ladies and gentlemen friends of MIT welcome to the second webinar of MIT ILP digital transformation series digital transformation is a phrase we hear often these days leaders across industries are adopting digital transformation strategies and innovative solutions to improve the way we work and live as enabler digital transformation combines strategy and the smart technologies to enable company to remain competitive in this rapidly changing marketplace in 2019 closed whoo about two trillion dollars was spent on digital technologies such as cloud data voice video and Internet things but still many challenges persist as more than two-thirds of these
digital transformation projects cannot achieve the goals I'm honored today to introduce two wonderful speakers from MIT to help us address some of these pressing challenges our first speaker Jeanne Jeanne Roz is the principal research scientist at a mighty Center for information system research well for 25 years she has studied the strategic use of computing technologies and data her particular expertise is around architecture specifically the design of people processes and technologies to enable execution of business strategies last four she co-authored her fourth book designed for digital how to architecture your business for sustained success which is
helping companies transforming for the digital economy she has helped bring architecture into strategic discussions at various companies including Aetna PepsiCo Schneider Electric electronic China Mobile and a Commonwealth Bank of Australia today Jeannie will speak to us on the topic the digital challenge how to transform your business in the midst of a crisis with that please help me welcome Jeannie Ross thank you thank you David it's great to be here and I want to thank the Emma Emma MIT ILP for inviting us to share our scissor research on digital design don't let me just start by
sharing with you my presentation here digital technologies are creating transparency into what does and doesn't work inside your company you can't survive on hard work and some combination of hope or life you'll have to design a seamless company that learns and responds who constantly changing customer demands by the time our book came out last fall it was clear that there would be winners and losers in this digital economy what we didn't know last fall was the extent to which a global pandemic would accelerate the emergence of those winners and losers addressing the opportunities and challenges
of digital has become truly urgent in this session my co-author Cynthia B's will join me to share with you what we've learned about how you position your company for success please ask questions at any point through the chat feature Cynthia will be monitoring the chat and until the interjecting questions as we come in let me start by simply introducing MIT sizzurp the Center for information systems research is a group of 90 companies that are all interested in understanding how companies will deliver success from information technology and we are to these sponsors or their support of
our research their willingness to discuss their ideas and their experiences with us and for giving us feedback on what actually works and doesn't work it's made the Center for information systems research a vibrant economy vibrant community within MIT now the particular challenge we want to explore here is what's happening as a result of digital technologies we've been studying for years now the introduction of technologies like social mobile analytics cloud Internet of Things we call this smack and here's what you need to understand about Snagit it is changing what's possible and why we care about this
is because it's not just smacking but this constant introduction of new technologies at artificial intelligence botching biometrics robotics quantum computing they just keep coming and they are changing what's possible in business in ways that Hoover made so evident when it said people don't just want a ride in a car they want an information enriched travel experience they want a solution to their transportation needs this is what digital is doing to business now the good news is you do not have to understand every new technology and what it makes possible as it arrives on the scene
what you can do is simply recognize that technology has gone from an enabler to a source of inspiration for your business strategy we suggest that you allow yourself to be inspired by three capabilities that extend across all these digital technologies the first is ubiquitous data there is basically nothing you can't know now the data is out there you're looking for ways to find it and use it so stop thinking of data as a limitation and think of all it makes possible then find a way to get the data and to get permission to use that
data the second capability is unlimited connectivity particularly IOT and mobile are making it possible to learn things immediately and then do something about them immediately recognize what that connectivity means in terms of what we need to be delivering and imagining for our customers finally there's massive processing power there is no limit to how much data you can process so what you can imagine you can do that is the challenge of digital now what's interesting to us is that as we study the possibilities here clear that companies were indeed responding they were not all doing so
in the same way they in fact didn't mean the same thing when they told us they were digitally transforming what we went out to study then is well what is a digital transformation and what you need to understand about what we learned is that there's actually two pieces of this and even now when everybody is working from home and people are saying to us well we just became digital not so fast working from home under duress is not the same as being a digital company there are two ways of thinking about this transformation the first
