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Assessing Digital Transformation Capabilities
by
Bahubali ShahMBA, University of Georgia at Athens, 2008
Bachelor of Engineering (Mechanical), University of Pune, 2003
SUBMITTED TO THE SYSTEM DESIGN AND MANAGEMENT PROGRAMIN PARTIAL FUFILLMENT OF THE REQURIEMENTS
FOR DEGREE IN
MASTERS OF SCIENCE IN ENGINEERING AND MANAGEMENTAT THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
February 2019@ 2018 Bahubali Shah. All rights reserved.
The author herby grants to MIT permission to reproduce and to distribute publicly paperand electronic copies of this thesis document in whole or in part in any medium now or
known hereafter created
Signature redactedSignature of Author:
System Design and Management ProgramJanuary 31, 2019
Signature redactedCertified by:
Dir. Eric RebentischResearch Associate, Sociotechnical Systems Research Center
Lecturer, System Design and Management
Signature redactedAccepted by: -
MASSACHUSETTS INSTITUTE Joan S. RubinOF TECHNOLOGY Executive Director, System Design & Management Program
MAR 14 20191UBRAR........
L LBRARIES
MITLibraries77 Massachusetts AvenueCambridge, MA 02139http://Iibraries.mit.edu/ask
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2
Assessing Digital Transformation Capabilities
byBahubali Shah
Submitted to the System Design and Management Program on January 31, 2019 inPartial Fulfilment of the Requirements for the
Degree of Master of Science in Engineering and Management
ABSTRACT
It is widely believed that we are currently living in the digital age. Advances intechnologies enabling connectivity, data aggregation and analysis, and aritificialintelligence/ machine learning are making it possible to obtain insights into human andmachine behaviour like never before. Companies are rushing to take advantage of thisnew resource called data for competitive advantage. Yet, while many are aiming topursue a Digital Transformation strategy within their organization, there appears to be arange of different opinions that professionals/ experts carry when it comes to identifyingcapabilities required to become a Digital Enterprise. This thesis is aimed at helpingprofessionals in two ways. First, it identifies required capabilities at functional level fromfirst principles. Second, it defines maturity levels for key generic capabilities at thecompany level for professionals to measure and guide their organization's progresstowards becoming a Digital Enterprise.
Thesis Supervisor: Dr. Eric Rebentisch
Title: Research Associate, Sociotechnical Systems Research CenterLecturer, System Design and Management
3
Acknowledgements
I would like to express my gratitude to my thesis supervisor, Dr. Eric Rebentisch, for his
time and continuous guidance since I began working on this thesis. Many of the
thoughts, ideas and questions that I deliberated upon during the process germinated
from my experience of working with him as a Research Assistant for the Brightline
Initiative during the Spring of 2018. Thanks are thus also due to the team at the
Brightline Initiative for being contributors to the origins of this work.
My time at MIT was one of continuous learning. It has beyond any doubt exceeded my
expectations of what I could learn coming into an institute after working for nearly a
decade. It would only be appropriate that I acknowledge the SDM team for accepting
me into the program and expanding my knowledge base all through the journey.
Finally, I would like to thank my family for their love, care and patience while I spent
time studying and being away from them. This thesis is dedicated to you.
4
Table of Contents
1. INTRO DUCTIO N.................................................................................................... 6
1.1 Background and Motivation................................................................................ 6
1.2 Thesis Structure ................................................................................................. 8
2. FUNDAM ENTALS AND DEFINITIONS................................................................. 9
2.1 W hat is Digital Transformation? ..................................... . .. ... .. ... .. .. .. .. ... .. ... .. .. .. . . . 9
2.2. W hy do com panies want to pursue Digital Transform ation?............................ 14
2.3 Assessing the status-quo: Where do companies stand today?.........................17
2.4 W hy is Digital Transformation challenging? ..................................................... 20
3. CAPABILITIES O F A DIGITAL ENTERPRISE.................................................... 24
3.1 Literature Review ............................................................................................. 24
3.2 Identifying Capabilities from First Principles ...................................................... 29
3.3 Results of the research .................................................................................... 36
4. MATURITY LEVELS FOR KEY CAPABILITIES ................................................. 42
4.1 Defining a Maturity Model................................................................................ 42
4.2 Defining M aturity Levels for key capabilities.................................................... 45
4.2.1 Approach and methodology ....................................................................... 45
4 .2 .2 R e s u lts ........................................................................................................... 4 6
4.2.3 Using Maturity Level descriptions............................................................... 76
5 . S U M M A R Y .............................................................................................................. 7 7
6. BIBLIOG RAPHY ................................................................................................. 79
5
1. INTRODUCTION
1.1 Background and Motivation
Many companies today claim to be in the middle of a Digital Transformation of some
sort. Whether it is a start-up that is out to disrupt traditional industries outright, or a
large, established company wanting to defend its market position at the least, increasing
adoption of technology seems to be a strategic move of choice. Several well-known
companies are even repositioning themselves as Digital Enterprises. The term "Digital
Transformation" is often cited by companies and its executives in their media
interactions or annual reports as being on the top of their agenda. However, there
seems to be little consistency in how these terms are used or what exactly they intend
to mean.
On another front, outcomes from Digital Transformation appear to be mixed as well.
While some start-ups have made it really big, there are many that have failed. Likewise,
many established companies that have been investing in Digital Transformation in
anticipation are not witnessing the returns they would like to see on their investments.
The motivation for my thesis originates from a simple question: why do companies fail at
implementing their Digital Transformation strategy? During my previous stints at
consulting companies, I had opportunities to work with organizations on engagements
that included strategic planning and transformations. We did extensive analysis, utilizing
many well-known frameworks and extensive data sources to come up with a plan that
seemed logical to us. I assume this must also be true of the companies I never worked
with; they would have employed "skilled" professionals to perform this task regardless of
whether they were company employees or outside consultants. So, if many companies
applied rigor in their strategic planning process, why did they not recognize the benefits
envisaged?
Part of the answer became clear to me when I took up a role in the industry. It was here
that I had first-hand experience in strategy execution. I gained insights on many things
that did not go to plan - both internal and external. It occurred to me that there were two
6
things that were of paramount importance if a company has to come close to realizing
its strategic objectives. First, it needed a sound process that could ensure that both
formulation and deployment of strategy takes place in a fool-proof manner (to the extent
possible). This implies understanding and developing capabilities desired to move from
the current state to a desired future state. Second, it needed to have mechanisms to
learn and periodically adapt as future unfolded. Uncertainty is a given and any
execution plan that "sticks" to the original without accommodating the discoveries along
the way is very likely to be deficient.
However, the question is whether the above can also be said about Digital
Transformation. Or is Digital Transformation different in any way that entails building
specific capabilities and adopting different approaches? It is with the above background
that I mention my key research questions below.
* What is a Digital Enterprise?
" What is Digital Transformation and how is it different from other transformations?
" What challenges are associated with effective implementation of Digital
Transformation strategies?
* What capabilities do organizations need to build to become a Digital Enterprise?
" How do companies know where they are in their journey to acquiring the
capabilities to become a Digital Enterprise?
7
1.2 Thesis Structure
The thesis is structured in the following manner:
Chapter 2 is dedicated to understanding the meaning of the term "Digital
Transformation" (DT). It clarifies the distinction between several related terms and
outlines the reasons why companies are drawn to DT. Evidences in the form of survey
results and research reports are included to assess the status quo with respect to DT
and note key reasons why companies find it challenging to implement DT in their
organizations.
Chapter 3 introduces the meaning of the word capability. It describes the approach
taken to identify key capabilities of a Digital Enterprise from first principles. Results of
research are presented.
Chapter 4 presents maturity levels for key capabilities identified in Chapter 3. It begins
with an explanation of a maturity model and subsequently explains the approach taken
to defining the maturity levels for key capabilities.
Chapter 5 concludes the thesis by noting additional work required in this field.
8
2. FUNDAMENTALS AND DEFINITIONS
2.1 What is Digital Transformation?
As alluded to earlier, the term "Digital Transformation" (DT) appears to be loosely used
by professionals. Several words that sound similar but have subtle differences in
meanings are often confused with DT. These include digital, digitization, and
digitalization among others. It is important to understand the meaning of these words
before we proceed to understanding the meaning of DT.
Digital
Gartner defines the word "digital" as "the representation of physical items or activities
through binary code". Merriam-Webster defines "digital" as "electronic" or something
"composed of data in the form of especially binary digits". The word "digital" is thus an
opposite of analog, which is often used to describe a device that has a continually
varying output proportional to the input.
Digitization
Digitization, on the other hand, refers to the process of conversion. It is defined as
"changing from analog to digital form, also known as digital enablement" by Gartner. An
example of digitization in this sense would be the conversion of old records from
physical (paper) to electronic form. A broader definition is offered by Cisco, a leading
technology company. It defines digitization as "the connection of people, process[s],
data and things to provide intelligence and actionable insights enabling business
outcomes" (Surber, 2016). In both cases, digitization (of anything) implies it being
available in electronic form.
Digitalization
The word "Digitalization" is somewhat similar to DT and is often used interchangeably.(i-
Scoop, 2018) Gartner defines Digitalization as "the use of digital technologies to change
a business model and provide new revenue and value-producing opportunities; it is the
process of moving to a digital business". Digitalization represents a more radical change
9
that could bring advantages beyond efficiency to an organization. This will become
more clear as we explore DT in the following sections.
Digital Transformation
Several consulting companies and research organizations have attempted to provide a
clear definition of DT. A study conducted jointly by MIT and Capgemini Consulting
defined DT as "the use of technology to radically improve performance or reach of
enterprises"(MIT & Capgemini, 2011). This definition does well to underpin the
importance of technology for improving performance in a significant way. However, it
does not talk about the different facets of transformation or the components that make
up the transformation as such.
As per McKinsey, "digital is less about any one process and more about how companies
run their business"(Schallmo & Williams, 2018). This definition appears to emphasise
operations and outcomes while viewing technology as an enabler. It breaks down DT
into the following three attributes (Dbrner & Edelman, 2015):
" Creating value at the new frontiers of the business world: This includes either
developing new businesses or identifying and chasing new value pools in
existing sectors
" Creating value in the processes that execute a vision of customer experiences:
This refers to leveraging new capabilities for improving how customers are
served
* Building foundational capabilities that support the entire structure: This refers to
technological and organizational processes that allow an enterprise to be agile
and fast
Gartner's CIO Agenda report takes a historical perspective in explaining how role of
enterprise IT has emerged and is contributing to digitalization. Its definition of
digitalization is similar to those offered by McKinsey and MIT-Capgemini above. It states
that the Y2K and the dot-com bust brought the first era of enterprise IT to a close and
ushered it in the second "industrialization" era of processes, services, standards, smart
sourcing, IT transparency, etc. It claims that we are now entering the third "digitalization"
10
era that is characterised by "moving away from running IT like a business within
business into a period characterized by innovation beyond process optimization,
exploitation of a broader universe of digital technology and information, more-integrated
business and IT innovation, and a need for much faster and more agile capability"
We are here
Focus
Capabilities
Engagement
Outputs andoutcomes
Business models
Digitalization
Digital leadership
Treat colleaguesas partners; engaged
with external customers
Digital business innovation;new types of value
Emerging role of enterprise IT and its contribution to digitalization. Source: (Gartner,
2014)
In summary, DT is broad in scope and goes beyond the limited changes implied by
digitization. The MIT-Capgemini Consulting report lists three building blocks of DT.
These are captured in the below graphic. These encompass strategies and initiatives to
improve customer experience, operational processes and business models. The
transformation is enabled by digital capabilities that include unified data & processes,
analytics, business & IT integration and solution delivery.
11
IT craftsmanship
Technology
Programming,systems management[Isolated; disengaged 1
internally and externally
Sporadic automation andinnovation; frequent issues
IT industrialization
Processes
l[T management,service management
Treat colleagues ascustomers; unengagedwith external customers
Services and solutions;efficiency and effectiveness
___1k
I I
Building blocks of digital transformation. Source: (MIT & Capgemini, 2011)
Digital Business Transformation
The words "Digital Business Transformation" and "Digital Transformation" seem to be
synonymous. Gartner defines Digital Business Transformation as "the process of
exploiting digital technologies and supporting capabilities to create a robust new digital
business model" ("Gartner IT Glossary," 2018). Its view of Digital Business
Transformation is thus similar to McKinsey's in that both imply broad and radical
change.
