The New Elements of Digital Transformation

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2014, “The Nine Elements of Digital Transformation”

It requires that companies become what we call digital masters. Digital masters cultivate two capabilities: digital capability, which enables them to use innovative technologies to improve elements of the business, and leadership capability, which enables them to envision and drive organizational change in systematic and profitable ways. Together, these two capabilities allow a company to transform digital technology into business advantage.

We found that the elements of leadership capability have endured, but new elements of digital capability have come to the fore.

While strong leadership capability is even more essential than ever, its core elements — vision, engagement, and governance — are not fundamentally changed, though they are informed by recent innovations. The elements of digital capability, on the other hand, have been more profoundly altered by the rapid technological advances of recent years.

Experience design: Customer experience has become the ultimate battleground for many companies and brands.

Customer intelligence: Integrating customer data across silos and understanding customer behavior

Emotional engagement: Emotional connections with customers are as essential as technology in creating compelling customer experiences.

As ever, well-managed operations are essential to converting revenue into profit, but now we’re seeing a shift in the focus of digital transformation in this arena.

Core process automation: Amazon’s distribution centers deliver inventory to workers rather than sending workers to collect inventory. Rio Tinto, an Australian mining company, uses autonomous trucks, trains, and drilling machinery so that it can shift workers to less dangerous tasks, leading to higher productivity and better safety.

Connected and dynamic operations: Thanks to the growing availability of cheap sensors, cloud infrastructure, and machine learning, concepts such as Industry 4.0, digital threads, and digital twins have become a reality. Digital threads connecting machines, models, and processes provide a single source of truth to manage, optimize, and enhance processes from requirements definition through maintenance.

Data-driven decision-making: from backward-looking reports to real-time data. Now, connected devices, new machine learning algorithms, smarter experimentation, and plentiful data enable more-informed decisions.

Transforming Employee Experience

Augmentation: Warnings that robots will replace humans have given way to a more nuanced and productive discussion.
Workers in Huntington Ingalls Industries’ shipyard use augmented reality to help build giant complex vessels such as aircraft carriers and submarines. They can “see” where to route wires or pipes or what is behind a wall before they start drilling into it.

Future-readying: providing employees with the skills they need to keep up with the pace of change. In the past few years, this has given rise to new models of managing learning and development in organizations, led by a new kind of chief learning officer, whom we call the transformer CLO

Flexforcing: To respond to fast-paced digital opportunities and threats, companies also need to build agility into their talent sourcing systems. As automation and AI applications take over tasks once performed by humans, some companies are multiskilling employees to make the organization more agile.

Transforming Business Models

three elements supporting business model transformation: digital enhancements, information-based service extensions, and multisided platforms.