Tag Archives: digital

Research, Reviews

The Digital Transformation Playbook by David Rogers (2016)

Leave a comment

The Digital Transformation Playbook by David Rogers (from now on: Rogers 2016), professor at the New York Columbia University, has been published on April 2016. I read it thanks to Fabio Paracchini @fcvg –he handed it over to me in an immaculate, shiny hardcover format. To the best of my knowledge, this is the second notable book offering an overview and a framework on the topic, following Leading Digital by George Westerman, Didier Bonnet e Andrew McAfee, published in 2014 (from now on: WBM 2014). I wrote about WBM 2014 more than one year ago.  Before getting into Rogers 216, I have to say that I am a bit puzzled by the relative rarity of these works. Let me clarify. The literature on the relationships between technology, business and society at large is vast, to say to least. However, studies that are precisely focused on the phenomenon dubbed as “Digital Transformation” are still few and sparse, especially if we restrict the range to solid, extensive analysis, discussing it in terms of boundaries, origins and evolution. Yet the formula is very much in vogue. Most likely I have missed this or that other book or paper. So anyone willing to point me in the right direction is very much welcome.

Rogers 2016 has a different genesis than WBM 2014. The latter started from two primary research cycles that provided the authors with an empirical basis, from which they shaped an interpretative model. Rogers has followed a more articulated path. The beginnings come from an earlier book by Rogers dedicated to people and consumer behaviour (sorry, I haven’t read it: The Network Is Your Customer: Five Strategies to Thrive in a Digital Age, 2011). Then Rogers has drawn from a series of interviews, personal exchanges and feedback collected over the years as he was advising companies or giving executive education course all over the world. Finally he has researched a number of academic papers, magazine stories, analyst reports and blog posts, all rigorously cited in the notes.

One of the more valuable contributions of Rogers 2016 is the identification of a number of cases that explain how all of those companies founded before the Internet came around cope with what we call “Digital Transformation”. The analysis starts with the definition of five domains: customers, competition, data, innovation and value. A newly launched startup or a well-established corporation would show very different choices and course of actions in tackling these strategic contexts. Yet both of these types of businesses have to transform themselves according to “digital era principles”. From this point of view, Rogers 2016 has a very similar standpoint to WBM 2014, in which too the primary focus was on all of the businesses that are not centred on digital technologies, even though they have to use them. This is not optional: their customers and collaborators have adopted these technologies anyway. In other words, here we are looking at those enterprises that at times are loosely categorized as “traditional” companies, implying that under this label falls any entity that has not its core in the Internet technologies. I think that this a good reason for making the reading of Rogers 2016 mandatory for anyone in the service business, not less than it was the case for WBM 2014. Be you someone working at an agency or consultancy, a solution provider or a vendor, of global scale or in a specialized niche, corporate or freelance, I think these books are highly relevant to your work.

As said, the case studies make one of the most interesting aspects of Rogers 2016. Even a 244 years old business like the Encyclopaedia Britannica can successfully embark on a digital transformation journey. The famed publisher, once dependent from the sales of the leather bound paper edition, has reinvented itself as a solution provider for the educational market. To get it there, it has shaped a new balance between its scientific heritage and a novel, more dynamic operational model. The Weather Channel is another case of radical transformation. It used to be a pure media company, highly specialized in weather forecasts, based on the daily elaboration of huge amount of data. Then it found out that these capabilities were not only a key asset but also a source of innovation and competitive advantage. Starting from them, they have developed an all-new range of services for a number of industry verticals that relies strategically on weather modelling and forecasts. Data have become the cornerstone of their transformation (The Weather Channel has been acquired by IBM in 2015; a few months ago they have announced a new “hyperlocal” weather forecast service).

…for each Britannica there is a Kodak or a Blockbuster

On the other hand, Rogers warns that for “each Britannica there is a Kodak or a Blockbuster”, or, in other words, there is a company that refuses to acknowledge the new rules of the game, trying to avoid the strategic change required by the digital reality. Once again, the advice recalls similar warnings of this inevitable wave of change already emphasized by WBM 2014. On a second thought, these warnings might sound a little bit too obvious for those of us that are in the agency or consulting business. One could wonder if these calls to action actually resonate as they should. Perhaps we are in a transition phase, in which many companies prefer to tackle the all thing with a lot of caution, encouraged by the fact that in their field there is still no startup going after their business with a disruptive technology and an innovative business model. It would be interesting to assess if that’s the case in analytical terms, looking at the specific situation of each country and each market.