Digital Transformation vs Business Process Reenqineerinq
The word "transformation" in DT could lead some to think that it is similar to Business
Process Reengineering (BPR) (Schallmo & Williams, 2018). According to Hammer and
Champy, "BPR is the rethinking and reengineering of business-related processes to
reduce costs and improve products and services". Authors Schallmo and Williams state
in their book that while BPR's focus is mainly on automating rule-based processes, the
objectives of DT are are obtaining new data and using this data to reimagine these old,
12
rule-based processes (Schallmo & Williams, 2018). They cite the example of how
Airbnb leveraged data to disrupt the rule-based processes in the hotel industry.
Digital Enterprise
Given all the definitions thus far, how do we then define a Digital Enterprise? Would it
be a company that uses digital technology in any form to conduct its operations? If so, it
will be difficult to imagine a company that is not a Digital Enterprise today. One would
believe that a majority of companies use digital technology for communications (e.g.
websites, email, etc) at the least. Companies with complex operations often also use an
Enterprise Resource Planning software for managing their operations (e.g. SAP). More
sophisticated ones' leverage technology for innovating new products or services (e.g.
Facebook, Microsoft, etc). While one could argue that companies adopting digital
technology for any of the above use cases can potentially call themselves as a Digital
Enterprise, the below definition by Jun Xu offers a more comprehensive description.
"..digital enterprise is defined as 'using digital technologies and networks in the
activities of buying and selling goods and services, servicing customers,
collaborating with business partners, conducting communications and
transactions within the organization" (Xu, 2014)
This definition is useful because it clearly specifies the extent to which technology is
embedded in a Digital Enterprise. It implies that a Digital Enterprise is one that is not
limited in its use of technology, but it finds many applications for technology across
different functions instead. It can also be inferred that a company, if beginning at a state
of modest technology adoption, needs to pursue Digital Transformation in order to
become a Digital Enterprise.
13
2.2. Why do companies want to pursue Digital Transformation?
Having discussed key terms and claimed that many companies are pursuing DT, a key
question that arises is - why do companies want to pursue DT? In order words, what
are the benefits of being a Digital Enterprise?
In general, companies feel the need to transform when they perceive business as usual
not to be good enough. Companies make profit by offering a product or a service that
customers need. They compete among each other on various dimensions such as cost,
quality and customer service in order to survive. The companies that perform better on
these dimensions tend to lead the market. The challenge that all companies face,
however, is that their internal and external environment is always changing. Customer
needs, competitive behaviour, regulations, and political situations are uncertain and
always in a state of flux. Likewise, the status of important internal resources such as
equipment, technology and labour could become unfavourable for various reasons.
These uncertainties are hard to predict. As such companies tend to focus more on
meeting short-term needs. However, to succeed at the marketplace in the long term,
companies need to constantly redefine (transform) themselves to stay relevant to
prevailing market conditions (Weil & White, 1994).
In the current times, factors driving the digital revolution - such as connectivity among
devices, abundance of data, low costs of computing, and evolution of key technologies
such as Artificial Intelligence and Machine Learning - are making it possible to access
and analyse huge amounts of data that was erstwhile considered impractical. The
trends are secular across industry sectors and seem to be irreversible, thereby causing
user-specific data to emerge as a vital resource that can be tapped for competitive
advantage by companies. While the technology savvy leaders are moving fast to grab
the first mover advantage, the followers are playing catch up not to be left too behind in
the race.
14
There have been ample publications, especially from research and consulting
companies, that have estimated benefits that DT stands to offer. Some of these are
presented below.
* Companies that become digital enterprises can look forward to a 26% increase in
profitability, 12% increase in valuation, 9% increase in revenue to asset ratio -
The Digital Advantage, Capgernini Consulting, 2015
" The top three reasons for embarking on a digital initiative are: 49% improved
customer satisfaction, 44% better workforce productivity, 41% improved
customer experience - Exploiting Software Advantage, Freeform Dynamics, 2015
" Cloud computing alone can lead to IT cost savings of 25 to 50 percent - Digital
Transformation of Industries White Paper, World Economic Forum, 2016
" Annually, big data will reduce computing costs for companies by 33%, storage
costs by 38%, and bandwidth costs by 27% - Internet Trends Report, KPCB,
2015
" Companies that make extensive use of customer analytics see a 126% profit
improvement over competitors - McKinsey, 2015
" The average initial increase in profits from big data investments was 6%,
increasing to 9% for investments spanning five years - Big Data Is Getting a
Better Read, McKinsey, 2016
The motivation for pursuing DT is not just the upside. Companies that do not transform
themselves as per changing times face an existential threat. Some noteworthy quotes
that highlight the level of ongoing disruption are included below.
0 Since 2000, 52% of companies in the Fortune 500 have either gone bankrupt,
been acquired or ceased to exist - Forbes, Cloud Is The Foundation For Digital
Transformation, 2014
0 75% of S&P 500 will be replaced by 2027 - Symposium India, Gartner, 2014
0 25% of businesses will lose competitive ranking due to digital incompetence - IT
Workforce Trends Survey, Gartner, 2013
15
* 84% believe big data analytics will "shift the competitive landscape for [their]
industry" within a year and 87% believe so in three years. In addition, 89%
believe a lack of big data adoption will create a risk of losing market share, and
75% cite growth as the key value of analytics - Industrial Internet Insights Report,
Accenture, 2014
Companies are experiencing the pressure to transform not just from customers or
competitors, but also from their own employees who are demanding modern
approaches or increasing levels of technology adoption (refer chart below).
U High 0 Medium
72%
32%
Customers Competitors Employees
Pressures for change. Source: (MIT & Capgemini, 2011)
16
2.3 Assessing the status-quo: Where do companies stand today?
Many of the research and consulting companies that have made predictions about DT
have also conducted surveys to understand how companies are faring with respect to
DT. The surveys have attempted to gauge participation levels as well as outcomes of
DT efforts. Some relevant survey findings and related observations are captured below.
1. A wide range of industries are pursuing DT: The digital revolution has touched
almost all sectors and companies. As per Forbes, virtually every Forbes Global
2000 company is on some sort of digital transformation journey (B. Rogers,
2016). A survey of DT efforts across industries in European Union was
conducted by Strategy& in 2011. Their survey found that while a range of
industries are pursuing DT, Financial Services & Insurance and Computers &
Electronics are leading the pack whereas Construction and Hotels & Restaurants
were lagging. Similar results were also found by a global survey conducted by
MIT-Deloitte in 2014.
0 5 10 15 20 25 30 35 40 -45 50 55
Financial services & insuranceComputers & electronics
Media & telecommunicationsAutomotive
Equipment & macinery
Trade & retail
Cwenicals
Basic manufacturing
Utiliies
Business & administrative services
Transportation & logistics
Consumer goods R -R
Real estate, rental & Ieaslng
Construction .
Hotels & restaurants A43.3
Index average
*Liading5Midfld
Lagy ng
The industry digitization index (2011). Source: (Strategy&, 2011)
17
2. Organizations are in the early to middle stages of DT: A survey conducted by
MIT-Deloitte in 2014 of more than 4,800 business executives across 27
industries and 129 countries worldwide found that -70% of participants believed
their companies were either in the early or developing stages of becoming a
Digital Enterprise. It is also noteworthy that these participants believed lack of
strategy and insufficient technical skills as being top barriers to their companies
becoming a Digital Enterprise.
tekspodents to tale their ccempay aa*ns a ln d organzlnea -f-f uansfomed by ds9na $ and Ca0 6t*e - Ca a .C 1LA I to 10 Three grouvs emerged: ~earhy" ' 1 "develowng' U-
arid raat.Lmriq U-10),
MM~g
Survey feedback on
While a k of strategy hinders earty anddevelopng =-rpams. secunty mses becme a greater
awcrn "O nwunrq diquta cc~p -gs
ft S- ia OA 3, Lw oft *WMg too $.wty&S1. mai 3 ulia 5af 6R 3 1~td 1 1 0OW~k
digital transformation - status and barriers. Source: (Kane et al.,
2015)
3. Many DT efforts fail: As per McKinsey's 2018 Global Survey on Digital
Transformations, only 16% of the total -1,800 respondents said their
organizations' digital transformations have successfully improved performance
and also equipped them to sustain changes in the long term. An additional 7%
said that performance improved but that those improvements were not sustained.
These participants represented a wide range of regions, industries, company
sizes, functional specialties, and tenure. The results of this survey were also
significant in that they reported poorer results of DT when compared to the 30%
success rate of organizational transformations in general. There have been
similar other studies that found companies reporting that their outcomes of DT
efforts were short of expectations.
18
Going by the above, we can conclude that while most companies are pursuing DT,
many have not experienced the returns on DT efforts that they would have liked. The
fact that the success rate of DT efforts seem to be inferior than other organizational
transformations is a cause of concern. A relevant question would then be - what is it
about DT that makes it so challenging?
19
2.4 Why is Digital Transformation challenging?
Many studies attribute the challenge of DT to its complexity and its nature of being a
simultaneous multi-dimensional change. For example, Ismail et al suggest that the
degree of complexity of a DT exceeds that of previous IT-enabled transformations
(Ismail, Khater, & Zaki, 2017). They conclude that DT needs to address the strategic
roles of new digital technologies and capabilities for successful digital innovation in the
digital world. They define DT as the process through which companies converge
multiple new digital technologies, enhanced with ubiquitous connectivity, with the
intention of reaching superior performance and sustained competitive advantage, by
transforming multiple business dimensions, including the business model, the customer
experience (comprising digitally enabled products and services) and operations
(comprising processes and decision-making), and simultaneously impacting people
(including skills talent and culture) and networks (including the entire value system).
Ismail et al also cite several other reasons that make DT difficult. These include lack of
clarity about the different available options and elements that managers need to
consider in their transformation approach, leadership challenges such as lack of
urgency, vision and direction, and institutional ones related to the attitudes of older
workers, legacy technology, innovation fatigue and politics.
A similar view is shared by David Rogers in his book on DT. He suggests that digital
technologies are transforming not just one aspect of business management but virtually
every aspect. They are rewriting the rules of five key domains of strategy - customers,
competition, data, innovation, and value. Companies that were established before the
Internet need to realize that many of their fundamental assumptions must now be
updated. Responding to these changes requires more than a piecemeal approach; it
calls for a total integrated effort (D. Rogers, 2016).
Hess et al note that DT is a complex issue that affects many or all segments within a
company. Managers have to simultaneously balance the exploration and exploitation of
their firms' resources to achieve organizational agility -a necessary condition for the
20
successful transformation of their businesses. They believe that at present, managers
often lack clarity about the different options and elements they need to consider in their
digital transformation endeavours. As a consequence, they risk failing to consider
important elements of digital transformation or disregarding solutions that are more
favourable to their firms' specific situations, which could have unintended adverse
consequences (Hess, Benlian, Matt, & Wiesbock, 2016).
Bilgeri et al conducted in-depth expert interviews across 11 companies with companies
across the Internet of Things (loT) ecosystem and identified six main issues regarding
how DT will affect large manufacturing companies' overall organizational structure.
According to their analysis, the core of the problem lies with the uncertainty executives
face of where and how to allocate and align digital capabilities within their organizational
structures (Bilgeri, Wortmann, & Fleisch, 2017).
Authors Oswald et al share a summary of two studies that identified major hurdles that
companies are facing in realizing the benefits of DT. The summary is shared below. It
can be inferred that while the hurdles are of various nature, those pertaining to People
and Organization seem to be among the dominant ones. This emphasises a need to
also look at the problem as one that relates to general business transformation and
change management. Indeed, as MIT-Capgemini Consulting study concluded "Whether
using new or traditional technologies, the key to digital transformation is re-envisioning
and driving change in how the company operates. That's a management and people
challenge, not just a technology one." (MIT & Capgemini, 2011).
21
The biggest challenges for digital tran4ormation programs.
