Topic 9 - 10 What's your Digital Business Model?

The document primarily discusses the evolving nature of digital business models (DBMs) and
how enterprises can navigate digital transformation. It provides insights into the significance of
digital disruption, strategies for becoming more digitally agile, and examples of companies
successfully transforming their business models.

The DBM Framework

The DBM framework categorizes businesses into four models:

1. Supplier: Provides products or services with minimal digital integration.

2. Omnichannel: Integrates digital channels for customer interaction, offering a seamless
experience across platforms.
3. Modular Producer: Specializes in a niche product or service within a larger ecosystem.
4. Ecosystem Driver: Orchestrates a broad network of partners and customers, offering
comprehensive digital solutions.

The framework emphasizes the need for businesses to move "up and to the right," transitioning
from suppliers to ecosystem drivers to remain competitive in the digital age(topic 9-10).

Case Studies

1. Schneider Electric:
○ Transitioned from a manufacturer of electrical products to an ecosystem driver in
energy management.
○ Leveraged IoT-enabled solutions to offer intelligent, connected devices and real-
time data analytics.
○ Achieved significant growth, with 44% of 2016 revenue from IoT solutions(topic
9-10).
2. Aetna:
○ Shifted from a health insurance provider to an ecosystem driver in health and
wellness.
○ Developed a vision of "building a healthier world," integrating acquisitions and
partnerships to offer comprehensive health services.
○ Positioned itself as a central hub for health-related needs, enhancing customer
engagement(topic 9-10).
3. Commonwealth Bank of Australia (CBA):
○ Innovated its mortgage business by creating a mobile app that offers property
price information and mortgage application services.
○ The app increased customer engagement and provided significant ROI,
illustrating the potential of digital tools to transform traditional banking services
(topic 9-10).
Digital Transformation Strategies

1. Deep Customer Knowledge:

○ Enterprises must understand their customers' needs and behaviors in depth.
○ Use data analytics to tailor offerings and enhance customer engagement(topic 9-
10).
2. Building Digital Capabilities:
○ Developing digital tools and platforms that facilitate seamless interactions
between the business, its customers, and partners.
○ Examples include mobile apps, IoT devices, and cloud-based services(topic 9-
10).
3. Creating Ecosystems:
○ Moving towards an ecosystem model involves partnering with other businesses
to offer comprehensive solutions.
○ Requires openness and collaboration, often facilitated through APIs and shared
digital platforms(topic 9-10).

Challenges and Opportunities

1. Digital Disruption:
○ Businesses face constant threats from digital disruptors, particularly smaller
enterprises that can quickly adapt and innovate(topic 9-10).
○ To combat this, companies need to be agile and willing to experiment with new
digital models.
2. Competitive Advantage:
○ Understanding and leveraging what makes a company unique is crucial in the
digital landscape.
○ This involves not only optimizing existing strengths but also exploring new digital
opportunities to stay ahead of competitors(topic 9-10).

Topic 8 What is the Digital Threat, and Opportunity?

(Chapter Introduction "What's your Digital Business Model" pp 7 -11)

Key Points on Digital Transformation

1. Nature of Digital Transformation:

○ Digital transformation isn't solely about implementing new technologies like
social, mobile, analytics, cloud, and IoT.
○ It’s about leveraging these technologies to differentiate the business by providing
new and compelling customer experiences.
2. The Next-Generation Enterprise:
 ○ To succeed in the digital age, companies must become next-generation
enterprises.
○ This involves understanding customer needs and creating engaging, technology-
enabled experiences.
3. DBM Framework:
○ The DBM framework categorizes businesses into four models:
1. Supplier: Companies that sell through other enterprises with minimal
digital integration.
2. Omnichannel: Businesses that integrate various digital and physical
channels to create seamless customer experiences.
3. Modular Producer: Providers of plug-and-play products or services that
can be easily integrated into other companies' ecosystems.
4. Ecosystem Driver: Companies that create and manage a network of
partners and customers, becoming the central hub in a specific domain.
4. Transitioning Business Models:
○ Companies are moving from traditional, controlled value chains to more complex,
networked systems.
○ They are also shifting from limited customer knowledge to a deeper
understanding of customer needs and life events.
5. Strategic Questions for Leaders:
○ Leaders must determine their company's position within the DBM framework and
decide where they want to move.
○ They need to assess how much they know about their end customers and how
integrated they are in a digital ecosystem versus a traditional value chain.

