In collaboration with Research
2013 Findings from the 2013 Digital Transformation
global executive study and research project Embracing
A New Strategic Imperative
By Michael Fitzgerald, Nina Kruschwitz, Didier Bonnet and Michael Welch Authors
Michael Fitzgerald is the Digital Transformation contributing
editor at MIT Sloan
Management Review, covering the
challenges that traditional companies face
as they adopt emerging
technologies. He can be
reached at [email protected]
mffitzgerald.com Nina Kruschwitz is
the managing editor
and special projects
manager at MIT Sloan
which brings ideas
from the world of
thinkers to the executives and managers
who use them. She
can be reached at
[email protected] Didier Bonnet is a Michael Welch is a senior vice president
and global practice
leader at Capgemini
Consulting. He can
be reached at
capgemini.com managing consultant at
and visiting scientist
at MIT’s Center for
Digital Business. He can be reached
at [email protected]
capgemini.com Acknowledgments Lori Beers, Wellpoint; Jon Bidwell, Chubb Insurance; Adam Brotman, Starbucks; Curt Garner, Starbucks;
David Kiron, MIT Sloan Management Review; Andrew McAfee, MIT Center for Digital Business;
Mark Norman, Zipcar; William Ruh, General Electric; Kimberly Stevenson, Intel; George Westerman,
MIT Center for Digital Business. Copyright © 2013. Massachusetts Institute of Technology. All rights reserved.
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Email: [email protected]
Phone: 617-253-7170 Contents
2013 2 / Executive
3 / Introduction
•Brewing Up Change
•About the Research 3 / Digital
Immaturity: A Widespread Problem
•The Digital Imperative
•Technology Everywhere sloanreview.mit.edu 5 / The Benefits
Transformation 8 / Institutional
6 / The Trouble
Lack of urgency
The vision thing
Picking a direction of older
Sidebar: Intel Gets Urgent 10 / Executing
•Making a Case for Digital
•Incentives 12 / Conclusion Embracing Digital Technology • MIT SLOAN MANAGEMENT REVIEW 1 R e s e a r c h R e p o r t E m b r a c i n g D i g i ta l T e c h n o l o g y Executive Summary
Companies routinely invest in technology, and too often feel they get routine results. Technology’s promise is
not simply to automate processes, but to open routes to new ways of doing business.
To better understand how businesses succeed or fail in using digital technology to improve business performance, MIT Sloan Management Review and Capgemini Consulting conducted a survey in 2013 that
garnered responses from 1,559 executives and managers in a wide range of industries. Their responses clearly
show that managers believe in the ability of technology to bring transformative change to business. But they
also feel frustrated with how hard it is to get great results from new technology.
This report (as well as the survey) focuses on digital transformation, which we define as the use of new digital
technologies (social media, mobile, analytics or embedded devices) to enable major business improvements
(such as enhancing customer experience, streamlining operations or creating new business models).
The key findings from the survey are:
According to 78% of respondents, achieving digital transformation will become critical to their organizations within the next two years.
However, 63% said the pace of technology change in their organization is too slow.
The most frequently cited obstacle to digital transformation was lack of urgency.
Only 38% of respondents said that digital transformation was a permanent fixture on their CEO’s agenda.
Where CEOs have shared their vision for digital transformation, 93% of employees feel that it is the right
thing for the organization. But, a mere 36% of CEOs have shared such a vision.
Previous research with executives by the MIT Center for Digital Business and Capgemini Consulting
showed that many companies struggle to gain transformational effects from new digital technologies, but
also that a significant minority of companies have developed the management and technology skills to realize the potential of new technologies. Our current survey deepens this research by getting frontline
perspectives as well as high-level ones, from staff to board member. (See About the Research, p.3.) It shows
that frontline corporate employees believe they face a strategic imperative to successfully adopt emerging
new technologies. Almost no organization is sheltered from the competitive disruption wrought by of the
widespread adoption of digital technologies.