is that it leads to digitization this is about operational excellence this is about end and delivery doing things for your customers in ways that simply work regardless of channel so they can call you on the phone they can chat with you on the Internet they can do things for themselves through an app but the idea is you are operationally excellent and thus you can anticipate your needs you can address their needs as they arrive you do better which you have always done you deliver traditional products and services but you deliver them at a level that
was not possible before we call that digitizing and the reason this is important is because digital technologies are raising the bar you really must be digitized but that is only half the story the other half of the story is becoming digital this is about rapid business innovation it involves delivering brand-new customer value propositions these are the solutions that uber has made so visible what problems can you solve for your customers that you never considered part of your mandate before move beyond your traditional products and services and solve your customers problems that is the challenge of
digital digitizing getting better and better at what you've always done and becoming digital delivering brand new customer solutions I think this is a good time to just learn a little about the companies out in our audience so we're going to ask a polling question here we'd like to know what digital transformation means to your company is it digitizing becoming more operationally excellent and what you've always done or is it about digital delivering rapid business innovation or is it neither or both what is digital to your company can we have the polling question please so if
you'll pick one of those options digitized only digital only neither or both look at a sense of what's going on here there we go ah so as you can see the majority of companies in our webinar here are trying to do both it doesn't get much harder than that I appreciate the importance of digitized only and if you have the luxury of time that's not a bad way to go so I have to see that you're all working so hard trying to make progress let's talk about these two things and so many of you are
trying to do here's your challenge it turns out that for the last Oh 30 or 40 years we have been using information technology to support our organizational processes the problem is we did it little bit by little bit and as a result we ended up with a lot of silent systems that address one very specific business need I'm showing five of those very specific needs that were addressed by a system and in the accompanying process and the data it generated the technology it relied on this is five we talked with many companies I would say
you know we have about 2000 of thoughts and this is what we've created the problem of course was is that while it made sense at the time this new system was created having hundreds or thousands of these siloed systems eventually created more and more demands to connect them people would go to their ITU and it's a mainstay well can't you make that system talk to that system or share that data with that data and so we got all these wires I'm showing in here sometimes they were in fact things the IT and it did sometimes
they were people downloading things into spreadsheets sometimes they were just heroes in your company that would see something going wrong and they would go out and take care of it but it doesn't matter how you solve that problem the solution itself was also a problem and now what we have is this mass of spaghetti this is what we're trying to fix right now as we digitize because we are indeed exposing all the spaghetti to our customers so we're trying to create something that looks more like a platform we call it an operational backbone this is
what digitizing is all about it takes our core operations and it says we can expose them to customers because they work and to em they allow us to complete transactions to get visibility into those transactions to do all the back office stuff that means get burn and it simply works so this operational backbone is that set of standardized business processes that supports your your core transactions and your core back office processes in a seamless way then and that allows you to add front ends like apps and browser interfaces with your customers this is a digital
platform an operational backbone not everything you do is part of your operational backbone that's fine but core is this is what allows seamlessness and visibility to your customers now this is really important I just want to describe to you one example of a company that kind of gets it and that would be Nordstrom we started studying Nordstrom about five years ago because they were so tuned into what it was going to take to succeed as a retailer in a digital world their business strategy was to recognize that some of their customers if any of you
don't know Nordstrom this is a high-end retailer mostly clothing for a hundred years the company was retail stores but what it started doing more than 10 years ago now was recognizing not everybody would want to go into a high-end retail some people would want to do things online some people would want to do things and I just copped so for years now it has been creating its its rack sports with a price it's creating nordstrom.com and and allowing customers to do things online but around 2015 it actually shared with its investors this vision of becoming
a digitized company and what it pursued at that point was a set of capabilities that would allow a customer to use all of its outlets it's off price it's full price its online its in-store and its size what we're gonna do is continue to specialize in service we are known for customer service we're gonna get better and better at customer service we're gonna create digital capabilities to support our people who are supporting our customers but we're also going to allow customers to do things for themselves so they emphasized the customer service element of this they
took a serious look at their product but this last piece the capabilities piece was about ensuring that technology would service their employees and their customers and this really paid off it it goes all the way back to 1998 when they created nordstrom.com which at the time of course it like everybody's it was kind of a static paint but they they started to build capabilities into nordstrom.com so people could order online so that they could take that advantage of a back-end where they could do store to store fulfill the critical capability that Nordstrom developed was actually