Case Studies and Examples

1. Aetna:
○ Transitioned from a B2B health insurance provider to a full-service health
destination, significantly increasing its revenue.
○ This transformation included integrating various health services and creating a
more customer-centric approach.
2. 7-Eleven Japan:
○ Evolved from a chain of convenience stores to a comprehensive service provider,
offering a vast selection of products both in-store and online.
○ Achieved a significant market share and profitability by leveraging digital
technologies to enhance customer experience.
3. Walmart vs. Amazon:
○ Walmart exemplifies the value chain approach by controlling product prices,
locations, and sales but lacks detailed customer knowledge.
○ Amazon represents the ecosystem driver model, providing extensive customer
choice, competitive pricing, and fast innovation through a curated digital
experience.

Performance Comparison
 ● Ecosystem drivers outperform other business models in customer experience, time to
market, revenue growth, and net profit margins. This highlights the importance of moving
towards an ecosystem-driven model for sustained success in the digital era.

Topic 8 What is the Digital Threat, and Opportunity?

(Chapter 1 What's your Digital Business Model)

Chapter 1 of "What's Your Digital Business Model?" introduces the concept of the digital threat
and the urgency with which organizations must respond to digital disruption. It begins with a
self-assessment tool designed to help companies evaluate the risk of their best-selling products
or services being digitally disrupted. The tool asks executives to rate the extent to which their
products are electronically specifiable, deliverable digitally, augmented with valuable
information, threatened by competitors from other industries, and at risk of being replaced by
digital alternatives. This assessment helps estimate the percentage of a company's revenues
that could be under threat from digital disruption over the next five years .

Scope and Scale of Digital Disruption

The chapter highlights the significant scale of digital disruption. On average, senior executives
expect that 28% of their enterprise's revenue will be threatened by digital disruption within five
years, with this figure rising to 46% for large firms with revenues exceeding $7 billion. This
necessitates substantial investments in new areas to protect businesses. The chapter
emphasizes that large enterprises, in particular, face considerable risks due to their high profits
and slower ability to change, making them prime targets for digital disruptors .

Industry-Specific Threats

Certain industries face greater digital threats than others. The media industry, exemplified by
ESPN's experience, is particularly vulnerable. ESPN, once a dominant player in the sports
broadcasting market, faced shrinking profits and a declining subscriber base due to digital
competition and changing consumer behaviors. This example underscores the need for
companies to adapt by improving customer experiences and leveraging digital tools to remain
competitive .

Opportunities in Digital Transformation

Despite the threats, digital transformation also presents significant opportunities. The chapter
discusses how companies can use digital tools to meet customer needs through integrated
omnichannel services. For instance, banks can shift from a product focus to a customer-centric
approach, using digital platforms to offer engaging and valuable services. The example of
iGaranti, a mobile app created by Garanti Bank to cater to millennials' financial needs, illustrates
how digital transformation can help companies attract and retain new customer segments .

Strategic Responses to Digital Disruption

Companies can choose different paths in response to digital disruption. One approach is to
specialize in handling backend operations while allowing other enterprises to manage customer-
facing services. However, a more promising route is to embrace digitization fully and transform
into an organization that prioritizes customer needs and offers integrated services. This often
requires significant organizational changes to shift from a traditional product-focused model to a
customer-first approach .

Navigating Dual Paths

Some companies may attempt to balance both traditional and digital models simultaneously,
which can be challenging. Efficiency in backend processing demands standardization and
automation, while enhancing the customer experience requires integration and customization.
This dual approach can make the digital transformation journey more complex, but it is often
necessary for companies that are not ready to abandon their traditional operations entirely .

Topic 8 What is the Digital Threat, and Opportunity?

