Digital Transformation and Strategic Innovation All Articles
Table of Contents
W1
• Digital doesn’t have to be disruptive the best results can come from adaption rather than
reinvention - Furr, N., & Shipilov, A. (2019)
• Embracing digital technology A new strategic imperative - Fitzgerald, M., Kruschwitz, N.,
Bonnet, D., & Welch, M. (2014)
W2
• From Niches to Riches: The Anatomy of the Long Tail - Brynjolfsson, E., Hu, Y.J., & Smith,
M.D. (2006)
• Pipelines, platforms, and the new rules of strategy - Van Alstyne, M.W., Parker, G.G., &
Choudary, S.P. (2016)
• Strategy and the Internet - Porter, M.E. (2001)
W3
• Business models and value: theoretical types, scale and scope - Baden-Fuller, C., Giudici, A.,
Haefliger, S., & Morgan, M.S. (2017)
W4
• What to expect from agile - Birkinshaw, J. (2018)
• Organizational decision-making structures in the age of Artificial Intelligence - Shrestha,
Y.R., Ben-Menahem, S.M., & Von Krogh, G. (2019)
W5
• Avoiding digitalization traps: tools for top managers - Nell, P. C., Foss, N. J., Klein, P. G., &
Schmitt, J. (2020)
• A study of NASA scientists shows how to overcome barriers to open innovation - Lifshitz-
Assaf, H., Tushman, M.L., & Lakhani, K.R. (2018)
W6
• Humans and technology: forms of conjoined agency in organizations - Murray, A., Rhymer,
J., & Sirmon, D. G. (2020)
• Unpacking the Disruption Process: New Technology, Business Models, and Incumbent
Adaptation – Cozzolino, A., Verona, G., & Rothaermel, F. T. (2018)
1
,W1 Digital doesn’t have to be disruptive the best results can come from adaption rather
than reinvention - Furr, N., & Shipilov, A. (2019)
Digital transformation means adapting an organization’s strategy and structure to capture
opportunities enabled by digital technology. However, this is challenging, because it has become
increasingly difficult for a company to translate that answer into an action plan. Nowadays, digital
technology is no longer in the cordoned-off domain of IT; it is being applied to almost every part of a
company’s value chain.
This paper suggests that for most companies, digital transformation means something very different
from outright disruption, in which the old is swept away by the new. Change is involved, and
sometimes radical replacements for manufacturing processes, distribution channels, or business
models are necessary; but more often than not, transformation means incremental steps to better
deliver the core value proposition.
THE PROBLEM
Many managers believe that digital transformation involves a radical disruption of the business, new
investments in technology, a complete switch from physical to virtual channels, and the acquisition of
tech start-ups.
WHY IT HAPPENS
Digital technology is being applied to almost every part of company value chains, making it difficult for
managers to identify priorities.
HOW TO FIX IT
The authors dispel five critical myths about digital transformation and offer executives a better
understanding of how to respond to current trends.
Myth: Digital requires radical disruption of the value proposition.
Reality: It usually means using tools to better serve the known customer need.
It is not about finding new ways that will serve brand-new customer needs, it is often the same
product/service but through the use of digital tools. The challenge is to find the best way to serve those
needs using digital tools.
Whether you are disrupted or not always depends on the job you do for customers. If an incumbent
can use digital tools to meet customers’ needs better than a disruptive new entrant can, it will still
prosper.
Understanding that digital transformation does not change the reason your business exists will help
you identify the technologies you should focus on. Managers who believe that digital disruption
requires wholesale reinvention of the core business end up running in a thousand directions. But if the
challenge is simply to better address their customers’ jobs to be done, they will most likely focus on
the technologies that have the greatest effect on their customers (such as customer experience or
relationship synergies) or their core capabilities (such as cost synergies). The needs of customers won’t
change – although digital will certainly provide a better way of catering them.
2
,Myth: Digital will replace physical.
Reality: It’s a “both/and”.
Both models have advantages: Physical helps build an emotional relation-ship with customers, while
digital (especially AI) helps better understand customers’ needs. Whereas in the past companies
focused too much on the product and not enough on the customer, hybrid models can put the
customer at the center of the business.
Shoppers value a physical store visit because they can see and feel actual products. They can reserve
items online and try them out in the store without obligation. Alternatively, they can buy products
online and simply pick them up in the store.
Myth: Digital involves buying start-ups.
