systems), a process (in operations) and a (normative) frame. - Open Innovation: the pre-competitive pooling of R&D activities, design criteria, and software code, either through consortia or though the voluntary “crowdsourcing” efforts of engineers and technologists interested in creating free resources for their communities.
- Platforms: The digital economy is, and will likely continue to be, characterized by a set of (more or less) interoperable technology and product platform ecosystems
Digital transformation (Vial 2019)
A process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies (SMACIT).
It is about several (plural) technologies orchestrating together at the business model level
Use of digital technologies (SMACIT)
fuel disruptions (consumer behavior & expectations, competitive landscape, availability of data)
trigger strategic responses (digital business/transformation strategy)
rely on use of digital technologies
enable changes in value creation paths (value propositions, value networks, digital channels, agility and ambidexterity)
affected by structural changes (organizational structure, culture, leadership, employee roles and skills) and organizational barriers (intertia, resistance),
changes in value creation paths
generate negative impacts (security & privacy) and positive impacts (operational efficiency, organizational performance, industry & society improvements)
IT strategy vs digital strategy
IT strategy not digital strategy:
- IT strategy is more on internal IT projects, solving problems, owning technology etc.
- Digital strategy is more external oriented, how you deal with technology
Digital (transformation) strategy
Blueprint that supports companies in governing the transformation that arise owing to the integration of digital technologies, as well as in their operations after (or for) a transformation.
Transcends the relation between digital transformation and other corporate strategies, integrating all coordination, prioritization and implementation efforts
This is what winners tend to do
The four dimensions of digital transformation strategy
Balancing:
- Use of technologies (strategic role of IT, technological ambition)
- Changes in value creation (degree of digital diversification, revenue creation, future main business scope)
- Structural changes (responsibility for digital transformation strategy, organizational positioning of new activities, focus of operational changes, building of competencies)
- Financial aspects (financial pressure on current core business, financing of new activities) –> everything is financial driven
Maturity implications for governance
Not one is right or wrong. Depending on the maturity, every one of those makes sense to have and has its benefits in different points of time and environment.
1. A firm in the early stage might need to focus on business monarchy, as their IT is underdeveloped. CIOs are not mature enough to think about DT
- At some point, your IT is more developed and skilled and then an IT duopoly might make more sense. You need very specialized people (CDO, CDTO) for this new technology
- More the stage of democratization, flat hierarchy, more bottom-up
- Little pockets of expertise that can drive change on itself. They drive the DT
- Corporate strategy becomes aligned with the IT strategy. They are almost the same thing
- Business model becomes platform based. More of a network view, groups of people that work together where everyone has a say in it
Procedural aspects of digital transformation
- Continuous undertaking
- Assign adequate and clear responsibilities
- Top management support
- Procedures for formulating, implementing etc.
Strategy, not technology, drives digital transformation (Deloitte, 2015)
- Digital strategy drives digital maturity
- The power of a digital transformation strategy lies in its scope and objectives
- Maturing digital organizations build skills to realize the strategy
- Employees want to work for digital leaders
- Taking risks becomes a cultural norm
- The digital agenda is led from the top
Value chain Porter
Every firm is a collection of activities that are performed to design, produce, market, deliver, and support its product.
Primary activities: Those activities that are directly concerned with producing and delivering a product or service (inbound logistics, operations, outbound logistics, marketing and sales, service)
Supporting activities: Enable the primary activities to take place (firm infrastructure, HRM, technology development, procurement)
Digital IT governance
How is IT decision-making changing in the digital age?
- Boundaries between IT and business processes are blurring, IT executives are more involved in business
- IT becomes more business-aware and involved in ”high-level” strategy-making
- Speed of technological development accelerates IT-related decision-making
Digital governance plays a critical role in digital transformation:
- Pushing down digital decision-making
- Activating pervasive, horizontal, and collaborative communications
- Support a shared decision-making culture
Critical facts about Digital Transformation
- Digital Transformation ISN’T really about Technology
- The role of strategy (governance) vs. technology
- Taking Risks becomes a cultural norm for digital transformation
- The digital agenda is led from the top