(Chapter Introduction "What's your Digital Business Model" pp 1-7)

Digital transformation is fundamentally about change rather than just technology. It’s inevitable
and crucial for organizations to determine when and how to undergo this transformation. The
essence of digital transformation lies in reshaping business models to focus on customer needs
rather than just transactions. For instance, a bank should become a destination for customers
navigating life events like buying a home, rather than merely providing mortgage services. This
shift requires profound changes across the organization, including business models, people,
structures, competencies, and cultures.Digital disruption is pervasive across industries.
Financial services, for example, face competition from fintech firms like PayPal and Apple Pay,
which offer superior digital experiences. This disruption necessitates a complete rethinking of
customer engagement to avoid being sidelined by more agile competitors. Retailers, too, are
entering new domains, such as Coles and Ikea moving into insurance.

The impact of digital disruption is significant, with massive investments in fintech and substantial
job losses in traditional banking anticipated. Larger enterprises, in particular, are vulnerable due
to their size and profit margins, facing a need to reinvent themselves to maintain customer
relationships and avoid a race to the bottom driven by cost competition.

There are three main forms of digital disruption:

1. New entrants: Startups with innovative business models and superior digital
capabilities, like Uber and Airbnb, disrupt existing industries.
2. New business models for traditional competitors: Established companies, such as
Nordstrom, adopt more appealing business models to enhance customer experience.
 3. Crossing industry boundaries: Successful companies in one industry, like banks or
insurance firms, leverage digital tactics to enter new markets.

Addressing digital disruption is a business imperative. Companies must evaluate threats, seize
opportunities, and create new business options. Board members and executives recognize the
need for significant attention to digital threats, with a large portion of revenue at risk in the near
future.Preparing for digital disruption involves developing a compelling vision for long-term
success in a digital economy. However, the path forward is often unclear due to the inherent
uncertainty of digital transformation outcomes. A lack of common language and frameworks
further complicates strategic planning for digital disruption.

The book introduces a digital business model (DBM) framework to help executives understand
their competitive environment, digital journey, and best practices for success. Derived from
extensive research and global testing, the framework aims to assist large enterprises, startups,
board members, consultants, and managers in thriving in a digitized world.

The DBM framework helps companies create new value propositions by leveraging digital
technologies to better understand and address customer needs. Digital transformation involves
moving from controlled value chains to networked systems and gaining a closer understanding
of customer needs, leading to improved customer engagement.

Ultimately, digital transformation is about creating a compelling destination for customers

through innovative business models and enhanced customer experiences, enabled by digital
technologies.

Topic 8 article good to read page 27-31

The business world is experiencing rapid digitization, leading to digital disruption that breaks
down industry barriers and creates new opportunities while dismantling long-established
business models. This process, though often slower than expected, can have profound impacts,
much like past technological advancements such as steam engines, cars, and mobile phones.
For example, e-books, initially slow to gain traction, are now growing in popularity due to their
cost-effectiveness and convenience.

Companies must evaluate the threats and opportunities presented by digital disruption to create
new business options for the future. Research shows that board members at large companies
recognize the importance of addressing digital disruption, with significant portions of their
revenue expected to be at risk. Disrupters like Uber, Airbnb, Apple Pay, and Amazon are
leading this change, impacting various industries such as taxis, hotels, banking, and retail.

However, digitization also brings opportunities. Companies can leverage strong customer
relationships and enhance cross-selling opportunities. To navigate the digital era, businesses
should transition from traditional value chains to digital ecosystems, focusing on understanding
end customers and integrating into digital ecosystems. Companies with a significant portion of
their revenues from digital ecosystems and a deep understanding of their customers tend to
perform better financially.

The research identified four distinct business models for the digital era, each with unique
capabilities and relationships:

1. Supplier Model: Companies operate in another company's value chain, often with limited
knowledge of end consumers.
2. Omnichannel Model: Businesses provide seamless customer experiences across multiple
channels, integrating physical and digital interactions.
3. Ecosystem Driver Model: Companies create platforms with relationships with various service
providers, offering comprehensive solutions and owning customer relationships in specific
domains.
4. Modular Producer Model: Companies offer plug-and-play products or services that can
integrate into various ecosystems, focusing on continuous innovation.

The move towards digital ecosystems allows companies to offer enhanced consumer value
through greater choice, faster innovation, and comprehensive customer data. Successful digital
transformation requires businesses to shift from episodic transactions to continuous, informed
interactions with customers, leveraging extensive customer knowledge to meet their needs
effectively.