But the survey also shows that organizations are finding ways forward by taking steps such as developing
business cases for technology adoption, creating cross-department authority for digital initiatives and realigning incentives to include metrics relevant to digital transformation. This report will delve into the
challenges of digital transformation and how companies are meeting them to achieve competitive advantage.
2 MIT SLOAN MANAGEMENT REVIEW • Capgemini Consulting sloanreview.mit.edu Embracing
Introduction E very company wants the technology it uses to transform its business. Executives see the
potential for using digital technologies to achieve transformation, but they’re unclear on
how to get the results. They look at high-profile examples of companies using technology to galvanize their business, and wonder what they need to do to follow suit. Brewing Up Change at Starbucks
One company that has succeeded is Starbucks. In 2009, after dismal performance cut the company’s
stock price in half, Starbucks looked to digital to help re-engage with customers. It created a vice
president of digital ventures, hiring Adam Brotman to fill the post. His first move was to offer free
Wi-Fi in Starbucks stores, along with a digital landing page with a variety of digital media choices,
including free content from publications like The Economist. It sounds simple, but as Brotman says,
we were not just doing something smart around Wi-Fi, but we were doing something innovative
around how we were connecting with customers.
Brotman is now chief digital officer at Starbucks, where he and Curt Garner, Starbucks’ chief information officer, have formed a close working relationship, restructuring their teams so that they
collaborate from the very start of projects. Last year, they cut 10 seconds from every card or mobile
phone transaction, reducing time-in-line by 900,000 hours. Starbucks is adding mobile payment
processing to its stores, and is processing 3 million mobile payments per week. Soon, customers will
order directly from their mobile phones.
Using social media, mobile and other technologies to change customer relationships, operations
and the business model has helped Starbucks re-engage with customers and boosted overall performance. Its stock price has also bounced back up from roughly $8 in 2009 to nearly $73 in July 2013. Digital Immaturity: A Widespread Problem M any companies want Starbucks-like results, but most are far from achieving them, according to
our survey (see About the Research). At the end of the survey, respondents answered a set of
questions about their companies’ digital maturity. Using an index of digital maturity developed by the
sloanreview.mit.edu About the
Research The survey uses a definition of
digital transformation that
came from research done by
MIT’s Center for Digital Business (CDB) and Capgemini
Consulting, which focused on
how digital transformation
plays out at traditional large
companies, those having more
than $1 billion in revenues. To
complement that research,
which involved interviews with
executives at 450 large companies, MIT Sloan Management
Review and Capgemini
Consulting conducted a broadbased online survey. It was
completed by 1,559 people in
106 countries (the five with the
most respondents were:
United States, 37%; India, 11%;
Canada, 5%; United Kingdom,
4%; Australia, Brazil and Mexico, 3% each). They represent
companies and organizations
across the business spectrum
— nearly half (47%) work at
companies with less than $250
million in revenues, 10% work
at mid-sized companies with
between $250 million and $500
million in revenues, 9% at companies with $500 million to $1
billion in sales, and 33% work
at organizations with more
than $1 billion in revenues, including 11% at companies with
more than $20 billion in sales.
Respondents span the gamut
of functions, from CEO to staff.
The survey asked the
respondents’ views on a
number of topics related to
achieving digital transformation. Respondents also took
a separate digital maturity
assessment, based on prior
CDB research, to determine
their digital maturity. Organizations were categorized
either as Digirati (mature at
both technology adoption and
(early adopters of technology
but without effective management skills), Conservatives
(slow to adopt technologies
but effective at managing
them) or Beginners (possessing neither advanced
technology or the ability to
manage it). Embracing Digital Technology • MIT SLOAN MANAGEMENT REVIEW 3 R e s e a r c h R e p o r t E m b r a c i n g D i g i ta l T e c h n o l o g y MIT Center for Digital Business and Capgemini
Consulting, we found that only 15% of respondents
were in the most mature category alongside Starbucks. Sixty-five percent of respondents are in
organizations that rank as least mature — the category the index refers to as Beginners (see Figure 1).