Study 1: MIT Sloan Management Review and Study 2: McKinsey & Company (BughinCapgemini Consulting (Fitzgerald et at 2013) et al 2015)I. No sense if urgency 39% 1. Lac f internal leadership or iaL- 31%
entfor digital projects
2. Not enough funding 33% 2. Lack of data and understanding of 125%how digital trends affect [ Icompetitiveness
3. Limitations of IT systems 30% 3. Inability to keep pace with faster i25 %speed if business under digital
4. Roles and respomnibilities are not 28 % 4. Inability to adopt an experimenia 15 %Clear dton mindset thai is key for best
pray. iles5. Lack of vision 28% 5. Lack of dedicated funding for dig 24 %
ital initiatives6. Unclear business case 27% 6. Misaligned or competing interests 23 %
between digital projects and tradi-tional businesses
7. Business units implementing 24% 7. Lack qf senirvnwnagenenr 121 %independently in silos involvement or desire to change cur-
rent practices8. Culture not amenable to change 19% 8. Lack of technology infrastructure 21 %
oand insufficient IT systems I9. Lack of leadership shills 16% 9. Organ tadonal structure not 120%
designed appropriately fir digital
10. Regulatory concerns 9% 10. Busines pmceses too inflexible 19%to take advantage of newopportunities
Perent of respondents Study 1: N= 159 executives and managers. Study 2: N =987 C-levelexecutivesItalic text indicates People and organizational related challenges
Major hurdles to realize benefits of digitization. Source: (Oswald & Kleinemeier, 2017)
Oswald et al also believe that the widespread deployment and adoption of digital
technologies has major organizational implications. They present the following six
theses with respect to organizational implications of DT:
a. Digitization changes the way of working
b. Digitization increases the dynamic of change
c. Digitization requires new skills and competencies
d. Digitization requires new forms of leadership
e. Digitization requires new organizational capabilities
f. Digitization changes the organizational culture
22
Finally, Nadeem et al note that business digital strategy, digital capabilities and
implementation of right set of organizational capabilities are critical requirements for an
effective and efficient enterprise transformation towards creating superior electronic-
commerce customer-centric services in the digital era (Nadeem, Abedin, Cerpa, &
Chew, 2018).
Considering the discussion above, one can conclude that DT, although distinct in
certain ways, is fundamentally a business transformation which in turn is described as
the orchestrated redesign of the genetic architecture of a corporation (Morgan & Page,
2008). Gouillart and Kelly in their book "Transforming the Organization" mention that a
business transformation initiative achieves fundamental changes simultaneously in four
respects:
1) changes in the company's view of itself and perceptions of the business situation
2) changes in the internal configuration and capabilities of the organization
3) changes throughout the value chain via improved alignment with marketplace
opportunity
4) changes in people-based matters such as behavioural factors and skill-sets
Overall, we conclude that DT is a complex multi-dimensional change that companies
find challenging for several reasons, one of which is not having a good understanding of
the capabilities required for transformation. In the next section, we attempt to identify
important capabilities a company needs to focus on in pursuit of its DT journey.
23
3. CAPABILITIES OF A DIGITAL ENTERPRISE
3.1 Literature Review
So far, we have introduced DT and explained some of the reasons why companies are
finding it difficult to execute it in their companies. The focus of the first part of this thesis,
as mentioned before, is to explore and understand the capabilities required to become a
Digital Enterprise. Knowing specific capabilities that a company needs to develop in
order to become a DE would be useful to its managers in managing the transformation.
In this section, we begin with an attempt to understanding the meaning of the word
"capability" and follow up with a review of capabilities required to become a Digital
Enterprise as suggested by different authors and experts.
The term capability is widely used and is assumed to have been understood. However,
business capabilities are often confused with business processes and resources
(Michell, 2014). Michell conducted an extensive literature search to review and
categorize existing definitions of the term "capability". A summary of his findings are
presented below.
Ref C: Defnition of Capability Xey Factors Xey Component Source
1 what a businessfmction does and what its what a function does a nd its Capability is related to workfunctions and lomann,-externally visible behaviour is behaviour behaviour 2006
2 itsfundamental purpose in terms ofthe outcomes purpose, outcome, activity Capability relates to activity outcomes Merrifield etof the activity al, 2008
3 ofrm's capacity to deploy Resources, usually in capacity to deploy Capability is a capacityto use resources Makadok,combination, using organizational processes, to resources using 2001effect a desired end. organisational processes
4 operations strategy involves exploiting exploiting resources Capabilities are functions of resources Slacket al,capabilitiesofoperations resources' capabilities 2004
5 an organiation' abiliry to ssemble. Integrate, ability to assemble and Capability as an ability to do coordinate Sharadwa,and deploy valued resources integrate resources resources for action 2000
6 process capability describes therange oferpected results of a process Capability relates to the result of a process Paul eta 1,results that can be achieved byfollowing a 1993software process
7 theability that an organisation, person or systems ability of a person or system Capability depends on resource Josey et al,
possesses 20099 abilities withina firm which can be linked abilities, process, outcome Capability as ability related to the specific Beimborn et
together asbusiness processes in order to enablea outcomeof a business process al, 2005specift purpose or outcome'
9 capability is the capacity of a team ofresources to capacity of resources to capability relates togroups of resources Grant, 1991perform some task oractivity' perform tasks
10 capabllities are'formed through the coordination coordination of activities capabilities depend on process l'afeez et al,and integration of activities and processes and processes integration/coordination 2002
Content comparison of Capability definitions. Source: (Michell, 2014)
24
Michell observed the following key themes about business capabilities from the
comparison of various definitions:
* Capabilities relate to work activities
* Resources possess capability
" Capabilities are the potential for action
" Capabilities relate to outcome/ value
He further notes that capabilities must provide the ability to deliver an outcome or a
change adding value to the customer.
McGee notes that capabilities are firm specific. They are developed internally against
the specific needs and ambitions of each company. They often depend on tacit
knowledge, are path dependent in that they emerge and develop over time, and are not
in the form of assets that can be traded (McGee, 2016).
Following a resource based view, Henkel et al. define a capability as the ability of an
organization to manage its resources to accomplish a task. They imply that the
organization must have resources as well as the right capacity of those resources to
perform the tasks. They use the notion of resource types (e.g. people, infrastructure,
etc) and tasks in the form of execution templates (e.g. a documented manufacturing
process). Further, they categorize capabilities as main capabilities and sub-capabilities.
They consider a main capability of an enterprise to be the one that produces value to
the enterprise's external stakeholders for which they are willing to pay (Henkel, Bider, &
Perjons, 2014).
On comparing the definitions and views of different authors, we can conclude that
capabilities are a firm's ability to manage its resources to create outcomes of value. We
now review the different capabilities required by a firm to become a Digital Enterprise as
suggested by experts.
25
1. As per the MIT - Capgemini study, digital capabilities are a fundamental building
block for transformation in customer experience, operational processes, and
business models. The study identifies the following key capabilities:
a. Unified Data & Processes: This refers to a digital platform of integrated
data and processes which would enable generation of a common view of
customers or products and overcome functioning in silos. This would do
away with disparate systems, data definitions, and processes that exist
within a company
b. Solution Delivery: This refers to the capabilities needed to modify
processes or build new methods onto the data and process platform.
Solution delivery requires effective methods and strong skills in IT,
especially those pertaining to the use of emerging digital technologies and
practices. This could entail partnerships with external vendors as well
c. Analytics: This refers to combining integrated data with powerful analysis
tools for gaining strategic advantage over competitors
d. Business and IT integration: This refers to strong integration between
technology and business executives. The emphasis is on trust and shared
understanding between the two while pursuing DT
While these are a good list of capabilities, they seem to be IT-focused.
2. Oswald et al suggest the following list of capabilities from a talent/ organization
perspective (Oswald & Kleinemeier, 2017)
a. Digital skills & competencies in employees, built either by hiring or training
b. A formal organization with new roles/ titles (e.g. Chief Digital Officer)
c. Aligned KPIs and incentive systems
d. A system to monitor adoption process
e. Change management
3. IBM Institute for Business Value suggests the following six capabilities of DT
a. Business model innovation: building customer value as a core
competency
26
b. Customer and community collaboration: engaging with customers fully via
various channels and touch points
c. Cross-channel integration: integrating digital and non-digital channels
d. Insights from analytics: taking advantage of predictive power of Big Data
and advanced analytics
e. Digitally enabled supply chain: optimizing and integrating all components
of supply chain
f. Networked workforce: getting the right skills around the right business
opportunities
4. As per McKinsey, certain capabilities-especially those that build foundations for
other key processes and activities-are more important than others for digital
success. Foremost among them are the modular IT platforms and agile
technology-delivery skills needed to keep pace with customers in a fast-moving,
mobile world. They believe that companies having a higher digital quotient than
others have an ability to engage customers digitally and to improve their cost
performance in four areas: data-empowered decision making, connectivity,
process automation, two-speed IT (i.e. companies can operate both a
specialized, high-speed IT capability designed to deliver rapid results and a
legacy capability optimized to support traditional business operations) (Catlin,
Scanlan, & Willmott, 2015)
5. Nadeem et al believe that currently there is an inconsistent understanding of
what constitutes organizational capabilities and a digital business strategy in a
digital transformation process. They conduct a systematic literature review on a
selected set of journals to explore what entails organizational capabilities and
digital business strategy. They conclude that dimensions of organizational
capabilities include digital leadership, agile & scalable operations, digitally
enabled CEX, digital artefacts, flexible and scalable digital platforms, internal and
managerial capabilities, external collaboration of ecosystem of digital platforms,
27
dynamic capabilities, plug & play capabilities and operational capabilities
(Nadeem et al., 2018)
On reviewing the definitions and views shared by different authors, we observe that
some approaches identify required capabilities from a functional perspective (e.g. IT-
centric, HR-centric), others take a practical approach deriving observations from
industry surveys or consulting assignments, while the rest seem to conclude basis
literature review. A list of required capabilities derived from first principles seems to be
missing. The first part of this thesis aims to undertake an endeavour to fill that specific
gap. Over the next couple of sections, we describe the approach taken and the
outcomes derived.
28
3.2 Identifying Capabilities from First Principles
Approach and Methodology
We adapt a method proposed by Michell in his paper aimed at bringing clarity in
defining capabilities within an enterprise in general (Michell, 2014). The method, in
summary, is as under -
1. Identify key business processes that create value in a company
2. Identify resources consumed or transformed in each of the processes
3. Then, identify and list capabilities required by the driving resource to coordinate
other resources and execute the processes creating value
He illustrates the method using a simple example of a pie serving restaurant. The
capability template and its application to the example are presented below:
Capability Template (above) and Example (below). Source: (Michell, 2014)
Capability f(P, Rt, Ri) to: serve customised pies to order
Driving Resource: Maitre de
Value: hand crafted country pies
Process (P) Tangible Resources (It) Intangible Resources (R)Pie Maki ng master chef, pastry chef, knowledge of pies, cooking s kills
cookRes tarant serv ice waiter service skills
Bill ng front of house, order knowl edge of order value,..... .... ... .. ... system, till ... simple mat he matic s
We use this approach to arrive at a list of important business capabilities that a
company must consider building while aiming to execute a digital transformation
29
Capability (P, Rt, R)to: action/deliveroble/conditions
Driving Resource. process owner
Value: related to customer need and business objectives and identifiable
productsservices
Process (P) Tangible Resources (Rt) Intangible Resources (Ri)
description from driving, passive, activeprocess architecture
strategy. Before we do that, however, it is necessary to explain the concepts that
underpin the approach taken by Michell in his paper and by us in our endeavour.
Value
As per Michell, value can be simply a statement of the benefit. However, value should
relate to customer needs and expectations and also to the business objectives. He
suggests that value should be linked to identifiable products and services to enable a
meaningful inventory of capability to be established that can help a business understand
how value is developed by combinations of different resources and processes.
As per Valentina et al., sources and the contents of value creation may vary according
to the different "targets or users for whom value can be created" Therefore, the concept
of value regards not only financial performance but also market competitiveness, human
resources involvement and commitment (talents' advantages and loyalty) and reputation
(brand and image) (Della Corte & Del Gaudio, 2014)
For our endeavour, we take value as an expression of benefit to the internal or external
stakeholders of an organization
Resources
Michell defines a resource as something having a capability for interaction with the
environment to create value. He categorizes resources as tangible and intangible and
summarizes their properties as under:
30
Tangible/ Intangible Resources. Source: (Michell, 2014)
Jay Barney's views on resources provide us greater depth and clarity. He mentions in
his paper titled "Firm resources and sustained competitive advantage" that (Barney,
1991):
* Firm resources include all assets, capabilities, organizational processes, firm
attributes, information, knowledge, etc. controlled by a firm that enable a firm to
conceive of and implement strategies that improve its efficiency and
effectiveness
" Firm resources can be conveniently classified into three categories:
o Physical capital resources: these include physical technology used in a
firm, firm's plant and equipment, its geographic location and access to raw
materials
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Tangible ResourcesPeopleMaterialsMachines (passive/ICT enabled)ArtefactsToolsCodified information and Knowledge
Documents/forms/drawingsPropertiesCan be physically touchedObservably transformedObservable capability of physicalaction/useIntangible ResourcesSoftwareKnowledgeEncoded information/dataIntellectual propertyCulture/valuesSkillsBehaviourPropertiesCannot be physically touchedNot observably transformedNon observable capability for action/use
o Human capital resources: these include training, experience, intelligence,
judgement, relationships, insight of individual managers and workers in a
firm
o Organizational capital resources: these include formal reporting structure,
formal and informal planning, controlling and coordinating systems as well
as informal relationships within the firm and between the firm and its
environment.