a transparent supply chain and this is a company that said the most important thing is customer service but when it looked at its operational backbone it said more than anything we need a transparent supply chain and as it's creating nordstrom.com as it's building capability at that is online it's taking advantage of that transparent supply change and do store to store fulfill to allow you to pick up one place and drop off somewhere else it creates the International shipping online by 2011 Nordstrom is saying we can really see the capabilities of digital here so they created
an app their iPhone app one of the first floors to do this but not only could you use an app by 2012 they were had they had mobile checkout then people in their stores saying let's take advantage of mobility in this floor by 2013 they're saying not only should we use Nordstrom technology we can use these public technologies like Pinterest and encourage our salespeople to post things and of course our customers will naturally do that 2014 they're recognizing the opportunities installed by Instagram all this continued to build but we kind of cut off the story
here because what we've found with Nordstrom is it continued to focus on the digitizing the digital is still part of its challenge nonetheless Nordstrom's digitizing efforts have positioned them to be stronger in this pandemic than any other department store the New York Times just ran an article in which it says Nordstrom's is the one retailer department store retailer that should be able to survive say a year-long global pandemic this kind of economy so the digitizing is really paying off now this is still the digitizing piece and what we're emphasizing here is you're going to go
from business silos to an operational own that enhances how you have traditionally conducted business and allows you to start adding these digital technologies to enhance those capabilities at the customer and employee interface here's the bad news when we went out and studied this what we learned is that only 14% of established companies actually had a robust operational backbone there's another 30% that have made enough progress that it's not necessarily impeding them as they become digital this is the state of the art a real real liability for many companies in this digital world isn't is the
lack of an operational backbone the inability to do things and to end and reliably for their customers this I think is a good point at which to bring in Cynthia hi thank you for joining us Cynthia and I have been doing research together for about 30 years now so we kind of know what one-another thinking but I always like to hear what she's thinking anyway so there any questions on the operational back book yes Mohamed has asked and this has been voted up by several people who should lead the digitization efforts line functions or a
specialized Department interested in your thoughts on this - Cynthia but I'll start by saying what we have found whether or not it is ideal is that this is typically led by the CIO the problem of course is that why the CIO can help shape the vision can provide the underlying technology the CIO cannot impose the discipline in the organization that creates this this digital putnis operational backbone so it can be headed by the CIO but it can't be a complex by the CIO what's your take on that Cynthia yeah I would agree this is an
enterprise effort and while the the CIO might be running the show orchestrating what is happening the decisions that are involved in what should be standardized and what should not and which which elements of the or operational backbone should be replaced and at what cost that's an enterprise question so I would say the line functions as a whole need to own this transition so how about I have another interesting question Jeanne somebody Jim asks what's the difference between the operational backbone and Porter's value chain well III think there's a there's a nice correlation there right if
you understand your value chain you can start to identify what has to be the essence of this operational backbone because one problem we've seen is companies pursue these massive ERP implementations that never get finished and I think if you understand your value chain and what matters most it can help you get past that gotta fix everything - there are most important things and their trip to getting an operational backbone in is to not try to do everything but to recognize some really critical things and go after them what's your thoughts yeah I think that's right
I think that's right the value chain is essentially those we think of those as those separate silos then the spaghetti lines between the separate silos are essentially the ways in which the value chain actually must be connected right it's data that has to pass along the value chain and so I think the operational backbone is what allows you to do that in a sensible efficient correct way so there are a number of other questions you want more questions or do you want to move ahead that I suppose one saying the rest for the end okay
so I think this is an interesting one Gerald says I understand shared data platform and shared technology but can you give us some examples of how processes and applications can be shared by different groups or functions different okay you got it yeah first I'll respond in your reaction I will at least take the applications and essentially whether or not data is shared it's often best instantiated by sharing the application right so that shared applications gives you data that is consistent and shared so that would be the first one and then processes processes are often some