2 - 3 What Is Digital Transformation?

(What do you really mean by Business Transformation Scott
Anthony (Harvard Business Review Digital 2016) pp 2-3)

Today's corporate focus is on transformation due to the rapid turnover and delisting of
companies, with the "topple rate" of industry leaders doubling in a generation. Software is
reshaping industries, and executives recognize the need to respond. However, the term
"transformation" often encompasses three distinct types of efforts:

1. Operational Transformation: This involves improving existing processes to be better,

faster, or cheaper using new technologies. It leads to cost reduction and increased
customer satisfaction but does not fundamentally change the company's essence. It is
insufficient in a rapidly changing world.
2. Operational Model Transformation: This involves fundamentally changing how a
company operates. An example is Netflix shifting from mailing DVDs to streaming
content and creating its own content. While the customer purpose remains the same, the
method of delivering it changes significantly.
3. Strategic Transformation: This is the most profound change, altering the very essence of
a company. Examples include Apple evolving from a computer company to a consumer
electronics giant, Google moving from advertising to driverless cars, and Amazon
expanding from retail to cloud computing. Successful strategic transformation
reinvigorates growth, while poor execution invites criticism.
 (What is Digital Transformation (Mckinsey Explainers 2023) pp 2)

Digital transformation is a fundamental overhaul of how an organization operates, aiming to

continuously deploy technology to enhance customer experience and reduce costs. Unlike
traditional business transformations that end once new behaviors are achieved, digital
transformations are ongoing efforts that require long-term commitment and adaptability,
especially with the constant evolution of technology and AI.

Key elements for a successful digital transformation include:

1. Clear Strategy: Focus on specific business domains (like customer journeys or

processes) that offer significant value, guided by a detailed roadmap.
2. In-House Talent: Develop a strong internal team of digital experts to drive
transformation, beyond just hiring external resources.
3. Ongoing Adaptation: Continually improve and adjust processes in response to
technological advancements, with AI playing a critical role in generating insights and
decision-making.

Overall, digital transformation requires a strategic, long-term approach to integrate technology

deeply into the organization and maintain a competitive edge.

Transformations that Work Michael Mankins Patrick Litre (Harvard Business

Review May - Jun 2024) pp 89 - 90

Recent surveys by Bain & Company on digital transformations reveal a mixed picture:

1. Decline in Failures: Fewer digital transformation efforts are failing outright, dropping
from 38% in 2013 to 13% in 2023. This improvement is attributed to better
understanding of common pitfalls and the use of advisory support.
2. Stagnant Success Rates: Despite fewer failures, success rates have remained low,
with only about 12.5% of transformations meeting or exceeding leadership's
expectations. This rate has not improved since 2013.
3. Mediocre Outcomes: The proportion of transformation programs achieving more than
50% but less than 100% of their targets has increased significantly from 50% in 2013 to
75% in 2023. Many leaders appear to accept these "mediocre" results, which can foster
cynicism and undermine future change efforts.
4. Continuous Transformation: Successful digital transformations are increasingly
recognized as ongoing processes rather than discrete programs. Companies like Dell
Technologies exemplify this by making transformation a continuous, integral part of their
operations, resulting in significant performance gains.
5. Key Practices for Success: To improve results, transformations should be continuous,
integrated into daily operations, and guided by clear, evolving agendas that address
critical issues.
Topic1

The article "How Incumbents Survive and Thrive" by Julian Birkinshaw challenges the
prevalent narrative that digital disruption is rapidly dismantling established companies in
favor of new tech giants. The reality, as Birkinshaw presents, is far more nuanced and
reveals that incumbents have not only survived but also thrived in the digital age by
adopting various strategies.

### Digital Transformation in Context

Digital transformation is often seen as a wave of technological advancements that old-

economy companies must ride or be swept away by. While it is true that digital disruption
poses significant challenges, the impact has been less uniformly destructive than
commonly believed. The Fortune 500 and Global 500 lists, comparing data from 1995
and 2020, show that many companies have maintained or improved their positions. Only
a small fraction of companies on these lists were newcomers founded after 1995, while
the majority have adapted and persisted despite technological upheavals【4†source】.