The world is going through a kind of digital transformation as everything — customers and equipment
alike — becomes connected. The connected world
creates a digital imperative for companies. They must
succeed in creating transformation through technology, or they’ll face destruction at the hands of their
competitors that do.
The Digital Imperative
Even in a connected world, it takes time, effort and
willpower to get major transformative effects from
new technology. Executives need to lead the process Figure 1 Rated01
D for digital
Most companies lack experience with
emerging digital technologies. Digital
14% Beginners 65% Beginner companies probably use email, Internet and various kinds of enterprise software. But
they have been slow to adopt, or are skeptical of,
more advanced digital technologies like social
media and analytics.
Conservative companies deliberately hang back
when it comes to new technologies, although
their management has a vision and effective
structures in place to govern technology adoption.
Fashionista companies are very aggressive in
adopting new technologies, but do not coordinate
well across departments or have an effective vision in place for dealing with digital business.
Digirati companies have executives that share a
strong vision for what new technologies bring, invest in and manage digital technologies quickly
and effectively, and gain the most value from digital transformation. 4 MIT SLOAN MANAGEMENT REVIEW • Capgemini Consulting and make sure they’re managing and coordinating
across the company. Employees know that technology
matters: a full 78% of respondents said achieving digital transformation will become critical to their
organizations within the next two years. Less than 5%
of respondents say digital transformation will never
become important for their organizations. Meanwhile, 81% said their organizations were already
trying to achieve digital transformation (see Figure 2).
The big thing is, technology change is happening so rapidly that every industry is being affected
by this, said George Westerman, research scientist
at MIT’s Center for Digital Business, and one of the
investigators leading the Center’s Digital Transformation Research.
Previous research by Capgemini Consulting and
MIT’s Center for Digital Business found that companies that invest in important new technologies and
manage them well are more profitable than their industry peers. Respondents to our survey corroborate
this view — they overwhelmingly believe that failure
to effectively conduct digital transformation will
harm their company’s ability to compete.
Of those working at organizations where digital
transformation is a permanent fixture on the executive agenda, and a core strategic consideration, 81%
believe their companies will be somewhat or much
more competitive in two years. That’s a stark contrast from those at organizations where leadership
is not focused on digital transformation — only
18% believe their companies will increase their
competitiveness, and nearly half (46%) project a
grim, less competitive future.
Despite growing acknowledgment of a digital
imperative, few companies are responding. Only
38% of respondents said that digital transformation
was a permanent fixture on their CEO’s agenda. Of
the rest, 65% of respondents thought it needed to be
more important than it currently is.
The pervasive nature of technology in consumers’
lives is causing rapid change in the business landscape. Lori Beer, executive vice president of
information technology and specialty business at
WellPoint, the nation’s largest Blue Cross/Blue Shield
licensee, said that [i]t’s not like we’re a consumer
sloanreview.mit.edu Figure 2 A current affair
Almost half of employees think digital transformation02
is upon us, and a third say it looms.
When will it
become critical to
organization? 27% That time has passed —
it is already a matter of
survival 18% This year 33% Within the next 2 years The Benefits of Digital
Transformation 13% 3 years or more ompanies that effectively manage digital technology can expect to gain in one or more of
three areas: better customer experiences and engagement, streamlined operations and new lines of
business or business models. Though innovative new
business models are what every CEO dreams of,
companies more often see digital technologies help
transform their customer experience or operations.
Business model transformation is difficult, and far
less prevalent, according to survey respondents.