Henkel et al proposed an alternative definition of resources of an organization as "the
products an organization owns, its personnel skills, its processes, and the information it
controls" (Henkel et al., 2014)
Grant proposes to use "resources" to describe inputs that can, in general, be purchased
on open markets and customized for use by the purchasers (McGee, 2016)
It is interesting to note how different authors look at resources differently. We observe
that some of them consider capabilities and processes as resources too. However, for
the purpose of our endeavour, we proceed with Michell's view of resources. He
differentiates between resources and capabilities by suggesting that capabilities are the
potential for action whereas resources have capabilities for interaction with the
environment to create value. Michell also categorizes resources on another dimension
based on their role as driving resource, utilized resource and consumed resource.
Driving resources are very often intelligent resources that actively drive the process and
coordinate the value added transformation. Examples of driving resources would thus
include people and intelligent machines. Utilized resources are those which are utilised
to transform the inputs e.g. a tool. Finally, consumed resources are those (usually) input
resources that get consumed as part of the conversion process, e.g. the solder used in
soldering an electrical component.
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Capability
Michell notes that capabilities provide the ability to deliver an outcome or a change
adding value to the business/ customer. They are thus required by the driving resource
to transform/ consume other resources while undertaking activities/ processes that add
value. He suggests that capabilities are realized by interaction between resources and
are inextricably linked to the processes and that the capabilities can be named using a
verb. For example, a production line has the capability to manufacture by consuming/
transforming a set of resources and following certain activities/ processes.
As per Offerman et al., skills differ from capabilities in that skills refer to the abilities of
persons, while capabilities, processes, and resources refer to organizational
components. They agree with Homann's and Wigotzki's definitions of business
capability as "a particular ability that a business may possess or exchange to achieve a
specific corporate goal" (Offerman, Stettina, & Plaat, 2017).
Brits et al compile the following capability types that aim to fulfil organizational goals:
1. Functional capabilities: they deepen functional knowledge (e.g. research and
development, manufacturing knowledge and marketing expertise) gained through
trial and error and experiments.
2. Integral capabilities: Integral capabilities bind together different functional
capabilities and also absorb knowledge from external resources and use them
productively
3. Strategic capabilities: Strategic capabilities, above and beyond basic capabilities
that enable the organizations to run as businesses, have three distinctive
characteristics:
o Of value to the customer (externally focused);
o Better than that of the majority of other competitors; and
o Difficult to imitate or replicate
4. Dynamic capabilities: these are organizational routines of strategic nature
through which firms obtain new configurations of resources when markets
emerge, collide, divide, evolve and die (Brits, Botha, & Herselman, 2007)
33
Leonard (Leonard, 1998) analyses the nature of a capability and concludes that core
capabilities "comprise at least four interdependent dimensions" as follows:
o Physical technical systems - machinery, databases, software systems etc.
o Managerial systems - systems for the management of operations, including
operation of technical systems
o Skills and Knowledge (systems) - systems for the maintenance of personal
and team skills and knowledge
o Values and Norms - systems for the regulation of behaviours and objectives
in organizations
The above perspectives are useful in thinking about different capabilities when we set
out to develop a capabilities list for Digital Enterprises from first principles. We begin by
identifying capabilities for DT at functional level and then generate a list of generic but
important capabilities a company needs to focus on. The steps followed are mentioned
below:
1. First, we define the value the company expects to derive out of a given digital
transformation initiative at the functional level. Several management consulting
companies have described the value DT offers to different business functions in
publications posted on their websites. We review these publications and articulate
the value in a concise manner for each function. The value identified could be to the
external stakeholders (i.e. customers) or internal stakeholders (e.g. employers) and
is largely generic to a business organization (i.e. not necessarily specific to an
industry or a company)
2. Once the value is identified, the next step is to list the sequential operational steps
involved in process of creating the said value using general understanding of
business. Any business process in practice is likely to involve a lot of sub-processes.
We choose to focus on only those high-level processes/ steps that contribute
reasonable fraction of the total value expected to be delivered to the stakeholder.
The process/ steps we work with are generic and not specific to a company
34
3. Next, a list of different resources required by the processes is listed. These
resources could be physical, people, or organizational and need to be categorized
as driving resources, tangible resources and/ or intangible resources
4. We then list the capabilities required by the driving resource to transform/ consume
other resources while undertaking the specific processes that add value. Key
capability themes are noted alongside for each of the processes for all the functions
5. Finally, we aggregate all capability themes to note generic company-level
capabilities important to become a Digital Enterprise
35
3.3 Results of the research
We present the outcomes of the method for each function below. These business
functions together represent the typical business value chain of a company as identified
and defined by renown academic, Michael Porter.
1. Procurement
Overall value: collaborative relationships with suppliers leading to efficient sourcing and
innovation
Driving Resource: Procurement Manager
Major Tangible Resources: suppliers (vendors), servers, connected equipment,
procurement team, R&D/ business/ IT team, data scientists
Major Intangible Resources: strategies (R&D, crowdsourcing, etc), ERP software,
external databases, optimization software, data visualization software, connections with
IT systems of suppliers, collaborative behaviour, cybersecurity software
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
Process StepsUnderstand business needs
Develop sourcing strategy
Understand supplier baseSelect suppliersSiqn contracts/ agreements
Manage paperwork/ process
Manage performance
Exchange ideas
Sample Capabilities of Digital Enterprise: ToLink R&D, Business and Procurement strategyAutomate demand recognitionForecast raw material price trendsDevelop optimal sourcing plans across suppliersAutomate cost comparisonsAutomate Purchase Requisitions/ Purchase OrdersAutomate purchase-to-pay processAutomate claim managementEnable dynamic dashboards/ scorecardsPredict supply side risksTrack shipment real-timeCrowdsource innovation
Key ThemeInnovation cultureAutomation of processesData-driven decision-makingData-driven decision-makingAutomation of processesAutomation of processesAutomation of processesAutomation of processesUser-centered designData-driven decision-makingScalable IT infrastructureInnovation focus
2. Manufacturing
Overall value: defect-free production made with optimal amount of resources
36
Driving Resource: Manufacturing Manager
Major Tangible Resources: sensors, actuators, embedded things/ devices, network
connections, 3D printers, data servers (local/ cloud), control systems (e.g. SCADA),
smart devices, production team, IT team, UI/ UX designers, data scientists
Major Intangible Resources: design/ modelling skills, dynamic adaption abilities, big
data tools for aggregation/ processing, Artificial Intelligence (Al)/ Machine Learning (ML)
algorithms, production standards, cybersecurity software
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
Procesa Steps Sample Capabilties of Digital Enterpriis: To Key T hemaCreate virtual production models/ digital twinsRun what-if scenariosEnable rapid experimentation/ simulationEnable in-production optimizationAutomate machine checksPredict avoidable downtimeProduce (Print) on demand/ near customerAuto-regulate energy consumptionAutomate process controlReceive production system alerts on personal devicesAutomate quality checks of raw materialAutomate deviation detectionAutomate defects detectionPredict maintenance needsEnable condition monitoring of equipmentEnable remote monitoring & control of equipmentAutomate maintenance ticket generation
Design/ Modelling, Scalable r infrastructureData-driven decision-makingData-driven decision-makingAutomation of processesAutomation of processesData-driven decision-makingScalable r infrastructure, FlexibilityAutomation of processesAutomation of processesUser-centered designAutomation of processesAutomation of processesAutomation of processesData-driven decision-makingAutomation of processes, Scalable rT infrastructureAutomation of processesScalable IT infrastructure
3. Lociistics & Distribution
Overall value: right quantity of stock available at the right location using optimal amount
of resources in a dynamically changing scenario
Driving Resource: Logistics & Distribution Manager
Major Tangible Resources: robots, GPS systems, sensors, data servers (local/ cloud),
drones/ trucks, smart tags, team (L&D/ IT/ UI/ UX etc), data scientists
37
Develop produtionplan / schedule
Produce goods
Test goods
Maintain equipment
Major Intangible Resources: Tools for data aggregation/ processing, Al/ ML algorithms,
inventory standards, Sales & Operations Planning/ Integrated Business Planning
methods, cybersecurity software
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
Process Steps Sampie Capabilities of Digital Enterprise: To Key Theme
Plan inventory Optimize inventory at multiple levels Data-driven decision-makingCreate real-time demand signals Data-driven decision-making
Ship goods Enable flexible routing of fleet Data-driven decision-making, Scalable IT infrastructureDeploy drones for delivery Scalable F infrastructure, Flexibility
Store goods Deploy robots for packaging/ picking/ loading, etc Automation of processesReal-time multi-level inventory monitoring Data-driven decision-making, Scalable Fr infrastructure
Monitor performance create dynamic dashboards User-centered designReceive alerts on personal devices User-centered design
4. Marketinq
Overall value: acquire, convert and retain digitally connected customers in a cost-
effective manner
Driving Resource: Digital Marketing Manager
Major Tangible Resources: servers (local/ cloud), marketing team, IT team, UI / UX
team, data scientists
Major Intangible Resources: consumer datasets, Al/ ML algorithms, Search Engine
Optimization tools, digital platforms for advertising, cybersecurity software
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
38
Process Steps Sample Capabilities of Digital Enterprise: To Key Theme
Idlentify targets Aggregate diverse customer data sources Scalable IT infrastructureConduct customer micro-segmentation Data-driven decision-makingPerform search engine optimization Data-driven decision-making
Deploy targeted ad campaigns leveraging social media Data-driven decision-makingReach targets Deploy sales force as per micro-market data Data-driven decision-making
Deploy chatbots for quick response to inquiries User-centered designAuto-recommend products Automation of processesEnable product feature comparison User-centered design
Convert targets i Enable price comparison User-centered designconers Enable cashless payment Scalable IT infrastructure, Partnershicustomers Provide transparency in transaction User-centered design
Provide secure transactions Scalable IT infrastructureExecute real-time price optimization Data-driven decision-making
Retain customers Predict future needs of customers Data-driven decision-makingMonitor/ measure customer joumey User-centered design
Analyze performance Assimilate multi-channel customer feedback User-centered designConduct A/B testing Data-driven decision-making
5. Finance & Accounts
Overall value: acquire and utilize financial resources in an efficient and legally compliant
manner
Driving Resource: Finance & Accounts Manager
Major Tangible Resources: servers, data scientists, finance team, IT team, UI team
Major Intangible Resources: RPA software, Al/ ML algorithms, compliance standards,
ERP software
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
39
Process Steps Sample Capabilities of Digital Enterprise: ToPre-fill planning & budgeting templates
Plan & Budget Automate scenario analysisPredict training needsAutomate payables process
Manage/ Control Generate auto compliance alertsAutomate reconciliation process
Measure Deploy dynamic performance dashboardsAuto detect risky transactions
Key ThemeAutomation of processesAutomation of processesData-driven decision-makingAutomation of processesAutomation of processesAutomation of processesUser-centered designAutomation of processes
6. Human Resources
Overall value: maximize productivity of an organization by enhancing effectiveness of its
employees
Driving Resource: Human Resources Manager
Major Tangible Resources: HR team, employees across the organization
Major Intangible Resources: RPA software, Al/ ML algorithms, ERP software, Internal
guidelines/ standards
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
Process Steps LSample Capab!ilitlesof Digital E4iterpiseTe . Key ThemeRecruitOnboard
Train & Develop
Manage performanceManage payrollManage culture
Auto-screen candidatesDeploy bots to onboard new recruitsDevelop apps for trainingDeploy e-leaming platformsAuto-suggest improvement areasAutomate routine processesDeploy collaboration tools, hackathons
Automation of processesUser-centered designUser-centered designUser-centered designData-driven decision-makingAutomation of processesInnovation culture
7. Information Technology
Overall value: technological readiness to support transformation journeys of various
functions of the company in a cost-effective manner
40
Driving Resource: Information Technology Manager
Major Tangible Resources: IT team, other functions/ teams
Major Intangible Resources: collaborative behaviour, servers & connectivity (local/ cloud
computing), cybersecurity and other software
Capabilities and Key Themes: These are identified basis the process explained in
Section 3.2 above. The list of capabilities is a representative sample; a more
comprehensive list can be generated by further detailing the process/ sub-processes
involved in creating value for the respective business function
Process Steps Sample Capabilities of Digital Enterprise: TGo Key ThemePlan Develop integration roadmaps (e.g. Mr/ OT convergence) Innovation cultureNetwork Scale using cloud technologies Scalable IT infrastructureData Management Deploy Big Data analybcs tools Scalable F infrastructureSoftware Development Adopt DevOps Innovation cultureSecurity Guard against cyberattacks Scalable rT infrastructureSupport Automate routine processes Automation of processes
We note the following common capability themes (i.e. Key Themes mentioned in each
of the capability tables above) across different functions. We believe that a company
should consider building these common capabilities in order to become a Digital
Enterprise.