### Myth vs. Reality

Birkinshaw identifies three myths about digital disruption:

1. **Every sector is under threat.**

2. **Disruption happens quickly and is accelerating.**

3. **Established firms are struggling to adapt.**

The reality counters these myths. While some sectors, like technology, media,
telecommunications (TMT), and retail, have experienced significant churn, many other
industries have shown remarkable stability. For example, finance, insurance, and
education have seen predictions of disruption since the 1990s, yet the dominant players
have largely retained their positions【4†source】.

### Strategic Responses to Digital Disruption

Incumbents have adopted various strategies to navigate the digital landscape:

1. **Fight Back:** This involves directly competing with disruptors by setting up new
digital units, acquiring tech companies, or entering joint ventures. For instance, the New
York Times created NYTimes.com to compete in the digital news space. However, this
approach can be challenging and is not always successful【4†source】.

2. **Double Down:** Companies leverage their existing strengths. Disney, instead of

immediately jumping into streaming, initially focused on building its content library by
acquiring Pixar, Marvel, and Lucasfilm. This strong content foundation later allowed
Disney to launch a successful streaming service on its own terms【4†source】.

3. **Retrench:** Some firms retreat strategically, consolidating their positions through

mergers and acquisitions or seeking regulatory support to protect their markets. An
example is the merger of Konica and Minolta in response to the digital camera market’s
growth【4†source】.

4. **Diversify:** Companies explore new business areas that complement their existing
capabilities. This involves expanding into adjacent markets or entirely new sectors to
mitigate the risk posed by digital disruptors. An example is Pfizer’s acquisitions to
enhance its marketing and distribution capabilities rather than venturing into unproven
biotech fields early on【4†source】.

### Long-term Adaptation

The article emphasizes that digital disruption, while impactful, unfolds over a long period.
Industries perceived as vulnerable in the 1990s, such as retail banking and education,
have not seen their established players overtaken by new entrants. Most incumbents
have successfully transitioned into the digital age, disproving the notion that they cannot
adapt【4†source】.
In conclusion, digital transformation is a complex, multifaceted process. While it does
bring significant challenges, many incumbents have demonstrated resilience and
strategic agility. Understanding the nuances of how industries and companies evolve in
response to digital disruption provides a more balanced view of the future, allowing
business leaders to make informed, strategic decisions that enhance their long-term
survival and growth.

Topic 5

### Digital Transformation as a Continuous Competitive Advantage

Digital transformation is not a one-time event but a continuous journey that business
leaders will navigate throughout their careers. This ongoing process is driven by the
constant evolution of digital technologies, including cloud computing, artificial intelligence
(AI), microservices, APIs, agile development, and more. These advancements have
permeated every aspect of business and life, making perpetual adaptation necessary for
maintaining competitiveness.

Historically, companies relied on standard technology packages from vendors to run

their operations, believing that developing custom systems was too costly and complex.
Technology was seen as a basic operational need rather than a source of competitive
advantage. However, the rise of digital technologies and new software development
paradigms has turned this notion on its head. Today, companies can develop and
maintain proprietary applications more efficiently and cost-effectively, thanks to a
maturing software industry and an emerging software supply chain that allows for the
assembly of applications from existing building blocks.

This transformation has made it possible for any company to compete using digital
capabilities. The integration of technologies like generative AI, edge computing, and
quantum computing is further reducing development costs and time, enabling companies
to differentiate themselves through digital innovation.

Empirical data underscores the impact of digital transformation on financial performance.

Surveys reveal that top-performing companies achieve significant improvements through
digital practices. For instance, 70% of top performers use advanced analytics for
proprietary insights, while 50% leverage AI to enhance and automate decision-making
processes. This indicates that a strategic approach to digital transformation can yield
substantial competitive advantages.

However, digital and AI transformations are challenging. Despite 89% of companies

having launched digital transformation initiatives, many have struggled to capture the
expected revenue and cost savings. Successful digital transformation requires a holistic
approach, involving hundreds of technology-driven solutions—both proprietary and off-
the-shelf—working together to create superior customer and employee experiences,
reduce costs, and generate value.