processes are shared across different parts of the business in the sense that they have to link together so they have to be designed in a way that they link or they can be replicated or duplicated across similar parts of the business where you're doing the same activity in different countries or in different locations or at different types different kinds of products so a process is kind of sure that the data that comes from those processes is in fact true yeah that's a great point because I know a lot of companies would like to solve their
data issues with better governance and I do not want to discourage good governance I think it's really really important but if we're saying we can govern this hall and then we'll get buy-in and people will do it it's just like we're being realistic about what life is like in a complex organization if we don't have established process and systems that guide that process our best intentions will never be realized we need those systems and processes to ensure that the right data is captured and that it's used appropriately so I think that that really is the
essence of the shared application yeah thank you and one thing that Cynthia and I talk a lot about is this an operational backbone is essential we call it here in in the side-table States and to be honest we do not know how you become a great digital company if your core operations are broken you have to fix them and this is why we consider this data on the relative dearth of operational backbones to be alarming but this this could sink you in your efforts so it's important to get started you can do that by not
trying to boil the ocean but by finding the most important data the most important process and fix it do something that will make a difference in three months even though fully realizing what you're trying to do we'll certainly take longer these operational backbones are challenges that have been created through years and years and years of processes and systems that need to slowly be fixed so focus on the most important do something substantive and then start to use it and then the job will never be done yeah you'll continue that journey for a long long time
but that is only half the story in addition to digitizing you have to become digital because your customers are demanding so much more you need to start solving their problems now to do that you have to think of their of your new value proposition what is it a customer wants from you this will manifest in digital offerings a digital offering you'll see here is an information enriched solution that engages customers in a seamless personalized experience it has to be information and rich because it has to take advantage of these new digital technologies the the data
that's available to them and the speed and connectivity that they make possible but it also has to be seamless and personalized because otherwise somebody else is going to come along and take your great idea and do it better now this graphic is probably the single most important graphic in this presentation and it looks ridiculously simple but it's incredibly hard there are two things going on here one is you're trying to be inspired by what digital technologies make possible and the thing is they make a lot of things possible MIT students come to me everyday with
things that digital technologies are making possible here isn't a problem nobody wants to pay for most of them and if nobody wants to pay for them it's not really that brilliant now your risk here is you're going to think you're some trying to Steve Jobs and you know better than your customer what they want do not make that mistake you do not know better than your customer what they want even if it's truly that your customer doesn't know what they want and that probably is true but you and your customer are going to learn together
what your customer wants I think that GE experience here is sobering this is I mean the industrial internet which is what GE envisioned was a brilliant concept it was brilliant the problem was after the company had spent several years and a billion dollars developing it it then took it to customers and they went you know that's not quite what I had in mind and and we can't do that we can't invest huge sums in a solution that the customer isn't bought into even if it's good for them so the other half of this picture is
what your customer desires now you can influence that you can market you can test with them this idea of ongoing testing of let me try this with you would you be interested in this here's something that you might like Amazon of course does this all the time and we're all jealous because they have such she volume they can test things all the time but every company and identify what's possible and test it with real customers and it is the only way to mark we have to understand we do not know what our customers want so
these two pieces come together day in and day out by trying things and learning and working hand in glove with our customers that is the challenge of digital now I want to share with you three companies that kind of get I'll start with Amazon because we all know Amazon you might think they're not really fair because they didn't start as a digital company but here's the interesting thing they are not a digital Sparta they were born in the 1990s before digital technologies were available they were born as an online book retailer you could order a
book through an email interface and they would ship it to you so what happened is that Amazon has continuously been inspired by technology when it saw that robotics was possible it got better and better at warehouse management to where it didn't have to restrict itself to books when it saw the possibilities of social media it said why are we paying people to write a few book reviews why don't we have everybody writing reviews and let people pick and choose when three years they find valuable when they saw that the browser that was the initial manifestation
of moving from an email retailer to an online company that invented the shopping cart an online virtual shopping experience now as you know Amazon is inspired by artificial intelligence and better data analytics that help recognize how to recommend products to you and help you design what it is you want to buy this is a company that's been inspired one of its digital offerings is Prime now this is like the digital offering of all digital offerings most of you are probably customers probably pay for Prime every year do you even know what you pay for Prime
