Home STRATEGY & MANAGEMENT Change Management The Building Blocks of Digital Transformation: Intelligence, Integration and Impact

The Building Blocks of Digital Transformation: Intelligence, Integration and Impact

September 23, 2016

By David Dubois

Leading an organisation’s digital transformation simultaneously entails driving change within three key pillars of one’s business: intelligence (competitive insights); integration (organisational structure and capabilities); and impact (value creation). Building on industry cases, David Dubois introduces a framework aiming to help leaders to meet these challenges and successfully drive the digital transformation.

As virtually every industry has, is or will experience significant digital disruptions, the question of how to transform one’s organisation is on top of every CEO’s agenda. Indeed, both academic and industry research show that companies that know how to align digital technology and strategic goals can reap substantial benefits in terms of revenue and profit generation as well as market capitalisations (e.g. CapGemini 2012; Niessing and Dubois 2016).

In the last two decades, disruptions have taken various forms: from social media platforms empowering customers, to the internet of things, and enabling information generation around one or several objects. Altogether, they gave birth to brand new ecosystems and business models redesigning the competitive landscapes across industries (McKinsey 2014; Brynjolfsson & McAfee 2012). At their core, the disruptive nature of digital technologies stems from their ability to (1) significantly reduce information asymmetry between different actors embedded in an ecosystem – typically a supplier and a customer (e.g. a driver and a potential passenger, a lender and a borrower) and (2) make this information instantaneously and easily accessible.

In the last two decades‚ disruptions have taken various forms: from social media platforms empowering customers‚ to the internet of things‚ and enabling information generation around one or several objects.

For C-suite executives and entrepreneurs alike, leading the digital transformation is often challenging because it involves driving change simultaneously in three key areas of one’s business where digital technologies represent a game changer. The first is business intelligence, with digital technologies yielding unprecedented amounts of data about business ecosystems from consumers to competitors and collaborators. The second is organisational integration, as digital technologies bring greater connectivity between people and/or processes. The third relates to the kind of customer value a company can bring by leveraging digital dynamics.

For each area, an obvious starting point for company leaders is to ask whether and how the company can align its business objectives with the use of digital technologies: first, how to leverage digital data to transform knowledge-creation processes and create a competitive advantage? (intelligence); second, how to leverage digital channels to transform organisational processes and create agility? (integration); finally, how to leverage digital dynamics to improve one’s value proposition? (impact).

As important as addressing these questions is to assess where the company’s efforts fall onto these areas (i.e. intelligence, integration, and impact) and planning how to bring the company’s transformation to the next level. Indeed, a typical digital transformation is a gradual process entailing three stages: an initiation stage (i.e. the focus is on the discovery of new opportunities), a ritualisation stage (i.e. the focus is on interacting within the digital ecosystem) and an internalisation stage (i.e. the focus is on prioritising digital solutions to lead a business) (see figure 1 below). Identifying where one stands and pacing one’s change is key to successful transformation as many failures to embrace digital technologies result from a desire to leapfrog a stage or a misunderstanding of where one stands.

Next, I briefly describe what each stage of the transformation looks like within the area of intelligence, integration and impact.

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1. Intelligence

With search engines such as Google processing a staggering 3.5 billion requests a day and massive quantities of content pouring on social media – 2.5 million pieces of content for Facebook alone daily, digital data represent the richest reservoir of insights that has ever existed. To leverage this data, a dynamic ecosystem of solutions – from social media listening dashboards such as Digimind, Synthesio, or Radarly to search-based insights generation such as Tsquared, has emerged (Dubois 2016b). Despite their appeal it is not always obvious how to gradually embrace the new possibilities offered by digital technologies. Building intelligence capabilities based on digital data rests – in fact – on three stages of development of increasing complexity.

The first stage – social listening – typically involves acquiring basic social media analytics skills giving instant access to online conversations and activities about brands and topics. Being in tune with one’s environment can reveal opportunities to increase brand awareness or reputation. For instance, when the power went out during the Super Bowl 2013, it only took a few minutes for creative teams at Oreo to post a tweet featuring an Oreo cookie and the caption “You can still dunk in the Dark”. This quick response successfully grasped the audience’s attention as many were already on social media to distract themselves from the power outage. In the same vein, 3M Singapore, a major supplier of anti-pollution N95 face masks was quick to respond in 2013 after a record haze blanketed Singapore and surrounding countries and published content on how to battle the haze and, advice on different types of respirators available and even sent gift packs, along with coordinating its supply chain to insure full availability of the products.

Companies advanced in their digital transformation pay greater attention to integrate digital data and experiences into their own processes in order to increase organisational learning and ultimately company performance.

The second stage – digital insights – entails using digital data from social conversations to web data within research capabilities to optimise operational decision-making. As an example, a large beauty company now systematically uses digital data when deciding to launch a product and has redesigned its marketing decision-chain with this purpose. After assessing the size and scope of new trends on social media (e.g. for new hairstyles), brand teams integrate these insights into key operational decisions around a brand launch (e.g. brand name, positioning, targeting, market access) to produce a solution closely fitting with customers’ expectation. In one product launch, the company decided to name a new brand with the very term consumers used in their organic searches for the hairstyle (i.e. “ombre”).

