digital transformation alc - · pdf filecore assumption was that at&t would ......
TRANSCRIPT
Digital Reconstruction and Transformation Karim R. Lakhani | Harvard Business School
[email protected] | @klakhani
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Most Technological Predictions Are Wrong
In 1982 - AT&T asked McKinsey to forecast US cell phone market in year 2000 McKinsey noted:
Heavy handsets
Low battery power
Patchy coverage
Exorbitant prices per minute
Forecasted 900,000 subscribers by 2000 Delayed serious entry into market by AT&T for several years
By 1992 - AT&T Had It Figured Out?
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What Happened?All key innovations were forecasted by AT&T Core assumption was that AT&T would deliver both devices and services Major business model impediment of providing “pipes” Major missed opportunities
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Connected Car Tablets Streaming Video eCommerce Messaging Social Digital Assistants SmartWatch Etc.
AT&T’s Future Vision Delivered by an Ecosystem
RIP Nokia
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What Killed Nokia?
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Note the following Nokia firsts
1999: first phone w/ web browser
2000: first smartphone that allows third-party apps
2002: second in offering camera phone
2003: first phone with touchscreen
2007: Ovi appstore, acquiring Navteq (digital map), Symbian market share: 67%
Why Did Google Buy
Nest for $3.2 Billion?Company launched in 2011 Selling 40,000 units /month
Annual revenue : ~$200-300M
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Digital Transformation in Home Thermostats?
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Install Furnace
Install Thermostat Buy Fuel Set Temp Sense
temperature Turn on/off
furnace
Install Furnace
Install Thermostat Buy Fuel Set Temp Sense
temperature Turn on/off
furnace
Data Local Intelligence (Analytics, Control, …)
DIGITAL
ANALOG
Digital Transformation Can Change Value Creation and Capture Models
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Install Furnace
Install Thermostat Buy Fuel Set Temp Sense
temperature Turn on/off
furnace
ANALOG
Install Furnace
Install Thermostat Buy Fuel Set Temp Sense
temperature Turn on/off
furnace
Cloud Infrastructure
Advise Energy Companies
Advise Consumers
Other Home Automation
Trigger Maintenance
Analytics
Data Local Intelligence (Analytics, Control, …)
CLOUD
CLIENT
DIGITAL
NETWORK CONNECTIONS
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Is a Pizza Company a Tech Firm?
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Domino’s Invests in Massively in Digital Technologies to Re-invent Firm
IT is the largest department in the company
“Ordering pizza is Domino's entire business. What we saw then and continue to see now, is consumers prefer digital ordering over any other type. "It’s got better repeat, higher spending, customer satisfaction is higher, they order new products at a two-to-one ratio, and then there’s all the data to learn from.”
New technologies improve same store sales by 14%
$2B in digital sales (35% mobile)
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The Future of Pizzas?
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Contest to Solve Highly Complex Analytics Problem
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Broad Engagement (459 Competitors & 2000 Code Submissions)
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Broad Engagement (459 Competitors & 2000 Code Submissions) & High Performance
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Solar Power Output W/h
0
30000
60000
90000
120000Internal NASA Solution
Recent Contest to Improve Performance of Genomic Data Processing (Kraft Gift for Precision Medicine - May 2016)
Objective: Improve accuracy and speed of standard sequence alignment algorithm (BWA) developed by Broad Scientist Hang Li (paper cited > 8000 times). (Already fully optimized?)
Relevance: Both academia and industry are faced with a data glut from genome sequencing - typical run will yield 50 - 400 million base pair reads in a single run. Mapping to genome is a massive computational and time intensive task. Can be a bottleneck in processing.
Contest: Design a 3-week long contest - $20,000 prize pool - TopCoder Platform.
Participation: 1198 people registered - 96 competitors submitted 410 programs (368 scored > 0).
20 Contestants > Benchmark, 17 > Benchmark +5%, 9 > Expectation Ceiling (Benchmark + 50%), Leader = Benchmark+ 87%
20 Contestants > Benchmark, 17 > Benchmark +5%, 9 > Expectation Ceiling (Benchmark + 50%), Leader = Benchmark+ 87%
Best Solution Increases Accuracy from 91% to 97% & Increases Speed by ~15X
Value Creation and Value Capture Core Aspects of Firm
Financial Model
Operating Model
Value Creation
Value Capture
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Digital Challenges to Legal Profession
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Digital Technology Changes Business Models
Machine Learning and AI will “automate” legal analysis
On-Demand models will pressure legal firm partnership structure
Digitization of in-house counsel work will pressure existing relationships
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Innovation Paradox: Why Do Winners Become Losers?