do you fully understand all the benefits of Prime probably not but do you ever say and do I want to spend the money this year probably not that is the kind of digital offering we all aspire to we can't your customer cannot live without it that is what we can do with a great digital offering it so solves a customer problem it can't even imagine life without it that's your challenge as you formulate your digital offering now let me take an older company shudder electrics been around for well over a hundred years and what it
did for most of those hundred years was sell electrical equipment engineering sell electrical equipment and what this does is it enables you as a builder to to buy things from Schneider and you can buy everything soup-to-nuts you can buy big transformers and switchboards you can buy the control panel that regulates your temperature you can buy cords and outlets soup to nuts it's it's all electrical equipment but what Schneider started to recognize a number of years ago was that with the big equipment it's good to have alerts if they're failing if too much is being demanded
of them and they no longer have the capacity and what they were doing was alerting the customer and the salesperson to basically stimulate a new sale but that recognition that that worked created additional ideas and the opportunity for additional services what Schneider does now is it creates intelligent energy management solutions this means that they help you recognize how to energy they tell you if you're at risk of having a grown-up you have something's dying they're looking for ways for you to save money as you provide the energy needs of your business I've started with energy
needs for companies like Hilton Hotels we're trying to manage all of the energy requirements for their hotels but they have also done this for data centers for office space they help you through the use of a dashboard understand how you can provide reliable cost-effective energy for your company what they now sell is what they call eco structure that's their underlying base for delivering energy solutions to your company and then they have multiple offerings depending on your particular industry now the third example is car max car max is a used car retailer and it started by
just recognizing that buying a used car tends to be a horrible experience but as they did this they started looking at all the possibilities that online made possible and and they added browser and and and to a large extent apps as well and they created not just the retail experience but an omni-channel experience Tim go shopping for a long time doing all of car Max's cars before you ever walk into a store and in fact if you'd rather never walk into a store our Max is now developing what it calls home delivery home delivery means
if you really are confident that's the car you want you can tell from the pictures you can tell from your research you just want it they'll just bring it to you interestingly this was in an experimental phase earlier this year the pandemic has kind of accelerated what's going on but this is positioning yourself to deliver new solutions to your customer and that is what customer insights are all about the digital offering is a response to your understanding of what's possible and what your customers want let me bring Cynthia back in here ask if there are
any questions about these customer insights and digital awesomes um Claudia asks what if you what if your customers don't know what they want or need the customers may not be that innovative and they may not recognize new opportunities this a great question and it's almost certain to be your experience the the funny experience that schneider had was that they were developing these amazing solutions for their customers but when they went to their customers and they started by seeking out their 24 biggest best customers they knock on the door and say guess what we could do
for you 24 of their best 24 customers went I don't think so and they really really had to work get any of them to say alright we'll try it and then they had one right and so they work with one to get one amazing solution and they have to work just as hard for the second one as you might expect you get the first through a lot of work the second through a lot of work it shapes it it helps you develop a better and better understanding of what you can do you make a better
plug to the third customer and it starts to build Sneijder now he is honorable it started seven years ago let's be clear about that in fact they they say it's a little hard to pick the exact date when they started they've been at this a while but they are now on a roll that customers come to them they ask for things that chance is low maybe a bit beyond what we do we'll go find a partner that can provide some of these services so they're growing not only with what they can do but with what
their partners can do and that is the path is recognizing that that's a challenge I think is step number one but this is about persistence and constantly looking for what you can learn from your customers you want to add anything to that yeah yeah I would just say that in the end your offering has to be something that customer wants and so it's even more important that you work with the customers to define those offerings and make sure that they fit well with the customers own processes and with what the customer is trying to accomplish
so in the end you regardless of how you get there it has to work for the customer okay I've got about 15 minutes okay so we'll move on and if there's more questions we'll look at those at the end is that they do require technology but for most cases this is new this is about a software solution that enriches your traditional products and services so you'll want to build these software components in an entirely new environment and what we call the digital platform this digital platform is reusable components some of these are business components at