" Automation of Processes
* Innovation Culture
" Scalable IT Infrastructure
" Data-driven Decision-making
" User-centered Design
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4. MATURITY LEVELS FOR KEY CAPABILITIES
4.1 Defining a Maturity Model
Once we have identified required business capabilities, the next natural question is -
how should companies acquire these capabilities? Is there a way for companies to
measure their progress and guide themselves? While the specific approaches
companies might take to developing these capabilities may vary a lot and are beyond
the scope of this thesis, a tool that will help them measure their development is the
focus of the second part of this thesis. Specifically, we attempt to develop a tool like
Capability Maturity Model that can be conveniently used by organizations for self-
assessment. We begin with a discussion of the Capability Maturity Model before
proceeding to introduce our tool.
The origins of Capability Maturity Model (CMM) date back to 1987 when the Software
Engineering Institute (SEI) at Carnegie Mellon University (CMU) was contracted by the
U.S. Department of Defense (DoD) to develop a model to evaluate the capabilities of
their software contractors. The SEI released the first version of the model in 1991. Over
the next two decades, the CMM model expanded into other areas such as Services,
Acquisition, and People and became integrated, to be known as Capability Maturity
Model Integration (CMMI). In 2012, CMU founded the CMMI Institute in order to extend
the benefits of CMMI beyond software and systems engineering to any product or
service company regardless of size or industry. As per CMMI website, over 10,000
organizations in 106 countries around the world have used CMMI Institute models to
improve their organization's capabilities and performance(CMMI, 2018)
The CMM is a reference model of mature practices in a specified discipline, used to
assess a group's capability to perform that discipline. It describes an evolutionary
improvement path for process maturity, and classifies the maturity of the processes
across multiple levels. SEI believed that processes have a major impact on the quality
and productivity delivered by an organization. Thus, the capability maturity model it
developed was a framework that focused on improvement of processes. The CMM
became an effective tool for companies in developing large and complex products to
42
assess their current practices and improve their organizational capabilities in processes
(Liu, 2003).
The CMMI Institute believes that that organizations do their best when they focus their
process improvement efforts on a prioritized and manageable number of practice areas
at a time. Maturity levels represent a staged path for an organization's performance and
process improvement efforts based on predefined sets of practice areas (PAs). Within
each maturity level, the predefined set of PA's also provide a path to performance
improvement. Each maturity level builds on the previous maturity levels by adding new
functionality or rigor. A generic description of the five maturity levels sourced from the
CMMI Institute website are mentioned below. These maturity levels provide a way to
characterize an organization's capability and performance.
* Maturity Level 0 (Incomplete): Ad hoc and unknown. Work may or may not get
completed.
" Maturity Level 1 (Initial): Unpredictable and reactive. Work gets completed but is
often delayed and over budget.
" Maturity Level 2 (Managed): Managed on the project level. Projects are planned,
performed, measured, and controlled.
* Maturity Level 3 (Defined): Proactive, rather than reactive. Organization-wide
standards provide guidance across projects, programs, and portfolios.
" Maturity Level 4 (Quantitatively Managed): Measured and controlled.
Organization is data-driven with quantitative performance improvement
objectives that are predictable and align to meet the needs of internal and
external stakeholders.
" Maturity Level 5 (Optimizing): Stable and flexible. Organization is focused on
continuous improvement and is built to pivot and respond to opportunity and
change. The organization's stability provides a platform for agility and innovation
43
In 2003, MIT's Lean Aerospace Initiative developed a self-assessment tool (LESAT) to
help companies measure the leanness of their organizations. It leveraged the CMM to
arrive at definitions of its maturity levels. The generic LESAT Capability Maturity Matrix
level definitions are included below for reference.
Cpabiliy..............,.. -. ............. ___
....r... .... .. ..... ...
Level I Some awareness of this practice; sporadic improvementactivities may exist
Level 2 General awareness; informal approach deployed in a few areaswith varying degrees of effectiveness and sustainment
Level 3 A systematic approach/methodology deployed in varying stagesacross most areas; facilitated with metrics; good sustainment
Level 4 On-going refinement and continuous improvement across theenterprise; improvement gains are sustained
Level 5 Exceptional, well-defined, innovative approach is fully deployedacross the extended enterprise (across internal and external valuestreams); recognized as best practice.
Generic LESAT Capability Maturity Matrix level definitions. Source:(Hallam, 2003)
It can be inferred from the above discussion that a maturity model classifies a process
with respect to the degree of its sophistication and integration across the organization. It
has several levels that present a graduated scale to a user for self-assessment. We
attempt to use this framework to develop our tool. Also, while the CMM focuses on
measuring capability levels of a process, our aim is to develop a tool meant for
measuring development of business capabilities within an organization.
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4.2 Defining Maturity Levels for key capabilities
4.2.1 Approach and methodology
We adopt the following approach to define the maturity levels for each of the common
capabilities we identified in Section 3 earlier.
1. First, we identify a company that represents "high performance" for a given
capability. The company is identified basis secondary research. Newspaper articles
or publications by academic journals or consulting companies are relied upon. Third
party survey results identifying top ranking companies for the given capability are
leveraged where available.
2. We then study the company and its high level of capability or its journey to achieve
high level of capability using secondary resources as much as possible. We use this
information to arrive at a definition of maturity level 5 (i.e. best performance) for that
specific capability.
3. Next, we refer the generic CMM level definitions described earlier and work
backwards from the level 5 definition to define the lower levels of maturity for the
concerned capability along similar lines.
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4.2.2 Results
The results of our method for each of the capabilities are presented below.
A. Generic Capability: Automation of Processes
Description: This capability refers to the ability of an organization to automate its
processes. In the manufacturing world, this could be in the form of physical robots
that substitute humans for labour. Alternatively, these could be intelligent machines
that take corrective action based on the ongoing performance of the production
process. In the services world, process automation often means automating
repeatable tasks or processes carried out by people. These processes are rule-
based (i.e. they do not involve human decision making), stable (i.e. processes are
not broken), usually voluminous (i.e. high volume activities) and are entirely in the
digital world for bots (i.e. software programs) to perform the tasks on their own. This
automation of computer-based tasks/ processes by software programs is often
referred to as Robotic Process Automation (RPA). RPA market is currently
experiencing a boom finding applications across several industries. As such, it has
attracted the attention of many IT and management consulting companies that
provide solutions that equip companies with the capabilities required to leverage this
opportunity.
High Performance Company: We study the positive results achieved by New York
Life Insurance Company by automating their processes using RPA technology. New
York Life Insurance Company is the third-largest life insurance company in the US,
the largest mutual life insurance company in the US and is ranked #69 on the 2018
Fortune 500 list of the largest United States corporations by total revenue (source:
Wikipedia). It achieved the following outcomes within 12 months of initiating the
process of deploying process automation and was hailed as a success story by EXL
Service, a leading provider of RPA solutions to the insurance industry in the US
(EXL Service, 2018):
0 $2.2 MM cost savings over 5 years
0 85% reduction in tax withholding processing time
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0 25% capacity gained in investment accounting reconciliation
Salient features of the company's transformation efforts included the following (EXL
Service, 2018):
" Goals were clearly stated (i.e. eliminate manual repetitive tasks, re-
engineer processes, and re-align human capital on strategic activities)
" Established and enabled RPA Office / Center of Excellence suited for
ongoing innovation in three steps:
o Established basic infrastructure and selected RPA platform
o Defined rules and governance structure
o Enabled supporting processes
The RPA office was equipped with a broad base of reusable generic
utilities
* Generated heat maps of RPA opportunities to immediately impact
outcomes. Identified opportunities to run pilot automations basis ROl
promise, connect with different parts of the organization (i.e. including
multiple stakeholders) and feasibility of execution
" Established "Bot Factory" for continuous improvement and maintenance
for all bots along with change management and continued governance
* Maintained consistency in language with respect to anticipated benefits
while communicating with different stakeholders
The company intends to take its RPA efforts to the next level with company-wide use
cases of increasing complexity (e.g. optimization of processes)
Maturity Levels: Basis the learnings from the case study and the generic CMM level
definitions discussed earlier, we define maturity levels for "Automation of Processes"
capability for a service organization as under:
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Maturity Level Description
Level 1(Low)
Level 2(Low-Medium)
Level 3(Medium)
* Minimal or no automation. Processes are largely manual with
significant dependence on human resources for laborious,
rule-based tasks
* Leadership or functional leaders unaware of automation
technologies such as RPA
* Low level of automation at individual level or systems (e.g.
Excel Macros)
* Management skeptical of technology and is generally not
focused on operational efficiencies
* Low level of organizational awareness about automation
technologies; knowledge restricted to a few functions
" Automation restricted to experimental projects in isolated
pockets in the company; efforts largely driven by personal
initiative
" Management open to leveraging technology for low-hanging
fruits but not willing to commit to change efforts that might be
inconvenient
" Absence of a vision or a company-wide roadmap to utilize
technologies for increasing efficiencies
" Enterprise-wide awareness about automation technologies
" High level of planning among a few functions with automation
metrics/ targets defined
" Higher automation-related expertise among staff, may even
have SMEs
" Automation roadmap clearly defined
" Efforts spread beyond one team or project
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Maturity Level Description
Level 4(Medium-High)
Level 5(High)
* Automation goals are set across functions and clearly
communicated and understood by various stakeholders
" Adequate staff - from various functions - is trained in the
technologies involved
* Efforts are scaled across the enterprise
* Presence of supporting processes as required
* A variety of automation tools and platforms are available;
maintenance could be need-based/ reactive
* Value of automation well-appreciated by management and
employees in general; automation is a strategic goal
" Presence of an Automation Center of Excellence to govern
efforts
" Candidate (processes) from across the organization are
systematically and strategically screened for prioritization;
Standard Operating Procedures well defined and understood
by all involved
" Additional technologies layered on top of those used for basic
automation to derive next level benefits (e.g. Al/ ML for
cognitive bots)
* Systems and plans exist for pro-active maintenance of
infrastructure
B. Generic Capability: Innovation Culture
Description: This capability refers to the ability of an organization to create a culture
that fosters unorthodox thinking in a collaborative environment. It not only helps a
company come up with path-breaking products or solutions, but also allows
organizational transformations to happen in a smooth manner. Collaboration in an
innovation culture happens internally as well as externally; ideas are constantly
generated, tested and iterated on a large scale among employees and with third
49
parties. An innovation culture thus helps companies compete in markets defined by
rapid change, which is a characteristic of many industries in the digital age we live in.
As per MIT (Rao & Weintraub, 2013), an innovative culture rests on a foundation of
six building blocks: resources, processes, values, behaviour, climate and success as
described in brief below:
" Values: Values drive priorities and decisions, which are reflected in how a
company spends its time and money. Truly innovative enterprises spend
generously on being entrepreneurial, promoting creativity and encouraging
continuous learning. Values manifest themselves in how people behave
and spend, more than in how they speak.
" Behaviours: Behaviours describe how people act in the cause of
innovation. For leaders, those acts include a willingness to kill existing
products with new and better ones, to energize employees with a vivid
description of the future and to cut through red tape. For employees,
actions in support of innovation include doggedness in overcoming
technical roadblocks, "scrounging" resources when budgets are thin and
listening to customers.
" Climate: Climate is the tenor of workplace life. An innovative climate
cultivates engagement and enthusiasm, challenges people to take risks
within a safe environment, fosters learning and encourages independent
thinking.