One more very valuable and distinctive contribution of Rogers 2016 consists in the elaboration of a set of strategic planning tools, based on a combination of scientific literature and hands on consulting expertise, as they draw from the workshops led by the author. They cover pretty different domains, from ideation to mapping and planning. If used as analysis models they indeed can lead a team in defining shared and sound conclusions, following a rigorous process. This is the “playbook” core of Rogers 2016, rich of advice for real life practice, encouraging readers to take advantage of these helpers to better cope with digital transformation challenges.

There is further contribution of Rogers 2016 that sounds particularly new and original to me: it is the discussion on the “disruptive innovation” concept coined by Clayton Christensen, following the earlier path of “creative destruction” defined by Schumpeter. First Rogers starts defining the subject – a much-needed step considering that the expression has become a sort of buzzword. “Disruption” does not mean “extremely innovative”. So yes, a company, product or service are “disruptive” when they provide something of unprecedented value to the market, thanks to a business model that traditional competitors are not able to replicate. This is not to say that whatever extraordinary innovation anyone is able to achieve is less valuable in any way. However, it would trigger different market dynamics. They might open up novel business spaces, but without making traditional competitors plunge into a crisis, as is happens when proper “disruptive innovation” occurs. Having said that, Rogers delve into the discussion of Christensen theory; according to his model, “disruptive” innovators displace traditional competitors by reaching new customers with initially less robust but cheaper solutions, exploiting some sort of new technology. Then they keep improving them until they become mature enough and of greater value than those offered by the incumbents. Now, Rogers acknowledges famed independent analyst Ben Thomson for a critical intuition on the nature of Christensen model: it works well with business to business market contexts, but it fails to explain the cases in which consumers are those that determine success or failure of a given product or service. If we take the iPhone, which is more of a product-service system than an isolated product, what has happened is has displaced the dominant incumbent with a combination of higher quality and price, something very far from the pattern identified by Christensen. There was no price discount at all and the overall experience was superior from the very beginning, so that it became an instant success even with the customer of the best Nokia phones. The “disruptive innovation” brought in by Apple has provided consumers with something of unprecedented value and over time has proved to be impossible to replicate by Nokia in a short timeframe. Rogers’ explanation to this case is a theory of “business disruption” that would make Christensen model a special case of Rogers’ approach. Using the logic and the concepts typical of the business model theory, Rogers focus his attention on two core elements, the “value proposition” and the “value network”. According to Rogers, we have “disruptive innovation” when a company manage to bring radical change in both of these dimensions, and only then. To make its argument, Rogers discusses three big cases. Beside Apple vs. Nokia, he focuses on Blockbuster vs. Netflix and Warby Parker vs. Luxottica. I enjoyed very much the reading, here: these pages are very timely and clear, and they illustrate well how the theoretical models presented earlier are translated into real business stories.

One last topic that unfortunately is only briefly outlined concerns the role of agencies and consultants. As Rogers weights the competencies needed to face the new behaviours of digitally enabled consumers, he writes that outsourcing would be a serious mistake. The turn that organizations are facing is so important that delegate it to someone else would be to concede that they are not able to steer their future direction. On the other hand, Rogers is also ready to acknowledge the positive role played by external partners. Discussing rapid prototyping, he recalls e.g. the case of R/GA with a quote of the former CTO John Mayo-Smith. For a partner committed to the innovative Nike projects like R/GA it was essential to “build something” even in a 2 weeks’ cycle, so that athletes and other stakeholders could be shown something real to get feedback, and feed it into further fast development cycles. So, apparently the cooperation between agency and client company can be beneficial, as the first not only provides efficient delivery but also conveys with it new values and a new way to work, modelled on digital principles. I think that this is a very important issue, not only from my point of view as an agency professional. The capabilities and the technologies that are shaping the big changes ongoing now are very distributed: as said earlier, we have the big platform player, with their unique dynamics (GAFA and other similar leaders) and the all spectrum of solutions providers; we have the marketing and communication holdings and the independent agencies; the large consultancies and the individual freelancers. All of these actors collaborate in constellations that to me are also proper “value networks”, different for each company, playing an important role in the company business model. I believe that thorough investigation of these dynamics is necessary: we need to identify patterns and best practices. Rogers 2016, not less than WBM 2014, will be a valuable companion for those willing to start the work.

I report here another review of Rogers 2016: Kathy Anne Cowie, “Book Review—Inspiring Transformation for Decades to Come”, Global Business and Organizational Excellence, July/August 2016; it is a premium content, available on demand or via a library subscription (I bought it on Readcube).