Customer experiences reflect the clearest impact
of digital transformation. The survey found that 5% It’s never going to
across the entire
organization Percentages don’t add to 100% due to exclusion of those
responding don’t know. products company, where you can put that product
on the shelf. Our products and services really are
supporting consumers, providing capabilities for employers, information, data, much more like a financial
services type of scenario. Technology has always been
important to our business, but it really is becoming
much more strategic, especially today, when you’re
seeing the emergence of new technologies. You’re seeing a transformation of how consumers are engaging
The rise of the tech-savvy, connected consumer
across all facets of society changes the expectations
consumers have of companies, regardless of their
business, said Curt Garner, the chief information
officer at Starbucks. IT and digital is pervasive in
people’s lives now. So the advice I would give somebody starting it now is, think of yourself like a
consumer technology company.
How do consumer technology companies act?
One key point is, they update frequently. For nontech companies, this translates into adapting by
streamlining product cycles. Quicker product cycles
often lead to adding some features later. Adding features into new versions of products can become a
sloanreview.mit.edu strategic move for non-tech companies, as well.
Responding effectively and quickly to new technologies affects the bottom line, and ultimately business
survival. Effective management of new technologies is
already creating winners and losers in measurable
ways, like market share and profits — both areas where
Digirati outperform their rivals. Business leaders who
embrace the digital imperative will see boosts in their
operations, customer relations and business models,
as described in the next section (see Figure 3). C Figure 3 Digital cash register
Digirati — the best companies at managing digital
technology — get the best financial results. 07 Digirati
creation +9% Fashionistas Conservatives Beginners
-10% +26% -4% +9% Profitability
-12% Source: MIT’s Center for Digital Business and Capgemini report The Digital Advantage: how digital leaders outperform their
peers in every industry (http://ebooks.capgemini-consulting.com/
The-Digital-Advantage/index.html) Embracing Digital Technology • MIT SLOAN MANAGEMENT REVIEW 5 R e s e a r c h R e p o r t E m b r a c i n g D i g i ta l T e c h n o l o g y improving customer relationships was the area where
ucts and services. General Electric is pushing an
companies were having the most success with digital
Internet of Things service strategy that will help it tell
technology. Most prominent was improving the overcustomers how to schedule maintenance and avoid
all customer experience, followed closely by enhancing
part failures, improving operations. The company
products and services in customer-friendly ways.
expects it will sell services related to maintaining its
Survey respondents said their organizations also
are seeing improvements in operations, in part in auOf course, more efficient products may well reduce
tomating operations. A number or respondents said
demand for new GE goods. But William Ruh, vice presinternal communications are sharply improved, espeident of software at General Electric, notes that there’s
cially through using social media. For example, Jon
upside for us in the services. We can grow on the
Bidwell, chief innovation officer at Chubb, a large
services side, and they’re winning and we’re winning.
specialty insurer, told us that social business tools and
But business model transformation is also elusive.
processes had transformed the company’s innovation
A mere 7% of respondents said that their company’s
culture, helping it develop products and understand
digital initiatives were helping to launch new busirisks as rapidly as new markets emerged.
nesses, and only 15% said new business models were
The opportunity for digital technologies to create
emerging thanks to digital technology (see Figure 4).
new businesses is real, andEnhance
products and services It could be that these technologies are so new that
expect digital transformation to launch new prodthey simply haven’t had time to be turned into new
business opportunities. One respondent noted that
in his company, the belief is that digital technologies
are not that effective yet in our marketplace. Another
said customers weren’t ready for new models yet,
What has digital done for us lately?
Companies are using technology to create real, transformative effects across
because they are highly conservative and resistant to
customer experiences, internal operations and new business model.
Number of responses
consistency 1876 Our digital initiatives
are helping us to:
(Select up to three.) 1800 1600 Enhance our
services Launch new
/ services to
digital products /
business models Enhance the
1087 Automate our
improvements Launch new
businesses Expand our
reach to new
and markets Business model
change 6 MIT SLOAN MANAGEMENT REVIEW • Capgemini Consulting 1000 800 600 400 200 0 The Trouble with Digital
Transformation D espite growing acknowledgment of the need
for digital transformation, most companies
struggle to get clear business benefits from new
digital technologies. They lack both the management temperament and relevant experience to know
how to effectively drive transformation through
Even companies where leadership has demonstrated it can effectively leverage technology can
run into challenges with new digital technologies.