" Resources: Resources comprise three main factors: people, systems and
projects. Of these, people - especially "innovation champions" - are the
most critical, because they have a powerful impact on the organization's
values and climate.
* Processes: Processes are the route that innovations follow as they are
developed. These may include the familiar "innovation funnel" used to
capture and sift through ideas or stage-gate systems for reviewing and
prioritizing projects and prototyping.
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* Success: The success of an innovation can be captured at three levels:
external, enterprise and personal. In particular, external recognition shows
how well a company is regarded as being innovative by its customers and
competitors, and whether an innovation has paid off financially. More
generally, success reinforces the enterprise's values, behaviours and
processes, which in turn drive many subsequent actions and decisions
such as who will be rewarded, which people will be hired and which
projects will get the green light.
High Performance Company: Cisco is considered to be one of the most innovative
companies of the world. Founded in 1984, the company develops, manufactures and
sells networking hardware, telecommunications equipment and other high-
technology services and products. Cisco's revenue crossed USD 49 billion and
employee count exceed 74,000 in 2018 (source: company website). Some of the
achievements and recognitions of the company that are relevant to innovation
include the following:
0 #25 on BCG's Most Innovative Companies List in 2015
* #43 on Fortune's list of businesses that Changed the World in 2018
* #12 on Fortune's 30 Best Workplaces in Technology List in 2017
Below are some of the features of company's capability with respect to an innovation
culture:
* Forward-looking mission and vision statements that embrace change
o Mission Statement: Shape the future of the internet by creating
unprecedented value and opportunity for our customers,
employees, investors, and ecosystem partners.
o Vision Statement: Changing the Way We Work, Live, Play, and
Learn.
" Infrastructure
o Hyper-Innovation Living Labs: CHILL (Cisco Hyper-Innovation
Living Labs) takes a vertical and creates an environment where a
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handful of Cisco's biggest (non-competing) customers (e.g. Nike,
Visa, etc) come together, collaborate and build prototypes to drive
rapid results -within months, days, or mere hours (Cisco, 2018a).
o Innovation Centers (ICs): ICs are placed around the world, each
serving as a hub to showcase what is possible with digital
transformation and loT, building solutions with partners, engaging
in rapid prototyping, investing and partnering with startups,
accelerators, and universities. The ICs accelerate opportunities,
deepen relationships, and foster innovation (Cisco, 2018e).
Employee and community engagement
o Innovation Grand Challenge: This global competition recognizes
technologies, products or business models that best leverage the
Internet of Things (loT) across a variety of categories. Submissions
are encouraged from startups, entrepreneurs, developers and
anyone else who has an early-stage business, prototype or solution
in customer trials (Cisco, 2018b).
o Hackathons: Cisco organizes hackathons which are sprint-like
events where participants tackle complex problems and emerge,
after a specific time frame, with innovative ideas and ways to better
change the world (Cisco, 2017a).
o Collaboration tools: Cisco deploys technologies / tools pertaining to
communication (IP phones, web, mobile, desktop clients, etc),
conferencing & messaging and physical and virtual workspaces to
drive collaboration among employees (Cisco, 2018d).
* Partnerships
o Investment in start-ups: Cisco Investments annually invests $250-
$300 million, both directly in startups and indirectly through venture
capital funds. Some of the investments may ultimately result in the
company's acquisition by Cisco or others, while some might last
years as the startup develops into a mature company (Cisco,
2018f).
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o Co-Innovation: The company works with customers, partners, start-
ups, academia and government to turn bright ideas into
transformative solutions (Cisco, 2018c).
o Cisco Tech Fund (Incubation): This is a multi-million dollar
innovation fund designed to nurture disruptive ideas inside Cisco
that are currently not on the company's radar (Cisco, 2012a).
Training & Development
o Cisco Innovation Academy: This is a website that provides
information about entrepreneurship and developing new ideas. It
helps leaders generate brilliant ideas from their teams.
o Cisco Pioneer Awards: These awards congratulate engineering for
the work that it does. Engineers select among themselves who to
nominate-who they consider to be the top candidates in the
development organization from the preceding 12 months. Winners
stand out not only in innovation and industry impact but how much
they had to be pioneers, how much they had to travel a road that
hadn't been built yet (Cisco, 2017b).
* Processes
o Cisco Technology Radar: Cisco has a self-nominated team of
employee enthusiasts unaffiliated with any particular function or
business unit that take up the challenge of identifying technology
developments worldwide. That team and the process that unearths
those emerging innovations is called as the Technology Radar. The
Technology Radar is based on the insights of 70+ globally-
positioned 'scouts' who have become fundamental to Cisco's
intelligence gathering initiatives. By channelling their passion for
emerging technologies, Cisco is identifying opportunities and
threats that could impact their business in five, ten or even twenty-
five years' time (Cisco, 2012b).
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Maturity Levels: Basis the learnings from Cisco and the generic CMM level definitions
discussed earlier, we define maturity levels for "Innovation Culture" capability as under:
Maturity Level
Level 1(Low)
Level 2(Low-Medium)
Description
" Minimal or no focus of the company on innovation. Company
is content relying upon existing products for future revenues
" Absence of or a poorly equipped R&D department. No cross-
functional approach to driving innovation/ development;
product development is largely performed in silos with low
level of trust among employees
" Aversion to risk causes employees not to attempt anything
that is different from what they are accustomed to doing
" Very limited tools for communication / exchanging ideas
among employees (e.g. emails only)
" Product-related decisions primarily made by top management
" Absence of documented or structured product development
processes
" Low focus on innovation. Company content following I copying
competitors
* R&D function exists, but limited focus on product development
" Need-based cross-functional interaction. Over-documentation
of communication records indicating low trust/ risk tolerance
levels
" Employees attempt new initiatives, but only as directed by top
management
" Limited tools for communication among employees (e.g.
emails, chat platforms, etc)
" Product-related decisions primarily made by top and middle
management
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I
Level 3(Medium)
Level 4(Medium-High)
* SOP for product development exists but is not mature enough
or not adhered to
* Moderate focus on innovation. Company comes out with new
products, but the change is incremental
* R&D function exists but with adequate resources. Focuses on
product development exists but works largely by itself
* Other functions provide inputs to the product development
process in a reactive manner; ownership still lies with R&D
" Employees attempt incremental improvement initiatives
" Tools for collaboration (e.g. idea sharing) among employees
available but not used much by employees due to lack of
awareness or skills
" Product-related decisions led by middle management
" A well-defined SOP for product development exists and is
systematically adhered to although more as compliance than
in spirit
" Innovation a strategic priority for the company. Company
attempts to lead the industry with offerings although change
not disruptive
" Innovation function exists. Integrates cross-functional inputs in
developing a product road-map
* Employees attempt radical improvement initiatives. Failures
are accepted
" Tools for collaboration (e.g. idea sharing) among employees
available and are widely used
" Product-related decisions led by middle management although
ideas form lower-level employees leveraged
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* A well-defined SOP for product development exists and is
systematically adhered to in spirit
Level 5 * Clear focus on innovation made explicit through mission and(High) vision statements or strategic goals. Company not afraid to
introduce disruptive changes in the market
* Innovation function collaborates with internal as well as
external stakeholders in jointly developing solutions (e.g.
suppliers, competitors, customers, etc)
* Company not hesitant to invest money to acquire innovation
(e.g. acquire start-ups)
* Dedicated buildings/ workplace facilities available for
innovation with adequate resource backing
* Employees across functions and hierarchical levels are able to
come up with radical ideas. Events such as hackathons
leverage this ability of the workforce
" Lower-level employees are encouraged and empowered to
champion new product development. Trainings are offered to
develop innovation skills of employees
" Presence of advanced tools that allow employees to manage
innovation projects as well as collaborate well
" Systems leverage data from multiple sources to allow
analytical thinking
C. Generic Capability: Scalable IT Infrastructure
Description: This capability refers to the ability of an organization to scale up (or
down) its IT capacity to meet dynamically changing business needs. Large storage
capacities as well as advanced computing abilities are essential resources to
leverage big data for business advantage. Technology is not just a supporting
function in this context; it is rather an enabler of important processes that often
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contribute significantly to the core competencies of a Digital Enterprise. Companies
without scalable IT infrastructure may find the volume and velocity of big data too
much to handle. The most common solution to achieving a scalable IT infrastructure
is cloud computing. Maenhaut et al define cloud computing as "a technology that
enables elastic, on-demand resource provisioning, allowing application developers
to build highly scalable systems"(Maenhaut, Moens, Ongenae, & Turck, 2015). A
popular definition of cloud computing comes from the National Institute of Standards
and Technology (NIST), that says "cloud computing is a model for enabling
convenient, on-demand network access to a shared pool of configurable computing
resources (e.g., networks, servers, storage, applications, and services) that can be
rapidly provisioned and released with minimal management effort or service provider
interaction". It allows end users to utilize parts of bulk resources that can be acquired
quickly and easily.
High Performance Company: Nefflix, world's leading entertainment service company
offering online streaming of films and television programs, is widely recognized for its
cloud-migration initiative. The company started in 1997 with a business model
focused on renting DVDs. It began streaming media in 2007, and over the next
decade or so, grew several fold to have 130 million paid memberships in over 190
countries. These customers enjoy TV series, documentaries and feature films across
a wide variety of genres and languages on Netflix. As the company's user base
grew, the data they were generating increased exponentially. The company
recognized the need to move to a cloud based solution early in its journey for the
benefits it offered with respect to reliability, horizontal scalability, and distribution. It
chose Amazon Web Services (AWS) as its cloud provider. Below are some of the
salient features of its migration as described by the Yury, VP - Cloud and Platform
Engineering for Netflix (Yury lzrailevsky, Stevan Vlaovic, & Ruslan Meshenberg,
2016)
* Majority of systems, including all customer-facing services, migrated to the
cloud prior to 2015
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" Figured out a secure and durable cloud path for its billing infrastructure as
well as all aspects of its customer and employee data management
" In early January, 2016, after seven years of diligent effort, Netflix completed
its cloud migration and shut down the last remaining data center bits used by
its streaming service. As such, Netflix became one of the largest companies
to operate entirely in the public cloud (Angus Loten, 2016)
" The company relies on cloud for all of its scalable computing and storage
needs - business logic, distributed databases and big data processing/
analytics, recommendations, transcoding, and hundreds of other functions
that make up the Netflix application
" They did not just forklift all of their systems, unchanged, out of the data
center and dropped them in AWS. The company believed that in doing so,
they would have ended up moving all the problems and limitations of the data
center along with it
" Netflix chose the cloud-native approach, rebuilding virtually all of their
technology and fundamentally changing the way they operate the company.
" Architecturally, they migrated from a monolithic app to hundreds of micro-
services, and denormalized data model, using NoSQL databases
" Budget approvals, centralized release coordination and multi-week hardware
provisioning cycles made way for continuous delivery; engineering teams
making independent decisions using self-service tools in a loosely coupled
DevOps environment. This helped accelerate innovation
" The company had to build many new systems and learn new skills in the
journey
Moving to the cloud has brought Netflix a number of benefits as mentioned below
(Yury lzrailevsky et al., 2016):
* Eight times as many streaming members in 2016 than they did in 2008. The
company today consumes 15% of the total downstream volume of internet
traffic globally. In the US, that figure is 19.1% of total traffic (Morris, 2018).
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" Ability to add thousands of virtual servers and petabytes of storage within
minutes, if required.
* Significant increase in service availability, near its goal of 99.99% uptime.
" Cloud costs per streaming start ended up being a fraction of those in the data
center.
Maturity Levels: Leveraging the learnings from Netflix, the generic CMM level definitions
discussed earlier, cloud related Maturity Models created by professionals (Joshi
Maneesh, 2018), (Atchison Lee, 2018), (Schmid Alexander, 2017) and AWS (Amazon,
2016) we define maturity levels for "Scalable IT Infrastructure" capability as under:
Maturity Level
Level 1(Low)
Level 2(Low-Medium)
Description
* Limited or no awareness about cloud technology among
employees
" Lack of vision for IT; seen by most as a support function
" Skepticism about hosting data outside the company; all IT,
including hardware, software and data is internal to the
company
" Long development/ implementation timeframe that often
begins with procurement of hardware and/ or software and
involves several layers of approval process
" Dev and IT organizations work in a siloed fashion
" Data analytics non-existent
* Cloud technologies perceived to be a cost-reduction initiative.