Achieving this level of transformation necessitates a fundamental rewiring of how

companies operate. This involves fostering collaboration across different units, bringing
in new talent, and developing accelerated learning loops to harness and grow their skills.
Digital transformation is as much about developing new organizational capabilities as it
is about technology.

Even tech giants like Amazon had to invest, experiment, fail, and adapt to succeed.
Amazon's journey involved automating key processes with proprietary solutions
developed by cross-functional teams of business, tech, and operational experts. This
continuous improvement has enabled Amazon to become digital to its core.

In conclusion, digital transformation is an ongoing endeavor that requires sustained

effort and investment. Companies that embrace this journey and continuously evolve
their digital capabilities are likely to maintain a competitive edge. The experiences of
digital leaders demonstrate that while the path to transformation is challenging, the
rewards in terms of financial performance and market differentiation are significant.

### Foundational Elements of Successful Digital Transformations

Digital transformation is a continuous journey that demands foundational and universal

elements: vision, alignment, and commitment. While these elements are crucial in any
transformation, they are often overlooked in digital and AI initiatives, resulting in
suboptimal outcomes.
#### Vision

A strong vision is essential for guiding a digital transformation. It serves as the North
Star, providing a clear destination for all activities and solutions outlined in the roadmap.
A good vision statement includes an aspiration often centered around the customer, a
time dimension, and quantifiable value. For example, a vision might be "to provide a
frictionless customer and employee experience by leveraging AI across our core
operational processes to deliver industry-leading customer satisfaction and a 15% lift in
EBIT in three years." This vision aligns with the overall business strategy and helps
reimagine the business by identifying the capabilities needed to achieve it.

#### Alignment

Alignment goes beyond mere agreement; it ensures that everyone understands their role
and responsibilities in the transformation. Digital and AI transformations require tight
cross-functional collaboration across departments such as sales, marketing, customer
service, and order fulfillment. Successful transformations involve end-to-end process
collaborations, making alignment critical. Research shows that companies with
successful transformations are nearly four times more likely to report a shared sense of
accountability for meeting transformation objectives.

At the early stage, leaders often have different priorities and perspectives, leading to
misalignment. Therefore, creating a common understanding of digital technologies and
their potential is vital. Experiential leadership learning journeys, including visits to
digitally advanced companies, executive training, and workshops, help build this shared
understanding. Each top executive should invest a minimum of 20 hours in learning to
be ready to productively engage in defining a digital roadmap.

#### Commitment

Commitment is indispensable for any transformation and extends beyond budget

allocation. It involves C-suite leaders making themselves accountable for delivering the
vision and related benefits. Commitment is reflected in four ways:
1. **Digital Business Case**: Leaders must commit to clear business performance
improvements. The plan should truly transform the business, with investments matching
the opportunity. Avoid the illusion of “digital magic” where minimal investment is
expected to yield significant value.

2. **Foundational Enterprise Capabilities**: Investments should focus on building

capabilities in digital talent, operating models, technology stacks, and data
environments. An early investment split of 50/50 between specific solutions and
foundational capabilities is recommended, ensuring value is built incrementally.

3. **CEO-led Governance**: Successful transformations require CEO sponsorship to

create cross-functional alignment and make bold decisions. Establish a transformation
office staffed with the most capable people to oversee the process.

4. **Executive Role Modeling**: CEOs and line executives should devote meaningful
time to the transformation, role-modeling customer focus, collaboration, tech savviness,
and agility. They should be curious, continuously learning about technology potential,
and actively engaging with their teams to observe successes and challenges.

In summary, successful digital transformations hinge on a clear vision, organizational

alignment, and unwavering commitment from leadership. These foundational elements
ensure that digital initiatives are effectively implemented and sustained, driving
significant competitive advantage.

Topic 7

### Foundational Elements of Successful Digital Transformations

Digital transformation is a continuous journey that demands foundational and universal

elements: vision, alignment, and commitment. While these elements are crucial in any
transformation, they are often overlooked in digital and AI initiatives, resulting in
suboptimal outcomes.