Today’s emerging technologies, like social media,
mobile, analytics and embedded devices, demand
different mindsets and skill sets than previous waves
of transformative technology.
There is no one factor that impedes digital transformation. Lack of vision or sense of urgency plagued
many companies, culture at others, and organizational constraints problems at still others. Our
sloanreview.mit.edu research highlighted nine specific hurdles in the
broad areas of leadership, institutional obstacles and
execution that companies need to overcome to
achieve digital transformation.
Leadership: Defining the Agenda
Many managers feel no urgency to achieve digital transformation. This may be because so few leaders offer a
vision and a road map for digital transformation,
leaving managers with no motivation for achieving it.
Lack of urgency Complacency affects more companies than any other organizational barrier cited
in our survey, with almost 40% of respondents saying that lack of urgency/no sense of burning
platform is the biggest single obstacle to digital
transformation. One survey respondent working in
higher education said The organization has a long
(70 years) history of success … the need to change is
not clear to some members of the old guard (see
The survey shows a clear split in perception of
urgency between the top managers at companies
and those below them. In fact, the further down the
organizational ladder one goes, the less satisfied
workers are with the pace of digital transformation
at their organizations. A third of C-level executives
and board members think the pace of change is
about right, and another 10% think it is fast, or even
very fast. CEOs are particularly bullish — 53%
think the pace is right, fast, or very fast, the highest
of any category (see Figure 6, p.8).
CEOs might know something their colleagues
don’t, of course. Or it could be that as one gets into
the trenches of transformation, conditions change.
Only 25% of managers think the pace is right, and a
mere 22% of staff agree. Of these, product development staff are the most positive — just over 40% say
the pace is very fast, fast or just right. Management
was guilty of complacency, ignorance of modern
technology, said one respondent. Clueless management, commented another.
But employee skepticism can also impede pace —
even when leadership is on board to promote digital
transformation. There is too much hype, said one
CEO. I can’t push harder because of all the hype and
the overselling from suppliers. I lose my credibility if
sloanreview.mit.edu Figure 5 The biggest transformation traps ppt15 (09) Desire, money and tools are the three big reasons organizations fail to use
technology to make their business better.
No burning platform / no sense of urgency
39% Not enough funding
33% Limitations of IT systems
30% Roles and responsibilities are not clear What are the most
barriers to Digital
as a whole?
Select up to 3. 28% Lack of vision
28% Unclear business case
27% Business units implementing independently in silos
24% Culture not amenable to change
19% Lack of leadership skills
16% Regulatory concerns
Percentages refer to respondents who clicked this option versus total number of respondents who
answered this question. I push it too hard. So we take a slower approach just
to make sure we don’t give the naysayers their way.
The vision thing Digital transformation starts with a vision from top leadership. Where senior
leaders had shared their vision, it had huge buy-in
— fully 93% of employees agreed that digital transformation was the right thing right now for their
companies to do, and 73% strongly agreed.
This idea that a thousand flowers will bloom and
we will all be okay is a great way to get some ideas, but
we have not seen any transformations that happen
bottom up, said George Westerman. They’re all
being driven top down. The big difference between
the companies that are just doing technology initiatives and the companies that are leading a
technology-based transformation is how they’re putting the leadership frameworks in place.
Embracing Digital Technology • MIT SLOAN MANAGEMENT REVIEW 7 R e s e a r c h R e p o r t E m b r a c i n g D i g i ta l T e c h n o l o g y Figure 6 ppt11 Off the pace The pace of digital transformation is too slow — unless you’re the CEO. 50% From your perspective,
how would you rate the
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