Magazine Spring 2015 Research Highlight

Revamping Your Business Through Digital Transformation

To gain the most business benefits from today’s digital technology, it pays to question key managerial assumptions.

George Westerman and Didier Bonnet Reading Time: 11 min 

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Image courtesy of Volvo Car Corp.

When Volvo Car Corp. introduced direct services to consumers through apps and in-car electronics, the company opted to keep dealers involved.

Image courtesy of Volvo Car Corp.

There is no shortage of stories about companies that create amazing innovations with digital technology. By using mobile devices, social media, analytics and the cloud, savvy companies are transforming the way they do business. Most of the stories feature companies that are small and young or that operate in industries such as music or high tech, where digital technology has already radically shifted the business landscape. For larger companies in more traditional industries, it’s easy to think that digital transformation can wait and that a follower strategy is a safer route than trying to be a pioneer. That kind of thinking, while tempting, is wrong.

Although the software, media and technology industries get a disproportionate share of the attention, those industries account for less than 10% of the U.S. economy. What about the other 90%? We studied more than 400 large companies around the world in industries including manufacturing, hospitality and mining. We found that in every industry we studied, companies are doing exciting things with digital technology and getting impressive business benefits. What’s more, any organization can adopt their methods.

Companies that lead in using digital technology — we call them “digital masters” — differ not only in their capability but also in the clarity of their vision. They see digital not as a technology challenge but as a transformation opportunity. Rather than incrementally adjusting current practices, they search for ways to use today’s fast-moving technologies to transform the way they do business.

For managers in traditional industries, this can be a tall order. Many assumptions about what is possible and impossible, based on experience with last century’s technologies, are no longer valid in the digital world. How do you move beyond your current mind-set to find opportunities that digital technology can enable?

Start by rethinking four traditional assumptions that affect how you relate to your customers, how you run your operations, how you organize and even how you think about your business model. This assumption-busting exercise will help you to think differently about what is possible.

Assumption 1: Our customers really value the human touch. Humans have their place in customer interactions. But not all interactions with humans are actually valuable to customers.

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About the Authors

George Westerman is a research scientist with the MIT Sloan School of Management’s Initiative on the Digital Economy. Didier Bonnet is a senior vice president at Capgemini Consulting and the executive sponsor for Capgemini’s digital transformation program. With Andrew McAfee, they are the authors of the book Leading Digital: Turning Technology Into Business Transformation (Harvard Business Review Press, 2014).

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Comment (1)
Todd Roth
Digital transformation creates vast new data sets of customer information. Sometimes called Data Lakes, these new databases of information should be harnessed with IT analytics to help mine additional information about your customers , their interaction with your company or feelings about your product and services.  Seeing trends develop earlier or deriving customer sentiment via social media through IT analytics is probably the best way to sustain and maintain your competitive advantage.