Digital transformation: 5 lessons on finding the right business model
Addressing digital disruption is no longer a choice; it’s an imperative. Even so, for many companies, the way forward remains unclear. In their new book, “What’s Your Digital Business Model: Six Questions to Help You Build the Next Generation Enterprise,” MIT research scientist Stephanie L. Woerner and MIT Center for Information Systems Research chair Peter Weill have developed a framework. Based on research across hundreds of companies, the book aims to help organizations determine which digital models are right for them and what changes they’ll have to make to get there.
While the digital business structure that Woerner and Weill provide is straightforward, executing it is not. “Successful transformation requires leaders to build a common understanding of the threats and to identify where the company is going, to communicate that vision to the entire company, and to make the hard choices about decision rights and organizational restructuring,” Woerner says.
“Leaders must also be vigilant about ensuring that the company’s investments in capabilities and innovation reflect their decisions about which digital business model (or models) and sources of competitive advantage to target,” she adds.
[ See our related story: 7 must-read books for digital business leaders. ]
Woerner and Weill see CEOs, CIOs, boards, and the workforce all playing key roles in a digital business model transformation. Their book offers a number of takeaways for IT leaders specifically, which the Enterprisers Project recently discussed with Woerner and Weill. Here are 5 key lessons to apply to your transformation work:
1. You need effective leadership on two fronts
Focus on the leadership of both the transformation and the accompanying cultural shift. “You can’t do one without the other,” Weill says. The owner of the transformation does not necessarily need to master both. However, says Woerner, “in the successful transformations we’ve studied, there is a CEO who is setting the vision on both aspects. A CEO has to know the enterprise’s strengths and weaknesses, and how to get the enterprise to move on both business model and cultural change.”
2. Different business models demand different leaders
Woerner and Weill’s book describes four flavors of transformation. CIOs are an ideal choice to lead transformations that focus on building platforms, consolidating data, and integrating silos, say Woerner and Weill. Companies that identify an omnichannel customer experience as their primary source of competitive advantage often ask the chief marketing or customer officer to take the reins. Companies that decide content will be their source of digital value may put product owners and product-innovation teams in charge. Those pursuing ecosystems need a leader who can integrate all three sources of competitive advantage, such as the COO or CEO.
3. Boards count on CIOs to explain digital business change
Board members gave CIOs an 82 percent effectiveness rating in helping them understand digital transformation.
While board members rated their own digital knowledge relatively low in Woerner and Weill’s research, they gave CIOs an 82 percent effectiveness rating in helping them understand digital transformation – higher than any other corporate officer. “It’s really not surprising when you think about how digital affects everything in the enterprise – the CIO has traditionally worked on systems and processes and integration and has a lot of experience and expertise to share with board members,” Woerner says. “Our research indicates that board members, who have been tasked with fiscal oversight, typically don’t know about what digital can do for the enterprise and are looking for help to interpret and evaluate transformation plans. The CIO is a great asset and resource for the board.”
4. CIOs must excel at three things during transformations
First, top-performing CIOs spend time with customers. “CIOs, in order to leverage digital for creating business value, need to know how customers are using company products and services,” says Woerner. These CIOs also focus on innovation. Being successful in a digital economy demands a steady stream of ideas both for customer-facing and internal modernization. Finally, they engage fully with their business colleagues and the executive committee: “A business transformation is going to affect all areas of the enterprise,” Woerner says. “[CIOs} can provide digital dashboards to track progress, keep colleagues updated on cybersecurity measures, and establish a clear and simple IT governance that addresses new digital assets like IoT, automation, and data.”
5. Employees play a pivotal role
In companies succeeding at transformation, team members are not just accepting, but leading digital change. “They engage the customers and they are going to do a lot of the work associated with the transformation,” says Woerner. Younger employees, in particular, may have an enthusiasm for change and a passion for digital. “The companies that are most successful engage the bulk of the people in the transformation,” says Weill, “one way or another.”
IT leaders can spearhead that effort. “The CIO is perfectly placed to leverage that enthusiasm and passion and those skills,” Woerner says. “We’ve seen companies use hackathons used to find innovations and internal social media platforms to open up channels between business units and different levels of the hierarchy, both dependent on platforms and integration – a CIO specialty.”
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