Reviews

Leading Digital (2014) by Westerman, Bonnet and McAfee

1 Comment

I read Leading Digital with a mixed sense of anticipation and suspicion. Heightened anticipation was there for a reason: I think that it is not common to read some rigorous, organic, extended, articulated analysis focused on how traditional corporations face the changes brought about by digital technologies. That slight suspicion came instead from the frequent déjà-vu that often happens to me when I get hold on something on the subject. This is an old debate now. Two decades have gone by since the New Economy highs and lows; some of the very same questions have been raised there, and left unanswered I’m afraid. Then, a few years into the new Millenium, with the advent of Social Media and the much awaited mobile explosion, and the new wave of enthusiam and investments that ensued, we got into the same discussion once again, especially in the professional service realm (where I have been working for a long time, as an agency guy – perhaps I should specify “digital agency” – or as a freelance). Sometimes this debate has turned into a rhetoric, or worst a trade event kind of cliché; paradoxically, it is often addressed to people already convinced of the importance of the issue – very much preaching to the converted, as they say. So, beside the debate and all of the digital “evangelism” (how dated it sounds!), now I would really like to read some systematic overview, have research results, and examine well founded reasoning. This is the promise of Leading Digital, and I think that to a large extent it delivers on that promise.  The book is the outcome of a collaboration between the MIT and Capgemini. It has been written by three authours: two of them have an academic profile, George Westerman and Andrew McAfee (the latter is also co-author of The Second Machine Age, with Erik Brynjolfsson), while the third, Didier Bonnet, is one of the global leader of the French-based consultancy.

The book is based on a three-years research work, from about 2010 to 2013 I would say (it is not specified but the book has been published in 2014). First, Westerman, McAfee and Bonnet, with the help of a team, have interviewed about 150 executives and managers at 50 large corporations that don’t have technology as a core business. This is an important distinction, as it specifies the generic term of “traditional corporation” I have used above. Secondly, they have run a survey involving almost 400 large corporations in 30 countries (“large” it means with revenues in excess of 500 million dollars). The authors are very clear about their global perspective, not centred on the United States. In fact, even if most of the major technology leaders are indeed from the US, as a matter of fact a vast number of large and very large corporations are based outside of the US in Asia or in Europe (where I’m based, en passant).

The focus on “traditional corporations”, defined as the ones that don’t have technology as core business, is a cornerstone of the all work: these firms make “the 90% of the economy”, so it is of outmost importance to understand how they react to the tecnologies brought on the market by the global platform leaders or by the all range of startups  – many of them coming the Silicon Valley or the US. The strenght and momentum of this wave of digital technologies, platforms and services are such that nobody can escape it. Westerman Bonnet and McAfee have no doubts: the firms that choose not to react are going to face obsolescence and decline.  Here it comes an analogy that has been made many times in these debate: digital technologies are the Second Industrial Revolution. Nothing can resist their momentum. It’s a warning for the executives out there: we have come to a point in which it is possible to discern between the corporations that have undergo a successful transformation, taking advantage of these technologies, and those that haven’t. The analysis of these outcomes has allowed the authours to devise an approach or a transformation roadmap that others can follow too.

En passant, Leading Digital is also the book of choice to get a synthesis of the many scholarly articles and white papers coming out from the cooperation between the MIT and Capgemini on the “digital transformation” idea. The expression has been quickly adopted by the industry jargon but it could be that many are not aware of the original formulation, or, better yet, of the formulation that has got the widest adoption. A 2011 MIT and Capgemini document reported the following definition:

Digital transformation (DT) – the use of technology to radically improve performance or reach of enterprises – is becoming a hot topic for companies across the globe.

I think it’s important to start again from here – it’s not about defining something once and for all but bringing some clarity about the context in which has been shaped. The first Altimeter report on the topic (published in 2014) says that in their instance digital transformation is analysed from the customer experience lens. A second Altimeter report on the same subject credits an earlier formulation by scholars Erik Stolterman and Anna Croon Fors. For what I can read through Google Books scans, they were pretty distant from an interest in corporations performances. In that discussion, “Digital transformation” is an emergent phenomena that calls for a critical scrutiny, it is a novel focus for information technology research – they might even quoting Marcuse if I’m not wrong.

… the most crucial challenge for IS [information Systems] research today is the study of the overall effects of the ongoing digital transformation of society. The digital transformation can be understood as the changes that the digital technology causes or influences in all aspects of human life. This research challenge has to be accepted on behalf of humans, not int their role as users, customers, leaders, or any other role, but as humans having a life.

This was about 2003. Fast forward to 2014 and typing “digital transformation” in the Google bar will get you a couple of ads from big and huge consulting businesses (Accenture, to mention one), followed by a deluge of organic results. Anyhow, my point is that for all of these mentions there is little research, so it’s worthwhile to have a close look at the book from the people that triggered the most informed debate.

