March 26, 2023

How many ways can one digitally transform? There is no single path. Every organization has its mix of functions that can and should be digitized, from call centers to field forces to e-commerce in order to factory floors. If you look at 1, 000 companies, you will find 2, 000 approaches. A group of MIT Sloan School of Management researchers, however, has done just that, and has managed to narrow down all methods and scenarios to four clear-cut pathways. The paths pursued depend on corporate culture, internal limitations, and even the fears of business leaders themselves.

These pathways were identified plus explored by Stephanie Woerner, Peter Weill, and Ina Sebastian, all with DURCH Center for Information Systems Research (CISR), in their latest collaboration, Future Ready: The Four Pathways in order to Capturing Electronic Value . While most businesses will opt to follow one particular pathway, some may even adhere to multiple paths, the co-authors state, after looking at several years’ worth of data from more than one, 000 companies—including BBVA, CEMEX, DBS, Fidelity, Maersk, and others.

Here are the 4 routes to the digital realm identified:

Pathway 1: Digitize first, then worry about customer experience. Woerner and her co-authors call this approach “industrialization” — start off by employing a brute-force process to begin overturning everything across the enterprise to electronic. Firms choose this pathway when they feel their own customer experience is already good enough to hold competitors at bay. The goal is in order to begin “radically simplifying operations by focusing on what the firm is best at, plus turning them into digital services. ” Build electronic operational strength first and then “use that strength to rapidly innovate and delight customers, ” Woerner and her co-authors advise.

Companies following the industrialization path should break it down into two phases, the co-authors advise: “building platform capabilities plus then exploiting those capabilities with rapid innovation. ” They caution, however, that will “building the particular capabilities takes time, and if the firm is well behind in customer encounter, they often can’t afford [industrialization] alone. ” They also recommend beginning the rapid innovation phase as soon as possible, ideally before ending the building platforms phase. This will reduce the time your firm spends in the digitization desert and speed up value creation. ”

Pathway two: First, be worried about the customers, then digitize. This is the route taken by companies whose customer service is underperforming, or if there are competitors bearing down on them. This path also has 2 phases: taking measures in order to amplify the particular customer’s voice inside the organization, then followed by building digital platforms. “Multidisciplinary teams from almost all over the particular firm innovate using digital technologies, better data, and new ways of working to engage plus delight clients. But all of this innovation doesn’t address the underlying complexity of the product offerings and systems, and this usually makes it worse, driving up the cost to the customer. Also, this particular pathway is hard, in the beginning, upon other parts from the business. ”

Pathway 3: Alternate between digitization and client experience in “stair-step” style. Firms that need to improve both their particular customer experience and operational efficiency may opt with regard to this route. This “stair-step” approach is partly driven by a perception that the electronic revolution might pass them by. “This pathway is the most popular because it can make perfect sense to many firms to deliver smaller but tangible improvements, ” Woerner and her co-authors point out.

At the same time, these people caution, companies that go this path “have the surprisingly higher risk with a slightly lower-than-average financial performance. ” The organization, they suggest, “must become disciplined inside scoping shorter digital initiatives, completing all of them, and after that sustaining the particular value development of each initiative on the stair steps so those benefits can end up being passed on to the next digital imitative. ”

Pathway 4: Forget fussing with redirecting the business, simply create a whole new digital-native business unit: This will be an option that established companies may pursue, as their corporate culture may be too rigid to support digital growth. “This pathway is usually more than just an development project, it’s a substantial investment within how the firm will make money in the future, ” Woerner and her co-authors explain. It enables the development of a digital-native organization from day one. Ultimately, as the separate device gains traction in the market, it will be reunited with the mothership.

Ideally, they will add, even with these separate new ventures, the main company will certainly also stick to elements of the other three pathways described above. For instance, “an insurance company could industrialize their core business, automating claims plus improving the particular customer encounter. At the same time, the firm can also create an unit with the new ecosystem business model to become a go-to destination for home security and integrate their insurance products and security products. ”

Organizations that are usually successfully moving forward with their transformation efforts have several things in common, the co-authors found. These people “develop a coach-and-communicate orientation” rather than command-and-control hierarchies; they focus on cross-product integration plus customer experience; and they do their best in order to promote advancement at just about all levels.

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