#### Vision

A strong vision is essential for guiding a digital transformation. It serves as the North
Star, providing a clear destination for all activities and solutions outlined in the roadmap.
A good vision statement includes an aspiration often centered around the customer, a
time dimension, and quantifiable value. For example, a vision might be "to provide a
frictionless customer and employee experience by leveraging AI across our core
operational processes to deliver industry-leading customer satisfaction and a 15% lift in
EBIT in three years." This vision aligns with the overall business strategy and helps
reimagine the business by identifying the capabilities needed to achieve it.

#### Alignment

Alignment goes beyond mere agreement; it ensures that everyone understands their role
and responsibilities in the transformation. Digital and AI transformations require tight
cross-functional collaboration across departments such as sales, marketing, customer
service, and order fulfillment. Successful transformations involve end-to-end process
collaborations, making alignment critical. Research shows that companies with
successful transformations are nearly four times more likely to report a shared sense of
accountability for meeting transformation objectives.

At the early stage, leaders often have different priorities and perspectives, leading to
misalignment. Therefore, creating a common understanding of digital technologies and
their potential is vital. Experiential leadership learning journeys, including visits to
digitally advanced companies, executive training, and workshops, help build this shared
understanding. Each top executive should invest a minimum of 20 hours in learning to
be ready to productively engage in defining a digital roadmap.

#### Commitment
Commitment is indispensable for any transformation and extends beyond budget
allocation. It involves C-suite leaders making themselves accountable for delivering the
vision and related benefits. Commitment is reflected in four ways:

1. **Digital Business Case**: Leaders must commit to clear business performance

improvements. The plan should truly transform the business, with investments matching
the opportunity. Avoid the illusion of “digital magic” where minimal investment is
expected to yield significant value.

2. **Foundational Enterprise Capabilities**: Investments should focus on building

capabilities in digital talent, operating models, technology stacks, and data
environments. An early investment split of 50/50 between specific solutions and
foundational capabilities is recommended, ensuring value is built incrementally.

3. **CEO-led Governance**: Successful transformations require CEO sponsorship to

create cross-functional alignment and make bold decisions. Establish a transformation
office staffed with the most capable people to oversee the process.

4. **Executive Role Modeling**: CEOs and line executives should devote meaningful
time to the transformation, role-modeling customer focus, collaboration, tech savviness,
and agility. They should be curious, continuously learning about technology potential,
and actively engaging with their teams to observe successes and challenges.

In summary, successful digital transformations hinge on a clear vision, organizational

alignment, and unwavering commitment from leadership. These foundational elements
ensure that digital initiatives are effectively implemented and sustained, driving
significant competitive advantage.

### Investing in a CX-Design Development Process

In the context of digital transformation, investing in a Customer Experience (CX) design

development process is crucial for creating products and services that truly resonate
with users. This process can be distilled into two essential phases: designing the right
thing and designing the thing right.

#### Designing the Right Thing

This initial phase focuses on understanding what users truly want. It involves engaging
directly with users to identify their needs—both functional and emotional. This approach
goes beyond what traditional quantitative or marketing surveys can uncover. By
spending time with users in their environments, designers can gather profound customer
insights. These insights are pivotal in understanding the real problems users face and
the specific needs they have.

The process of designing the right thing heavily relies on empathy. Designers must
employ various methodologies to conduct consumer research effectively. These
methodologies range from direct observations and interviews to more advanced
techniques such as ethnographic studies. It is crucial for the design team to master
these techniques to capture accurate and comprehensive insights about customers'
unmet needs.

#### Designing the Thing Right

Once a firm understanding of the customer needs and the problem to solve is
established, the next phase is to design the thing right. This involves creating solutions
that accurately address the identified needs. It is important not to rush this phase.
Jumping straight to prototyping without a clear understanding of the problem can lead to
misaligned solutions and subsequent delays.

The CX-design development process is structured into five stages, each utilizing a suite
of design tools to achieve the desired outcomes. These stages typically include:

1. **Empathize**: Understanding the users and their needs through direct engagement.

2. **Define**: Clearly articulating the problem to be solved.

3. **Ideate**: Generating a wide range of ideas and potential solutions.

4. **Prototype**: Creating tangible representations of the ideas to explore potential

solutions.

5. **Test**: Iterating on the prototypes based on user feedback to refine the solutions.