Awareness of cloud benefits limited to "lift-and-shift", thus
cloud usage limited to storage or a few safe applications
mainly as an experiment
" Initiatives leveraging cloud largely driven by a few teams
" Absence of company-wide knowledge about cloud; cloud not a
part of company's IT strategy
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i
* Dev and IT interact as needed but implementation timelines
long
0 Basic in-house analytics abilities used by the company
Level 3 0 IT function well versed with cloud technologies, capabilities(Medium) and benefits
0 A vision for cloud exists within the company, including a
roadmap for migration
0 Cross-functional policies pertaining to cloud usage exist
0 Cloud replaces some of the on-premise servers and other
back end resources. Cloud used under the laaS or SaaS
models
0 Analytics services offered by cloud service providers
leveraged
0 Application visibility and monitoring strategies being used in
data centers get extended to the cloud
Level 4 0 Value-added services offered by cloud service providers(Medium-High) leveraged
* Cloud used under the PaaS model. Applications re-architected
and developed using cloud-native features with the intent to
take advantage of features, scale or performance otherwise
not available in the existing environment
* High confidence among management in cloud; management
believes in increasing cloud adoption to release internal
resources for more value adding work
Level 5 0 Cloud is an important part of business strategy(High) 0 Almost all of the company's IT (hardware, software, data)
operates in the cloud
0 A large fraction of company's data centers shut down
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Generic Capability: Data-driven decision-making
Description: This capability refers to the ability of an organization to leverage data
analytics for decision making. There are three aspects to this capability - a) having
the IT infrastructure to run advanced analytics algorithms, b) having the ability to
understand algorithms and their outcomes, and c) adopting the cultural change to
make decision basis evidence as opposed to intuition.
High Performance Company: German-headquartered Audi AG is among the most
successful and well-known automobile companies in the world. As per Wikipedia, the
company's revenue and operating income stood at E60 billion and E4.7 billion in
2017. Its production output was 1.9 million units. The company was originally
established in 1909 and was acquired by Volkswagen (VW) in 1966. Consistent with
the slogan of Vorsprung durch Technik, meaning "Being Ahead through
Technology", the company aims at further extending its market leadership by
leveraging digital technology to provide superior products and services to its
customers.
Audi's digital transformation journey focused on establishing big data analytics
capability within the company. The initiative began in 2013 and was spread out
across three phases over a five-year period. In 2016, Audi won the "Best Practice
Award for Business Intelligence and Analytics" from BARC Congress for BI and Data
61
" Applications built on microservices
" DevOps teams are nimble, bringing new features to market in
less time
" Focus on exploiting cloud for innovation related benefits (as
opposed to looking from only a cost reduction perspective)
" Utilization of advanced analytics capabilities leveraging cloud
infrastructure
Management (BARC, 2018). Salient features of Audi's transformation journey
include the following (Dremel, Herterich, Wulf, Waizmann, & Brenner, 2017):
Phase I - Advancing
* Created an inter-disciplinary innovation hub called the Audi Business
Innovation GmbH (ABI) with an aim to extend capabilities of existing
departments to develop and implement digital business innovations in 2013.
ABI's teams embraced various disciplines, including software development,
big data architecture, data science and user experience
* External parties (consultancies) were used for acquiring analytics
competencies (knowledge and methodological input for data analytics); IT
department played a passive, coordination role
* Consultancies played IT department's traditional technology tasks (data
integration, conceptualization, selection of technology infrastructure, etc)
* Analytics demands of business units were met one at a time through pilot
cases. Topics regarding analytics were discussed only infrequently in existing
committees
* The ABI primarily delivered reporting and descriptive analytics services using
marketing data (data flowing from Audi's web portals) as the main data
source
" Sales & Marketing department initiated analytics projects and was held
accountable for their success. Costs of the projects were not passed on to
internal customers
* Insights from analytics services were used in daily decision making
processes in sales & marketing department only as on-top information.
Decision making not driven by data-based insights
Phase II - Enabling
* IT department began to provide technology support for data analytics,
enabling the exploitation of big data. Thus, analytics competencies began to
be built up in the IT department
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* IT department began to take up the tasks previously carried out by external
consultancies
" A unit specifically responsible for general technology infrastructure for big
data use cases was established as an internal IT competence center for
synchronizing all existing Audi big data projects
" More advanced technology infrastructure deployed to develop analytics
services (e.g. Hadoop cluster).
* Advanced descriptive analytics services were developed by the ABI using
methods such as neural networks and marketing data
" Program steering board was established to create holistic analytics
capabilities. This board included managers and professionals from Sales &
Marketing as well as IT departments to push big data analytics forward. The
board reviewed collaboration model, assesses strategy and projects, goals
and challenges, etc on a bi-weekly basis
" Analytics services still operated largely as a cost-center. However, any
shortfalls in budgets were filled by service-oriented payments from internal
customers
" Decision makers gained better understanding of the value of data analytics;
supplemented intuitive and experience based decision making with data
based insights
* Decision making processes were now characterised by recurrent patterns
enriched by data. For instance, data driven insights were used to forecast
orders with a three-month time horizon and to optimize media spending
Phase Ill - Leveraging
* This is the current, final state in its journey
* Focussed on providing analytics-as-a-service with advanced analytics
methods (i.e. predictive and advanced descriptive analytics). A committee of
senior executives from different departments established to oversee the
analytics-as-a-service initiative
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" Operational car data being used in the design of digital services for drivers of
Audi cars (thus, expansion of use cases)
" IT department fully responsible for all technology tasks and is becoming a
consulting partner for the other big data analytics stakeholders
" Development team adopted the agile software development method (Scrum)
" A digital business department was formed within the sales and marketing
department. This department is responsible for enabling digital topics and
initiatives through analysis of different data sources (beyond sales and car
operations data). "Digital Factbook" created to document rules and guidelines
for the department
" Roles and responsibilities for team to drive analytics-as-a-service established
* Analytics unit operates as a profit center aiming for 10% ROI on analytics
services to internal customers.
" Chief Digital Officer role reporting to the CEO established
" Workshops about digital culture, agile work, new processes, etc conducted
" Decision makers rely on data-based insights for decision making
Maturity Levels: Leveraging the learnings from Audi's case study and the generic CMM
level definitions discussed earlier, we define maturity levels for "Data-driven decision-
making" capability as under:
Maturity Level Description
Level 1 0 Limited or no awareness about data analytics in the company(Low) 0 Perception of analytics limited to elementary analysis using
basic tools such as Microsoft Excel; absence of manpower
skilled in data analytics
0 Decision-making is based on intuition and experience
0 Lack of knowledge about how to set up data-based
experiments for innovation
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Level 2(Low-Medium)
Level 3(Medium)
e Lack of awareness about cloud technologies or features
" Knowledge of analytics limited to a few individuals or teams
" Analytics not a strategic priority; company unwilling to commit
resources beyond utilizing external agencies for occasional
data analytics assignments
" Legacy IT architecture that does not leverage cloud
technologies
* Management appreciates analytics but decisions still taken
based on experience and intuition
" Limited manpower that is able to understand the advantages
of data analytics, but not supported by the environment/
culture to deploy methods and derive benefits
" Analytics services seen as a cost head
" Awareness about data analytics among leadership of multiple
functions within the company
" Analytics based projects run by a few departments regularly
* Some of the legacy systems migrated to cloud for leveraging
big data analytics
" Reliance on data analytics for decision making by some
functions
" A pipeline of analytics based projects exist for a few functions
" Limited pool of skilled resources that is stretched across
several assignments that it may or may not be able to deliver
upon all by itself
" Projects mainly restricted to descriptive analytics
Level 4 * A full-fledged analytics department exists within the company(Medium-High) Collaboration between IT and other departments in developing
and executing a vision for data analytics within the company.
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Steering committee comprising of company's leadership
oversees progress
" Value-added analytics services offered by cloud service
providers leveraged
" High confidence of management in analytics which is
ingrained in company's strategic decisions
" Presence of trained manpower in the company to run analytics
assignments
* Data analytics department seen as an asset / profit center by
company's leadership who is willing to provide resources to
build functionality in the company
" A culture welcoming of experimentation and learning being
developed. SOP documents/ trainings/ workshops being
executed in the company to increase awareness
Level 5 0 Value-add of data analytics is widely recognized across(H igh) different functions of the company
" Pipeline of projects (e.g. use cases) across multiple functions
maintained and worked upon
" IT infrastructure completely developed to enable big data
analytics (e.g. cloud computing)
" Presence of skilled professionals in the company to run and
understand advanced analytics assignments (e.g. data
scientists, statisticians, computer scientists, etc). Importantly,
the team members can interpret the outcomes to business
users to inform decision making
" Analytics Center of Excellence exists for different teams to
approach and seek help while developing their analytics use
cases
" Leadership relies significantly on outcome of analytics projects
for daily and strategic decisions
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D. Generic Capability: User-Centered Design
Description: This capability refers to the ability of an organization to create products
or solutions with a deep focus on user experience. In today's digital age, a large
amount of user data is being continuously generated and made available to
companies thanks to connected devices. Companies are leveraging this data in
designing and developing products aimed at delighting the customer not just before
or during the purchase stage but throughout the usage journey and lifecycle of the
product. There are some related terms that could be confused with user-centered
design. We clarify them as below:
* Human-centered design: As per the definition sourced from Kent State
University, human-centered design is an approach that focuses on fully
understanding the perspectives of the people the design is for in each step of
the process. Human-centered design requires a large amount of ideation,
testing, learning and adjusting based on the feedback from a sample of the
intended audience. On the other hand, they define user-centered design as
an approach that is complementary to the user's inherent way of doing things.
Rather than having people adjust to the technology and design, the design
and technology attempts to account for their tendencies and preferences in
the very way they are built. While the terms human-centered design and user-
centered design can be used interchangeably at times, there could be a
subtle difference in meaning. User-centric design could be taken as a less
emotionally empathetic approach, focused primarily on the tangible,
physiological ways users interact with a product, whereas human-centric
design incorporates their emotional or psychological preferences as well
(KSU, 2018).
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0 A culture of rapid testing/ experimentation exists. IT and other
functional teams are aligned to deliver on this approach to
innovation
* Design-thinking: It is an approach that asserts that a hands-on, user-centric
approach to problem solving can lead to innovation, and innovation can lead
to differentiation and a competitive advantage. This approach comprises of 6
distinct phases: empathize, define, ideate, prototype, test, implement
(Gibbons, 2018)
* User experience: As per Nielsen Norman Group, user experience
encompasses all aspects of the end-user's interaction with the company, its
services, and its products. The requirements for an exemplary user
experience are meeting the exact needs of the customer without fuss or
bother, and making products that are a joy to own and use. Providing high-
quality user experience in a company's offerings needs a seamless merging
of the services of multiple disciplines, including engineering, marketing,
graphical and industrial design, and interface design (Norman & Nielsen,
2018)
* User interface: As per Every Interaction (a London-based UX Design agency),
a user interface (UI) is a conduit between human and computer interaction -
the space where a user will interact with a computer or machine to complete
tasks. The purpose of a Ul is to enable a user to effectively control a
computer or machine they are interacting with, and for feedback to be
received in order to communicate effective completion of tasks. They list the
criteria for a sound user interface as: should be intuitive (not require training
to operate), efficient (not create additional or unnecessary friction) and user-
friendly (be enjoyable to use) (El, 2018).
* Customer journey: As per the definition offered by Forrester, the customer
journey is the series of interactions between a customer and a company that
occur as the customer pursues a specific goal. The journey may not conform
to the company's intentions (Forrester, 2018).
High Performance Company: Apple is one of the most successful consumer
electronics product companies in the world. The company has had a long history of
bringing innovative products to market. These products have revolutionized as well
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as disrupted entire industries. Examples of such products include the iPod, iPhone,
iPad, Mac personal computer, Apple Watch etc. Apple was also the first public U.S.
company to be valued at over US$1 trillion. The success of the company is often
attributed to its founder, Steve Jobs, whose distinct views on design influenced the
creation of its many popular products.
Apple is widely perceived to have a secretive culture that is intended to guard the
company's innovation / ideas from being stolen (Willis, 2012). We thus rely on
quotes of people who have either worked in Apple or have had first-hand
experiences of working with Apple employees to gain an understanding of how the
company maintains its focus on user-centered design. We also include some of
Steve's famous quotes that give us an insight into his perspectives on design.
