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Published: 07 Aug 2015
When Jeanne Ross, director and principal research scientist at MIT School's Center for Information Systems Research,...
considers what enables digital transformation, she points to two critical factors: Treating data as an asset and building a platform so that data can be used as an asset.
That's what connects United Parcel Services Inc. in Atlanta, Ga., to GE in Fairfield, Conn., to the United Services Automobile Association in San Antonio, Texas. But, she said, the companies that possess these digital building blocks are in the minority. For those who haven't already made the leap to digital business, the journey will not be easy. "If you are one of the companies that doesn't have a platform, and we estimate that's about 85% of companies … your obstacles are pretty significant," Ross said.
How do you define digital disruption?
Jeanne Ross: It's the recognition that because there are so many more technologies at our fingertips and they have so much potential to enhance capabilities or even introduce brand new capabilities, that 'business as usual' will lead to failure. It will make us irrelevant. Recognizing that the processes and often the products and services that we have relied on won't take us forward -- won't take us to future success -- I call that digital disruption.
I've heard that company culture can be a big hurdle to digital transformation. If we're talking about the difference between surviving and failing -- if the stakes are that high -- why is culture even an issue?
Ross: When people think about risk, they think the unknown is the risky part, and the known -- the things they're used to -- is less risky. What we're starting to understand … is that, actually, the known -- the way we're accustomed to doing things -- is pretty risky. If we choose not to change, we are taking an enormous risk. But that doesn't help us define what changes are the good changes to make and what changes just look like chaos.
Are there any knowns? What are the common denominators among successful disruptors?
Ross: If I look at a company that has a great platform -- Lego, Schindler, Kaiser Permanente, USAA -- these are companies that build underlying capabilities with technology and people who knew what to do with it. They are ahead of the game. They can get up every morning and say, 'What should we innovate on today? What should we try today that we didn't try yesterday? What are our customers planning for that now we could actually deliver to them?' If a company does not have an underlying platform -- if they never thought that way, if they built silos -- it's a mess. So anytime they try to do anything, they have to do it as another one-off or they're trying to build a platform that will take them forward, but that is slowing them down.
How do you define the term platform?
Ross: It's the technology, the data, the people and the processes that hardwire some capability into your organization. One place where this was attempted in many companies was the implementation of an ERP and the associated transformation. Companies that had all of these processes were messy, disjointed and they suddenly said, 'We ought to have standard processes around finance, around supply chain.' So they built platforms. Some of them were really good -- this is why I've so enjoyed studying Lego; they went after their supply chain and fixed it. Campbell's Soup went after theirs; Nordstrom has an unbelievable supply chain platform.
And because their platforms are quite transparent, they get to decide if they want to add a new product pretty easily. They just add it and then they ship it. If you don't have this global supply chain [platform], and you want to enter a new market or try a new product line, it's slower, it's more expensive [and] it's less known. That's a process platform we'd see particularly at companies where supply chain is important.
It sounds like the platform needs to be automated and repeatable.
Ross: Exactly. And it's easier to see in something like a supply chain process, and a little bit harder to see in something like fabulous data. But what happens with fabulous data is that the data itself is protected, and that company has built people and capabilities around that to use that data well. It looks a little different, but it is very much a platform.
How does a more traditional company decide what kind of platform to build?
Ross: You stay focused, decide what you're going to do, [and] accept that if somebody looks under the carpet, they're going to see dust and stuff you don't want there. But you stay focused on what's going to drive the most value, what's the most important thing for you to do, what you can pull off -- and that's how you start to build a platform. I also describe it this way: When I have guests coming, they think my house is clean, but that's only because I figured out what rooms they're going to be in. And that's kind of what goes on when you build a platform at a company that's been around for a long time.
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