Reality: It involves protecting start-ups.
Smart companies prefer to build hybrid relationships with start-ups - strong enough to learn and find
synergies but weak enough to avoid destroying the culture. So even though they may own the start-
ups, they allow them to operate as semi-independent businesses.
The company can take advantage of the best of both organizations, not only helping the start-up
hold fast to its mission (which is what motivates much of the talent to stay) but also linking it to the
mission of the larger organization while protecting the start-up team from all the bureaucracy and
reporting that tradition-ally eat up company time. Meanwhile, the big company can take full
advantage of the start-up’s ideas, processes, culture, and technology.
Myth: Digital is about technology.
Reality: It’s about the customer.
Managers often think that digital transformation is primarily about technology change. Of course,
technology change is involved—but smart companies realize that transformation is ultimately about
better serving customer needs, whether through more-effective operations, mass customization, or
new offers. Because digital enables—even demands—the connection of formerly siloed activities for
this purpose, the company must often reorganize both people and technology.
In practice this may mean changing structure—for example, in situations where a more agile
structure is merited, creating internal squads with the capabilities and authority necessary to follow
projects from beginning to end. Although a squad is a team, it differs from most big-company teams
in being empowered to solve key problems quickly, as an entrepreneur would.
- It is ok to fail
- Instead of designating individuals as product owners, it now calls them project managers,
responsible for designing the customer journey (mini-CEOs)
- Transitioning to squats can be painful (elimination of current divisions and functions and
embrace agile structures; employees fired and need to reapply for jobs)
Myth: Digital requires overhauling legacy systems
Reality: It’s more often about incremental bridging
Large companies cannot ignore the need to update legacy systems forever. However, postponing
your digital transformation until you can update them fully or all at once is dangerous. If you break
the problem into modules and create a middle-layer interface, you can maintain operational stability
for the core of the organization while experimenting with satisfying customer needs.
3
,FOR MOST COMPANIES
Even those truly threatened by disruption, digital transformation is not usually about a root-and-
branch reimagining of the value proposition or the business model. Rather, it is about both
transforming the core using digital tools and discovering and capturing new opportunities enabled by
digital.
Each company we have described has incorporated different digital elements in its business model,
and not all the changes were disruptive or intrusive.
The keys to success have been a focus on customer needs, organizational flexibility, respect for
incremental change, and awareness that new skills and technology must be not only acquired but
also protected—something the best traditional companies have always been good at.
4
, W1 Embracing digital technology A new strategic imperative - Fitzgerald, M., Kruschwitz,
N., Bonnet, D., & Welch, M. (2014)
The problem: Executives see the potential for using digital technologies to achieve transformation, but
they’re unclear on how to get the results. Most companies lack experience with emerging digital
technologies.
Example: Starbucks has succeeded using digital technologies to achieve
transformation. They used social media, mobile, and other
technologies to change customer relationships, operations and the
business model has helped Starbucks re-engage with customers and
boosted overall performance.
The importance: Companies must succeed in creating transformation
through technology, or they’ll face destruction at the hands of their
competitors that do.
The benefits of digital transformation:
Companies that effectively manage digital technology can expect to
gain in one or more of three areas:
1. Better customer experiences and engagement
2. Operational improvements: streamlined operations
3. Business model change: new lines of business or business
models
However, business model transformation can also be elusive. In this
research, only a small part of respondents says that their company’s
digital initiatives were helping to launch new businesses, and new
business models were emerging thanks to digital technology.
Reason:
- Technologies are so new that they simply haven’t had time to be turned into new business
opportunities.
- Digital technologies are not that effective yet in their marketplace.
- Company is not ready for new models yet, because the company is high conservative and
resistant to change.
The trouble with digital transformation
Despite growing acknowledgment of the need for digital transformation, most companies struggle to
get clear business benefits from new digital technologies. They lack both the management
temperament and relevant experience to know how to effectively drive transformation through
technology.
Nine obstacles that companies need to overcome to achieve digital transformation:
Leadership
1. Lack of urgency (most frequent obstacle): Many managers feel no urgency to achieve digital
transformation. This may be because so few leaders offer a vision and a road map for digital
transformation, leaving managers with no motivation for achieving it.
- There is a clear split in perception between top managers and those below them. The further
down the organizational ladder, the less satisfied workers are with the pace of digital
transformation at their organizations. But the C-level executives think the pace of change is
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