Schneider for example we want to learn how to do subscription billing this subscription billing was brand new they never did that before they built it as a reusable component so as they're adding new solutions they can reuse it or we could think and take part of it and not the rest of it but they don't have to change their entire operational backbone where transactions are normally completed they also had to create dashboards that's a reusable component even though these dashboards are customized but there are a lot of algorithms that go into those there's asset management
we have to make sure that we're collecting all the data from one of our customers equipment and none of the data from other requesting customers is entering into the assessment one customers need so this Identity Management asset management becomes really important that kind of capability gets built into infrastructure services many of which are purchased through through vendors that's cloud services some of them are data components have become available by buying by collecting data from IOT by borrowing data from their customer backbone those those data components then serve these business components and the digital offerings at
the top of this picture are the unique code for each offering we have unique code that accesses the reusable components and delivers an actual solution to an actual customer it's unclear how many of these you might have but that number can grow and grow because the components themselves are well-defined for reuse and what the company has decided is it's a value proposition to customers now here's the story on the digital platform two years ago when we asked how many of you have digital platforms only five percent of his published companies have popcorn and started to
create repositories of digital components the good news is we don't have a horrible legacy here so as we start doing it it may be small but that platform grows rapidly I am very confident that this data we collected two years ago is out of date now this would be significantly different unlike the operational backbone where that data is moving very slowly so here we see new companies recognising the importance of digital platforms and starting to build them but this is what it takes to create digital offerings now understand what this means for any existing company
is that you're going to need to technology environments one is this digital platform where you're creating these reusable components that build your solution see they allow for development they allow you to say oops that's not working and get rid of things really quickly that's your digital platform you still need this operational backbone that's how you know your customers it's how your back office processes work that's your supply chain for your physical products and services it's really important these two platforms do tend to rely on one another for data we have identified the most progressive companies
as doing a remarkable job of allowing people to operate in one environment or the other and then having a small technology team in between managing what we call the ATI linkages you might call it the middleware you might call it the data that needs to be exchanged this is how these two environments can coexist they allow you for all you who said we're doing both right now digitizing and digital if you've separated responsibilities and you have some parts of the business probably the bigger part of the business on the operational backbone other people can start
working on those digital offerings in the digital platform so this is the environment that we think you need to create I know we don't have a lot of time Cynthia but if there's a question or two we could actually manage a question or about this double a technology platform here's your problem for years if you're our company of any size at all when you wanted to accomplish something you turned to structure you said well we'll create a new business unit or we'll insert a new line of management or will do this matrix that goes across
the silos that we've created we structured the problem is structure stabilizes and we are in a world in which our digital offerings are unpredictable we have to be identifying and responding to emerging customer needs we all know our customers don't know what they want we're going to try to help them figure at out and then simultaneously deliver we're not going to do it with a matrix hierarchy of a company to slow what we'll do instead is something like this this image is from Spotify it's widely circulated on the web so I thought I would use
it it is old it's from 2012 so I'm pretty sure as Spotify would say wow we don't quite look like that anymore the reason they wouldn't look like that is because what we've learned about these environments is they change rapidly you learn something you adapt your customer needs change you adapt you find a new opportunity you adapt so how you design your company is constantly evolving it's a learning process what works but the idea is you are relying on empowered teams you're distributing you're distributing decision making so people can get stuff done and they can
learn from what they get done and they can build on it or trash it depending on what they learn that is these single hardest parts all the other stuff is hard this is the single hardest part usually the first team isn't that so hard even the second team isn't so bad it's when you get to three four or five that you start to realize this is actually pretty hard because we want everybody empowered but we don't want them all just going rogue and doing whatever strikes them as a good idea that is a good way
to waste money so what we're looking for is continuous learning laughs we're gonna get better and better and better in this Spotify picture you'll see they started they move from just some teams to tribes they would have a tribe that was responsible for free radio they'd have a tribe that's responsible for core infrastructure so they have multiple tribes that actually do have some interdependencies and the important thing is that the tribes recognize their interdependencies and respond to one another's needs this is why they have things like guilds and chapters that work across teams and across