During these stages, it is crucial to make ideas tangible as early as possible. Starting
with low-fidelity mockups, such as sketches on paper, allows for rapid testing with real
customers. This iterative approach helps to quickly identify what works and what doesn’t,
leading to progressively more sophisticated prototypes like fake apps. Ultimately, this
process culminates in a working product ready for development by engineers.

#### Standardizing the Tooling Suite

To ensure efficiency and consistency, it is important to standardize the suite of design

tools used throughout the process. This standardization drives team productivity and
enables the reuse of work products, ensuring that the design process is both efficient
and effective.

#### Integration with Digital Transformation

Integrating a robust CX-design process into a company’s digital transformation strategy

ensures that the solutions developed are not only innovative but also closely aligned with
user needs. This alignment enhances the overall customer experience, driving higher
satisfaction and loyalty. By continuously iterating based on user feedback, companies
can maintain a competitive edge, ensuring their products and services remain relevant in
a rapidly evolving digital landscape.

In conclusion, investing in a comprehensive CX-design development process is a vital

component of successful digital transformation. It ensures that products and services are
designed with a deep understanding of user needs and are developed efficiently and
effectively, leading to superior customer experiences and sustained competitive
advantage.
### Investing in a CX-Design Development Process

In the context of digital transformation, investing in a Customer Experience (CX) design

development process is crucial for creating products and services that truly resonate
with users. This process is essential for ensuring that digital initiatives are user-centric
and drive meaningful engagement. The CX-design process can be distilled into two key
phases: designing the right thing and designing the thing right.

#### Designing the Right Thing

The first phase focuses on understanding what users truly want and need. This involves
directly engaging with users to identify both their functional and emotional needs, going
beyond traditional quantitative or marketing surveys. By spending time with users in their
environments, designers can gather deep customer insights. These insights are vital for
understanding the real problems users face and the specific needs they have, ensuring
that the solutions developed are relevant and impactful.

The process of designing the right thing relies heavily on empathy. Designers must
employ a range of methodologies to conduct effective consumer research, from direct
observations and interviews to advanced techniques like ethnographic studies. Mastery
of these techniques is crucial for capturing accurate and comprehensive insights about
customers' unmet needs, forming the foundation for successful digital solutions.

#### Designing the Thing Right

Once a firm understanding of customer needs and the problem to solve is established,
the next phase is to design the thing right. This involves creating solutions that
accurately address the identified needs. It is important not to rush this phase. Jumping
straight to prototyping without a clear understanding of the problem can lead to
misaligned solutions and delays.
The CX-design development process is structured into five stages, each utilizing a suite
of design tools to achieve the desired outcomes:

1. **Empathize**: Understanding users and their needs through direct engagement.

2. **Define**: Clearly articulating the problem to be solved.

3. **Ideate**: Generating a wide range of ideas and potential solutions.

4. **Prototype**: Creating tangible representations of the ideas to explore potential

solutions.

5. **Test**: Iterating on prototypes based on user feedback to refine solutions.

During these stages, it is crucial to make ideas tangible as early as possible. Starting
with low-fidelity mockups, such as sketches on paper, allows for rapid testing with real
customers. This iterative approach helps to quickly identify what works and what doesn’t,
leading to progressively more sophisticated prototypes before settling on a final product
for development.

#### Standardizing the Tooling Suite

To ensure efficiency and consistency, it is important to standardize the suite of design

tools used throughout the process. This standardization drives team productivity and
enables the reuse of work products, ensuring that the design process is both efficient
and effective.

#### Integration with Digital Transformation

Integrating a robust CX-design process into a company’s digital transformation strategy

ensures that solutions are not only innovative but also closely aligned with user needs.
This alignment enhances the overall customer experience, driving higher satisfaction
and loyalty. By continuously iterating based on user feedback, companies can maintain
a competitive edge, ensuring their products and services remain relevant in a rapidly
evolving digital landscape.
In conclusion, investing in a comprehensive CX-design development process is a vital
component of successful digital transformation. It ensures that products and services are
designed with a deep understanding of user needs and are developed efficiently and
effectively, leading to superior customer experiences and sustained competitive
advantage.