" "Whenever there's a question about whether we should do something or not,"
Tran (who worked in Apple's social and content team) told me, "we always
come back to the question of, 'How would this impact the customer
experience?' The answer to that question determines how they should
proceed. "If it's going to improve the customer experience even marginally,
the answer is yes, we should be doing that - even if it takes us hours or days
or weeks," Tran said (Lebowitz, 2018)
" Our goal has always been to create products that our customers love - Tim
Cook, CEO (Haselton & Lipton, 2018)
* "From the beginning to the end, the same recruiter stayed in touch via email
with me and answered my questions in time. I did not get a single system-
generated email. My recruiter works with applicants for design roles
specifically. What this means is that your recruiter will at least know
something about your industry and will first screen the applicants before their
resumes reach the department they apply for" - Darren Chang on his Product
Design Internship Interview at Apple (Chang, 2018)
" "There was this culture of working hard, dedicating yourself to the work and
trying to imagine (the user's experience). The idea of empathy is something
that maybe you don't think about from the outside world as being a big part of
69
technology development and software development, but it was this culture of
thinking about people and trying to empathize with them and their future
experiences that they would be having with the work that we are developing
in the labs. ... There are so many elements that go into making these
experiences actually happen, so we had to imagine what it would be like for
someone who doesn't care about the gadget for the sake of the gadget but
simply wants the experiences and then wants to get on with the rest of their
lives. This empathy, this notion of putting ourselves in somebody else's
shoes, was a big part of how we thought about it, how we approached our
design and development work" - Ken Kocienda former Principal Engineer at
Apple
* "The critical thing for me is that the company has always had a strong sense
of its connection with the end user-the person who was actually going to be
using the product. For this reason, we even had someone whose job was to
do "unboxings," helping us get a clear impression of what the user experience
was like from the customer's point of view before the packaging tape was
severed... In my time at the company, Apple was never a structural company.
It was never defined by the numbers or the mechanics. It was always a
cultural company, defined by its mission-that is, its connection with the end
user. And everybody who worked for the company knew it" - Michael
Hageloh, Sales at Apple (Hageloh, 2018)
* "Apple employs what is known as a "unitary organizational form" - U-form for
short - which is also known as a "functional organization." In broad strokes,
a U-form organization is organized around expertise, not products: in the case
of Apple, that means design is one group (under Ive), product marketing is
another (under Schiller), and operations a third (under Williams, who is also
Chief Operating Officer)... What is most striking about that list is what it does
not include: the words iPhone, iPad, Mac, or Watch. Apple's products instead
cut across the organization in a way that enforces coordination amongst the
various teams" (Thompson, 2016)
70
* "Jony Ive - the British designer that is the Chief Design Officer (CDO) at
Apple- and his design team lead the company and they do not report to
finance, manufacturing, etc. They are given free rein to set their own budgets
and are given the ability to ignore manufacturing practicalities... When a
design team works on a new product they are then cut off from the rest of the
Apple business. They may even implement physical controls to prevent the
team from interacting with other Apple employees during the day... The team
is also removed from the traditional Apple hierarchy at this point. They create
their own reporting structures and report directly to the executive team. This
leaves them free to focus on design rather than day-to-day minutiae.... The
Apple New Product Process (ANPP) information is given to a product
development team when they begin work. It details every stage of the design
process and it goes into elaborate detail. The idea is to define what stages
the product creation team will go through, who will be responsible for
delivering the final product, who works on which stage and where they work
and also when the product is expected to be completed... The Apple
Executive Team holds a regular Monday meeting to examine every single
product that the company has in design phase at that point in time... Like any
good design company, the design process at Apple is not over when
manufacturing begins. In fact, Apple iterates the design throughout
manufacturing. The product is built, it's tested and reviewed, then the design
team improves on it and it's built all over again. These cycles take 4-6 weeks
at a time and may be run many times over a product's development
lifecycle... When production is complete the EPM will take possession of
some or all of the test devices and then take them back to Apple's
headquarters at Cupertino.... It must be a nerve-wracking experience to be
privy to the "Rules of the Road" (commercial launch details) because if you
lose it or leak it... you're immediately fired. This is explained in the document
itself" ("Apple's Product Development Process - Inside the World's Greatest
Design Organization," 2018)
71
Famous quotes related to design by Steve Jobs:
. "You've got to start with the customer experience and work backwards to the
technology. You can't start with the technology and try to figure out where can
I sell it"
* "Design is a funny word. Some people think design means how it looks. But of
course, if you dig deeper, it's really how it works. The design of the Mac
wasn't what it looked like, although that was part of it. Primarily, it was how it
worked. To design something really well, you have to get it. You have to really
grok what it's all about"
* "Pointing is a metaphor we all know. We've done a lot of studies and tests on
that, and it's much faster to do all kinds of functions, such as cutting and
pasting, with a mouse, so it's not only easier to use but more efficient."
* "'Sometimes when you innovate, you make mistakes. It is best to admit them
quickly, and get on with improving your other innovations."
* "Our DNA is as a consumer company for that individual customer who's
voting thumbs up or thumbs down. That's who we think about. And we think
that our job is to take responsibility for the complete user experience. And if
it's not up to par, it's our fault, plain and simply"
* "It's not about pop culture, and it's not about fooling people, and it's not about
convincing people that they want something they don't. We figure out what we
want. And I think we're pretty good at having the right discipline to think
through whether a lot of other people are going to want it, too. That's what we
get paid to do. So you can't go out and ask people, you know, what's the next
big [thing.] There's a great quote by Henry Ford, right? He said, 'If I'd have
asked my customers what they wanted, they would have told me 'A faster
horse."
An important inference that can be drawn from the above quotes is that Apple lays a lot
more emphasis on user research as compared to market research.
72
Maturity Levels: Leveraging the learnings from Apple and the generic CMM level
definitions discussed earlier, we define maturity levels for "User-centered Design"
capability as under:
Maturity Level
Level 1(Low)
Level 2(Low-Medium)
Description
* Limited or no awareness about design thinking in the company
" Products are designed considering manufacturing
convenience; user experience is not factored in
* R&D team has little exposure to or interaction with customers
" Design team has little inclination to innovate; product
improvements are safe, incremental changes
" Products tested at the end of manufacturing during
development; company hesitant to make iterative changes
" Absence of tools to measure customer satisfaction or capture
feedback
* Low customer satisfaction; they could even serve as
detractors advocating against the company's products
* Knowledge of user-centered design restricted to a few
individuals or teams
" User-centered design not a strategic priority; company
unwilling to commit resources beyond utilizing external
agencies for occasional assignments on a piece-meal basis
* Elementary tools available for creating user-centered designs;
design team knowledgeable about using them
* Management appreciates user-centered design but design
related decisions still taken based on convenience
" Lack of full-time manpower dedicated to understanding user
experience; it is a part of the job for design team
" Product development process led mainly by the R&D team
with occasional exposure to customers or product usage
73
i
i
Level 3(Medium)
Level 4(Medium-High)
* Creative ideas screened through a lens of manufacturing /
implementation feasibility
" Awareness about user-centered design exists among
leadership of multiple functions within the company
" Products or services are designed including user experience
as a factor, yet final designs are an outcome of a mix of
manufacturing constraints and customer needs
" Advanced tools available for creating user centered designs;
design team somewhat limited in skills to leverage full utility
" Dedicated resources for tracking customer satisfaction /
journey; inputs feed into the product development process
" Product development process driven mainly by the R&D team;
involvement of other functions limited to a certain extent
" Creative ideas from design employees are entertained by the
leadership team
" Company's leadership believes user-centered design provides
a strategic advantage
" Products or services are designed including user experience
as an important consideration
" Design team skilled in using sophisticated tools and methods
for creating user-centered designs made accessible by the
company
" Dedicated resources for tracking customer satisfaction /
journey; inputs feed into the end-to-end product lifecycle
management process
* Product development process driven by a dedicated design
team that is empowered to generate new ideas and test them
on their own with limited management interventions
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Level 5 j Company's leadership and employees across different levels(High) and functions believe user-centered design provides
meaningful competitive advantage
" Design thinking is ingrained in the company's culture and
approach to product development; a well-documented process
involves multi-functional internal and external collaboration
and iterative development in phases
" Products are designed keeping user experience in mind;
manufacturing or production constraints do not compromise
design. Company happy to shelve projects in the advanced
stage if desired customer experience not achieved
" Design team has not afraid to innovate or introduce new
ideas; failure is accepted or even celebrated
" Company invests in tools and resources skilled in measuring
customer satisfaction, and understanding customer journey
and feedback. Employees provided constant trainings to
elevate skill levels to match industry best practices
" Company's management includes a Chief Design Officer who
has deep background in user-centered design
" Customers are so deeply engaged with the company that they
act as strong advocates of its products
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4.2.3 Using Maturity Level descriptions
The maturity levels described for various capabilities above could be useful to
organizations in the following ways:
" Companies could use the descriptions to make an assessment of their progress
along the DT journey. By comparing the existing status of their capabilities along
the attributes (bullet points) mentioned in each of the levels, companies can aim
to get a fair sense of where they stand when compared to a high performance
company with respect to a given capability. Interviews of key personnel or
employee surveys could be among the options a company could exploit to obtain
data/ information necessary for assessing current state with respect to an
attribute/ capability
" Companies can refer the maturity level descriptions to take measures to move
from one maturity level to another. They can prioritize development initiatives
along those specific attributes where they perceive themselves to be particularly
lagging. Depending on the context (e.g. industry, size, strategy, etc), the
initiatives and the prioritization could differ from one company to another
76
5. SUMMARY
This thesis delved into the topic of Digital Transformation (DT). We observed that DT is
essentially a business transformation that is enabled and led by technology. The scope
of DT is broad to not only include leveraging technology for the creation of more efficient
processes but also for enhancement of customer experiences and development of new
business models altogether. However, DT is also a complex multi-dimensional change
that is challenging because of several reasons including lack of an understanding of
technology, a clear strategic vision and a certain culture/ way of working among others.
These factors contribute to poor outcomes of DT efforts by companies.
We observed that there were specific capabilities required for business functions to take
advantage of the value that DT offers. This thesis identified those capabilities from first
principles. We also noted that while these required capabilities varied from function to
function, there were a few common themes that ran across them. These themes were
Innovation Culture, Data-driven decision-making, Automation of Processes, User-
centered Design and Scalable IT Infrastructure. A company aiming to pursue DT must
consider working on developing these generic capabilities within the organization,
irrespective of the sector or industry it belongs to.
Next, maturity levels were defined for common/ generic capabilities in order to help
managers of a company measure and guide the progress of their organization. We
noted several well-known companies (such as Apple, Cisco, Netflix etc) from different
industries that have achieved "high performance" status with respect to capabilities
required for DT. We observed that these high performance companies not only
introduced technologies but also managed change effectively. The maturity levels
described in this thesis can help companies benchmark their capability levels (including
change management practices) with those of the high performance companies.
While the list of capabilities and the maturity levels are useful, there are certain
limitations of the approach taken and results achieved. Firstly, the list of processes
included and resources used in identifying capabilities at the functional level is kept
limited for practical purposes. DT is an emerging field with new tools and technologies
77
evolving on a continuous basis. It is possible that there could be additional resources
available/ used by companies which are not mentioned in this thesis. Likewise, the
processes mentioned could be further broken down into sub-processes for additional
insights. These measures could help enlist additional capabilities. Secondly, maturity
levels are developed referring to the success/ status of one high performing company.
Better results could be achieved by examining a number of companies that share
certain characteristics such as size or industry. Structured surveys could be used to
define consistent measures of progress across the maturity levels. Maturity levels
defined in such a manner could be more representative and useful to a practitioner from
a company that belongs to the concerned industry or size category. Thirdly, descriptions
of maturity levels in this thesis are influenced by the industry of the high performance
company. For instance, maturity levels for "Automation of Processes" capability are
developed considering an insurance company (New York Life Insurance Company) as a
benchmark. The level descriptions may not translate well for a company from the
manufacturing industry. However, the approach taken in defining the maturity levels
should extend to other industries/ sectors. Finally, the methods and results included in
this thesis could be made more robust by validating them against a sample of
companies. In other words, data could systematically be gathered from a collection of
comparable companies (sample set) to define maturity levels that could be tested and
improved upon by applying them on a company with characteristics matching that of the
sample set.
Despite the limitations, we believe that this thesis helps clarify DT and demonstrates a
useful method for identifying and developing capabilities required for DT. Further
research in developing functional capabilities in additional detail as well as identifying
maturity levels specific to different contexts (industries, sizes, etc) as described earlier is
recommended.
78
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