I think the book offers three main original results and contributions. The first is a set of models and categories that frame and define the all question; they are the tools that allow to investigate its dynamics and produce practical recommendations. The second set of results includes the case  and example reviews, the corporations that have been analyzed, with all of the excerpts from the research interviews. The third is a proper “discovery”, so to say, regarding the fact that the best corporations from the digital transformation angle show also better business results.

Let’s have a look at the first and at the second point. One key categorization or model makes a distinction between three dimensions relevant to the digital transformation concept: customer experience, operations and business models. These are different but interdependent aspects, so that changes in one would influence the others, to some degree. All of the corporations cases mentioned in the book can be mapped to these domains. So Burberry and Starbucks e.g. are explored mostly in the customer experience perspective. Very distant businesses like Asian Paints (India), Codelco (Chile, mines) or Zara are in the spotlight when it comes to the operations dimension. Hailo, Uber, Airbnb, Fujifilm, Zipcar, Car2go and many others illustrates the business model discussion. So this is about how corporations react to digital technologies in one or another of these key three dimensions, or all of them at once. Then the authors introduce also a typology based on another distinction. There are digital capabilities or competencies and leadership capabilities. Here you get a typical two axis matrix with four cases, in which the upper right quadrant is for “Digital Masters” . I think that these are the most analytical parts of the book. Combining these models with real cases offers a very rich material, interesting per se and useful as the basis to build advice for other corporations. In fact the book offers plenty of checklists, summaries and an entire final “playbook” addressed to executives that want to face the digital transformation challenge. Those are not at ease with the business book flavor might be slightly annoyed at this point, but the authours have been impeccable in pointing to the many scholarly or public sources in the endnotes (to testify again the research rigour).

By the way. The book has 9 mentions of the term “advertising” and 8 of the term “campaign” (just 7 in the proper advertising context) and just one of the expression “digital advertising”. I am aware that this is nothing scientific but this rough count made me think that the research has not been conducive to the discovery of some distinctive way of doing advertising by the digital leaders. It is as if a smart, sensible usage of digital advertising is taken for granted, just as a necessary element of a broader framework. In other words, where the digital transformation is in place digital advertising will be   a part of it, but simple budget shifts from one channel to another don’t make a big difference.

Let’s move to the third result. Here we have a very sharp and interesting conclusion, based on the research empirical work combined with the typology created by the authors. “Digital masters” make more revenues and profits than their competitors.

[…] Digital Master outperform their peers. Our work indicates that the masters are 26 percent more profitable than their average competitors. They generate 9 percent more revenue with their existing physical capacity and drive more efficiency in their existing products and processes.

Even though Westerman, Bonnet and McAfee are keen to stress that this conclusion indicates a correlation and not a causal factor, it is evident that these are big figures (think about the 10% of a 1 billion in revenues). So here the authours are really zooming in on an opportunity, a huge one. Grab it is open for everyone – every company that is willing to. There is no need to be based in Silicon Valley, no need to have hundreds of software engineers, no need to have onboard some one of a kind maverick pioneer. For sure it will be an endeavor, more or less challenging depending on the starting point, and the honesty of your initial self-assessment, but it is something attanaible by every company with adequate willingness and practical means to go forward.

Once again, it is not just about a big opportunity. Beside the call for action to grab it, there is another take running through the book. Westerman Bonnet and McAfee warn readers that they need to get moving anyhow, since the transformation has just begun, and its effects are barely starting to emerge.

We ain’t seen nothin’ yet.

This is not secondary, as said above. Moreover, it highlights a sort of paradox, a relative lack of solid knowledge about the possible negative outcomes of the transformation as depicted by this research. If we accept that at this stage the impact of digital technologies and platforms is only beginning to take shape, and much stronger changes are to come, then the reason to react is not only the opportunity to have more revenues and more profits (as Digital Masters have), but first and foremost companies is about the companies survival and essential prosperity. So what are the “traditional corporations” that prove the point? Yes, the authors mention Kodak, or cabs (“Uberized” as it has been said), and then? Talking about the standard verticals, or categories that have lost their descriptive power (say “telecommunications”, “advertising” or “newspapers”) is of little help I think. Here again what is badly needed is solid research, well organized reviews, structured cases, empirical evidence and models. After so many years of debates about the effects of digital tecnologies, how one can’t see the paradox of not having a great pars destruens in the library? If you know it, please tell me where it is, and I’ll get it straight away (likely via Amazon Prime).