Digital transformation strategy: Four questions for the C-level

MIT Sloan's Jeanne Ross, speaking to an audience of CIOs, cited vision, action and architecture among the key components of a digital transformation initiative.

If you've been struggling to develop a digital transformation strategy, take heart. 

According to Jeanne Ross, principal research scientist at MIT Sloan's Center for Information Systems Research, the shift to digital business was never going to be easy. To get the job done -- and become more than a digital transformation hobbyist -- requires nothing less than reinventing your entire company. 

"Digital transformation is not about technology," Ross explained last month at MIT Sloan's CIO Symposium. "Digital transformation is about redefining your value proposition and to deliver that value proposition you'll have to redesign your companies. That is really hard."

Jeanne Ross, principal research scientist, MIT SloanJeanne Ross

Ross' redesign directive recalls the work of another MIT management thinker: the late Michael Hammer. Back in the 1990s, Hammer urged enterprises to "obliterate" outmoded processes rather than automate them. Radical redesign became the cornerstone of his business process re-engineering (BPR) vision. BPR was no walk in the park and digital transformation won't be either. Ross outlined four questions, or decision points, that C-level executive should consider as they prepare for the tough slog ahead:

What is your vision for improving the lives of customers?

Ross said a company embarking on a digital transformation strategy needs a vision of what it wants to accomplish and that vision has to be more than a statement on a website. For transformation to succeed, a company must enact its vision every day and employees must know how they will contribute. 

Ross pointed to the example of Philips, which seeks "to improve the lives of 3 billion people a year by 2025." The company's plan to execute that vision includes its HealthSuite digital services platform, which aims to create an ecosystem of connected healthcare offerings. 

Indeed, to make digital transformation a reality you need a vision and the ability to make it happen, which brings us to Ross' second question:

How will you put your vision into action?

Ross said companies have two options for distinguishing a digital transformation strategy: customer engagement and digitized solutions. The former revolves around responsiveness to changing customer demands, a seamless customer experience across all channels and the ability to engage customers in a personalized relationship, she noted. 

Digitized solutions, meanwhile, are digital or digitally enhanced products or services -- Philips' connected healthcare platform or GE's offerings in the industrial internet of things, for example. 

Ross said organizations, over time, may achieve both customer engagement and digitized solutions. But to avoid competing and conflicting initiatives, they shouldn't chase both objectives simultaneously. "It's a mistake to do these two things … at the same time," she said. 

What are your key digital capabilities?

CIOs will need to create a technical foundation for digital transformation. Ross said the key components include a solid operational backbone for efficient and reliable transaction processing, a digital service platform with reusable data and technology components and digital linkages that permit data transfer between the backbone and the platform. 

How will you architect your business?

Ross said enterprises in the pre-digital economy built business architectures with the goal of greater efficiency. In the digital economy, with its emphasis on unified product lines and presenting a single face to customers, companies will need to architect for speed and integration, she noted. Ross suggested service leaders -- mini CEOs -- will be assigned to grow and develop individual digital services, replacing rigid hierarchies. Service owners will be able to stitch different services together to deliver new customer offerings. 

Digital transformersmay find addressing the architecture question particularly difficult, as it calls for a different organizational structure. 

"This fourth decision is why digital transformation will prove harder and take much longer much than most people think," Ross said.

Next Steps

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