Not a new phenomenon Common across industries Seen around the world
Why Do Succesfull Firms Fail?Wrong Technology? Wrong Strategy? Stunted Execution? Bad Luck?
Extraordinary Intervention for the Development of Gunfire at Sea
Existing Hierarchies Have a Tough Time with Innovators
Ignore Debate and Denial Personal Attack Fire the Innovator
Uncertainty Cognition Business Model Change
Nature of Innovation Process
Competency Traps Explore/Exploit Tension Leadership Challenge
Organizational Factors
Skills Identity Incentives
Individual Factors
Uncertainty Becomes an Excuse to Not Embrace InnovationGenuine uncertainty
It’s not going to happen – certainly not now
Cannibalization
It will compete with our current products
Margin erosion
It will make less money
Implementation
We’re not going to be able to do it, anyway
Uncertainty Cognition Business Model Change
Nature of Innovation Process
Competency Traps Explore/Exploit Tension Leadership Challenge
Organizational Factors
Skills Identity Incentives
Individual Factors
Competencies evolve over time, creating �competency traps�
Performance
Time
Competence at major innovation is practiced
Takeoff
Maturity
Discontinuity
Competence at incremental innovation most practiced
Firms Have to Deal With Exploration and Exploitation Simultaneously
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• A single general manager and team • A common vision and values • Strong decentralization • Multiple strategies, structures, processes,
and cultures -- each separately aligned
Exploitation
Exploration
Variation Selection Retention
[Horizon 1]
[Horizon 2]
[Horizon 3]
Growth
General Manager
Senior Team Challenges
• Clear strategic intent that justifies the importance of the ambidextrous form
• Overarching vision and HR practices to emotionally engage everyone
• Aligned senior team with common rewards that communicates a consistent message
• Organizational architecture that promotes exploration and exploitation with targeted integration to leverage firm-wide assets
• Ambidextrous leadership that tolerates the contradictions of multiple alignments and can resolve the trade-offs required
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Ambidextrous Leadership Skills..
• Hold Paradox, Be Consistently Inconsistent • Manage a portfolio of related experiments or projects
• Establish and communicate a clear vision
• Establish a Few Overarching Core Values
• Create an extended team for advice and counsel
• Balance opposing factors to imagine future possibilities that are currently unrecognized market needs
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! Recognize when to continue and when to abandon an idea ! Build and Coach a senior Team that can deal with paradox
Change can challenge every aspect of an organization
Leadership & Strategy
Structure & Process
Incentives
Culture & Mental Models
Individuals become Invested in old
approaches Strategic/competitive problems may provide an excuse for inertia
Existing incentives often work against significant change, and new incentives take time and work
Whole scale changes to structure and process are very
disruptive: Two years of lost time?
Strong cultures & deeply rooted mental
models are extraordinarily
resistant to change
Digital Transformation is Making Every Company into a Software and Services Company
Digital transformation re-architects transactions and processes… Digitizing process components
Distributing transactions more easily
Connecting with other businesses, forming large digital networks, accumulating and communicating lots of data
Generating opportunities for powerful analytics to aide in value capture
… ultimately transforming business models, organizations, cultures and ecosystems
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Digital Transformation is Making Every Company into a Software and Services Company
Digital transformation re-architects transactions and processes… Digitizing process components
Distributing transactions more easily
Connecting with other businesses, forming large digital networks, accumulating and communicating lots of data
Generating opportunities for powerful analytics to aide in value capture
… ultimately transforming business models, organizations, cultures and ecosystems
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New Capabilities & Strategies Needed To Execute Digital Transformation
New Strategies
Shift from products to services + products
Cultivating platforms & ecosystems
Developing new revenue & business models
Talent and new business incubation
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New Capabilities
Data gathering and management
Advanced analytics
Realtime monitoring and control
Software development excellence
“The Future is Already Here, Its Just Just Not Very Evenly Distributed” - William Gibson
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[email protected] | @klakhani