tribes that's the challenge you'll take on as you start to use empowered people and teams to ensure your learning and responding to new customer demands it's hard work and it starts on the digital side of your business ultimately it's also applicable to the operational backbone side but it is so essential on the digital side that you really want to make sure you're trying to appear and then implementing it as you can on the operational side I would say there are eight principles that you're trying to get your head around here one is as you start
to do this you want to recognize you need people to own your major components and offerings both past projects where somebody says I'll deliver something and then hand it off you want people who are learning doing improving getting rid of doing whatever needs to be done so that some offering to a customer that's better and better and better and richer and richer it gets too big it'll become two offerings and they'll have more owners or many different parts of those offerings the second thing to recognize is you are trying to get rid of structure as
you're organizing logic let me be clear there will be structure but it should follow not lead the thing that leaves is mission what am I trying to get done here how do I assign some talents some energy some resources to a mission that somebody and somebody's team can pursue those teams are driven by metrics they understand the mission they establish some metrics that will help them understand if they're succeeding this is not about the boss telling them what to do this is about them imagining what they can pull off so what they do then is
create experiments to see if they can in fact achieve the mission by zeroing in on the metrics that they've identified certainly in conjunction with management that would deliver to the needs of the company now what this means is you have to be able to continuously release this is a new a technology environment and it's why you are likely to do this on the digital side before you get around to the digitized side this is about what we call DevOps it's a it's an environment in which people are empowered to put their code into production and
you need a well designed infrastructure for that so doing this for your digital offerings which will be much smaller initially makes a lot of sense you can eventually go back and make sure this happens with your digitized side then you have to understand that this is not the cheapest organizational design you have to resource it otherwise you have people waiting for stuff like you've been waiting for approvals in your hierarchal hierarchical environment you're gonna end up having this waiting time while people are waiting for people to get stuff done you rely on collaboration not hierarchy
to ensure that people get stuff done and you make sure that leaders trust the decision makers if you empower people but you don't trust their decisions you have not really empowered them this is about assigning accountability you tell someone you trust them that they can deliver you're constantly working with them to clarify what it is they're their mission should accomplish you're challenging their ideas you're testing why they want to pursue a certain experiment this is about learning to coach instead of direct this is hard and people tell us the hard part is not the empowered
team part you'll find people perfectly capable there it's the next layer up people who are capable of coaching on moving Talent of identifying missions that are really clear now that is the real challenge here and it is why this is even harder than the technology environments you're trying to create so let's stop here for our second polling question we need to do this real quickly so if you bring that question up when you look at this these principles for accountability and the need to empower what would you say is true of your company what percentage
has been designed for accountability rather than structured for delegated activities is that less than 10% 11 of 25 26 to 50 more than 50 and I ask you all to go ahead and fill that in pick one of those choices now let's go ahead and look at the results here all over this is very interesting so we have slightly more in the 11 to 25 apparently but they're closed so you can see some companies just getting started some have you been at this a while those might be smaller companies I am NOT able to ask
but that is that's our pursuit that's what we're trying to do we're trying to run our companies through impoundment so let me wrap up now by giving you the really bad news this is hard of course it's hard but you're all up for that the thing is it's slow there is so much learning as you learn to assign accountabilities as you learn to build a digital platform as you learn what your customers want now what we've observed from the companies we've studied is there's no way to become digital rapidly you'll see that the hypothetical we've
grown here is that well if your digit if your revenues your traditional revenues are over time going to diminish which is true for a lot of companies well good news is you'll have these digital revenues coming in the orange line here but it takes a number of years to go from zero to something substantive on average five percent of a company's revenues and we're talking companies that have digital offering they the report we got is on average five percent of their revenues are from those digital offerings that's slow and it's not gonna change overnight unless
of course that's exactly the impact of Pam Debra cows will be studying that what we have learned is you're gonna have to allow some time for learning well I don't have time to cover this in this particular webinar but in our book we describe five building blocks that help you accumulate the learning to create deliver and benefit from digital offerings so I'll end by just putting up that website and and encouraging you to take a deeper look do we have time for one last question yeah