The third and last stage – digital foresight – entails using multiple sources – social media, search, geolocalises data – and integrate these insights at a strategic level. The combined sum of insights of different digital footprints from consumers, competitors and the media often reveal brand new insights about one’s brand – “unknowns-unknowns”. As an example – Tsquared, a pioneer in search analytics, works with large FMCG brands to help them understand their digital footprint (e.g. based on search) as well as potential threats and opportunities around leveraging the brand. For instance, they help companies understand when a company can use its brands for brand extension in new categories, or the degree of overlap between brands and actual or potential spokespeople, and help companies understand their digital ROI. Although digital foresights represent the largest shift in opportunities since the emergence of marketing research, this last stage also requires a tight integration with one’s organisation and leadership.

2. Integration

Although a majority of executives mention digital as a key priority, they often outsource capabilities in this area to others (e.g. digital agency, consultancy). Outsourcing the design and implementation of digital initiatives carries two risks for companies: first, they run the risk of becoming less familiar with digital technologies – that is, the very heart of the digital revolution – and keep up with improvements in communication overtime; second, they lose control over digital data, which, even when shared by service providers used (e.g. digital agencies), is not fully leveraged in the company. In contrast to this approach, companies advanced in their digital transformation pay greater attention to integrate digital data and experiences into their own processes in order to increase organisational learning and ultimately company performance. Digital integration typically occurs through three stages.

The first step involves the creation of digital to create a digital memory – that is, a transparent repository or sharing mechanism of the efforts undertaken across the company’s different divisions as well as dedicated resources and expected or actual outcomes. The forms this memory can take are many and often unique to each company (e.g. a simple spreadsheet, a collection of videos) as it should blend as closely as possible with the company’s culture and objectives. With such a toolkit, companies prove to be able to learn much faster from their mistakes, build best practices and leverage their own successes in the digital race with their competitors.

Identifying where one stands and pacing one’s change is key to successful transformation as many failures to embrace digital technologies result from a desire to leapfrog a stage or a misunderstanding of where one stands.

The second step entails integrating digital sensory capabilities, such as social media analytics. While companies often choose to delegate these capabilities, integrating them provides a number of notable advantages, including greater knowledge of up-to-date technologies, greater inter-departmental communication and faster organisational learning. Key to developing a company’s sensory capabilities is the design of information sharing so that digital data is shared dynamically and interactively within a company’s command centres. To illustrate, a large restaurant chain developed listening capabilities and integrated them in the organisation at a global and local level: every restaurant was able to have access to online conversations produced by consumers and received a weekly e-reputation score vis-à-vis local competition. Of key importance, this e-reputation became part of the staff incentive structure, with bonuses of a certain restaurant staff directly linked to its e-reputation score.

The third step of digital integration is digital autonomy – whereby a company acquires the ability to track data about processes and customers. This novel ability to track data (for instance, data about customer activity or data about use of a machine) offers a unique opportunity for a company to become a truly responsive organisation offering rapid quality improvement and learning. An early pioneer of this technique, a large shoe manufacturer started collecting data about runners by including electronic chips in its shoes which provided a unique repository of customer insights and source for continual product improvement. The company would know where and when a runner would use a shoe. Similarly, a well-known manufacturer of plane engines inserted a tracker within each engine to monitor potential defection as well as the engine’s resistance and performance to different weather conditions. As a result of such increased knowledge, this company previously limited to interacting with aircraft manufacturers became a data provider for airline companies and to pilots to help them better program flight efficiency.

3. Impact

From reaching new customers to connecting different, digital technologies represent a tremendous source of value creation. As with intelligence and integration, transforming one’s organisation value creation processes contains three steps of increasing intensity vis-à-vis customers.

At the most basic level, digital technologies create a tremendous opportunity to connect with their audience – customers, collaborators and the media (Dubois(a)). From social media to messaging app, these technologies connect individuals with other individuals and can help organisations increase awareness about their brands and services. To win new audiences, companies engaged in digital word-of-mouth mechanics. To illustrate, a large shipping company built a 1M+ community on Facebook as a bridgehead of a broader strategy aiming to establish Maersk’s leadership in the shipping industry.

A second, more involving stage of the digital transformation changes the type of value companies can create lies in driving engagement – that is, systematically using digital and non-digital interactions and involvement from customers to increase value. A widely used strategy relying on influencers entails “seeding” products to key influencers in order to facilitate and fasten product adoption. For instance, a large US manufacturer decided to seed its products and now systematically uses its relationship with a small set of communities in order to get instant feedback on its product and co-create new models.

Finally, a third stage involves leading disruptions. Reaching this stage often means that companies have developed a complex data-collection system providing unique information that the company can leverage in another setting. A particularly good case are all the apps that followed the steps of a large US shoe manufacturer in the collection of a series of consumer-focused health-related (e.g. calories intake, sport habits etc.) information susceptible to be of interest to industries such as health, banking and of course health providers. This stage thus requires the use digital technologies to produce a self-generated stream of innovations whereby products and services are continuously improved.

Conclusion

In a world where the digital revolution transforms markets and rapidly changes the competitive landscape, embracing the digital transformation can mean the difference between keeping one’s leadership and losing ground and eventually being pushed out of the game. To win this challenge, three areas need to be at the core of digital transformation efforts: intelligence, integration and impact. Across areas, company leaders will drive their organisation through increasingly intensification – initiation, ritualisation and finally internalisation, leading to a fully digital organisation with sustainable competitive advantages in the decades ahead.

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About the Author

David Dubois is an Assistant Professor of Marketing at INSEAD. His expertise lies in understanding (1) the design and implementation of effective digital marketing strategies and (2) value creation processes in luxury and fashion. In addition to teaching in the MBA program, he co-directs INSEAD’s Leading Digital Marketing Strategy program.