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Digital Transformation Middle East

Digital

Putting Culture at The Centre of your Digital Transformation

January, 23rd, 2018

2


What Is Organizational Culture?

“Organizational culture is the sum of

values and rituals which serve as ‘glue’

to integrate the members of the

organization.” — Richard Perrin

“In large part, culture is a product of

compensation.” — Alec Haverstick

"Culture eats strategy for breakfast" –

Peter Drucker

What Digital Transformation Means?

The meaning of “digital transformation”

has changed dramatically in just the past 10

years

In 2007, the iPhone had just been introduced.

Digital was the domain of IT, and companies

focused on data mining, search technology, and

virtual collaboration. Only 33 percent of

CEOs were champions for digital

Today, companies have digital, mobile, and social

strategies. The main areas of focus are

artificial intelligence, machine learning,

and the Internet of Things. Digital drives the

road maps and goals of entire companies as well

as functions including marketing, sales, and HR.

The number of CEOs who are digital

champions has more than doubled.Source: Harvard Business Review

3

Arthur D. Little developed a leading Global Digital Transformation Index

benchmark across industries, including telecoms: Culture is a centerpiece

Source: Arthur D. Little Digital Transformation Study

Digital Maturity Assessment

• Large panel for digital

• Cross-industry, including Telco

• Relevant to challengers & incumbents

4

Our global study reveals that despite being a key enabler of digitalization,

Telcos are still lagging in digital maturity with an average below 4/10



DTI (Digital Transformation Index) for Telecom & Media Industry

10

9

8

7

6

5

4

3

2

1

0

Digital aware[score below 2.5]

Digital oriented[score between

5 and 7.5]

Digital adaptive [score between 2.5 and 5.0]

Digital centric[score above 7.5]

AverageEach # represents a specific company

Automotive

Energy & Utilities

Consumer & Life science

EPC & Manufacturing

Financial institutions

Telecom & Media

Travel & Transport

102 100 98 96 94 92 90 88 86 84 82 80 78 76 74 72 70 68 66 64 62 60 58 56 54 52103 101 99 97 95 93 91 89 87 85 83 81 79 77 75 73 71 69 67 65 63 61 59 57 55 53

51 49 47 45 43 41 39 37 35 33 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 150 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2

X-Axis = Indexed at Cross-Industry Ø 3.92

Y-Axis = Company Specific Deviation to Ø

5

Major Challenges for Digital Transformation

Automotive Telecom

& Media

Energy

& Utilities

Consumer

& Life

Science

Financial

Institutions

EPC &

Manufac-

turing

Travel &

Transport

1

6

8

7

8

5

6

7

8

6

2

3

4

7

8

5

3

1

6

4

2

5

7

8

3

2

1

4

7

8

6

5

1

3

7

2

8

4

6

5

Lacking financial

resources

Lacking control

system

Legal requirements 27%

32%

Lack of knowledge

39%

Lacking mgmt.

Support23%

23%

45%

50%

Excessive

complexity

Sense of urgency

40%

Goal definition

Source: Arthur D. Little Digital Transformation Study Numbers indicate frequency of answers among companies in given industries

Share of participants

Most critical challenges for Digital Transformation are 1. lack of

knowledge, 2. lacking sense of urgency and 3. excessive complexity

2

3

7

4

5

1

2

3

4

5

6

1

2

3

4

1

Highest


6

Measures Applied to Catalyze the Digital Transformation

Automotive Telecom

& Media

Energy

& Utilities

Consumer

& Life

Science

Financial

Institutions

EPC &

Manufac-

turing

Travel &

Transport

3

1

2

3

4

5

2

1

3

4

5

6

3

1

2

4

5

6

1

2

3

4

6

5

1

2

3

4

5

6

1

3

2

4

5

6

1

2

3

4

5

6

53%

VC arm/ capital

provision for incub.5%

Acquisition of

digital co.11%

Own corp. incubator/

accelarator31%

Strategic alliances

w/ digital co.44%

Hiring Digital talents 51%

Training and further

education

Source: Arthur D. Little Digital Transformation Study 2015 Numbers indicate frequency of answers among companies in given industries

Share of participants

Consequently, “hiring digital talents” and “training and further education”

dominate when it comes to capability building effort in all industries

Highest


7

Survey results reveal gaps with Workplace & Culture maturity scoring low


DTI for Telecom Industry per Section

Source: Arthur D. Little Digital Transformation Study Numbers indicate frequency of answers among companies in given industries

Highest

= Telecom Virtual Star = Telecom average = Large Telco Client Sample DTI

10

9

8

7

6

5

4

3

2

1

Strategy &

Governance

Products

& Services

Customer

Management

Operations

& Supply ChainCorp. Services

& Control

Information

Technologies

Workplace

& Culture

Client Example

Many telecoms are

advanced in terms

of overall Strategy,

but have not yet

broken down their

strategy into

functional areas –

Workplace &

Culture is among

least advanced

8

All industries

Today simple concepts for communication and collaboration, as well as

for agile methods, seem to prevail, hindering digitalization enablement

Deep Dive – Workplace & Culture


Classic

19%

Simple

42%

Advanced34%

Innovative

5%

All industries

No

21%

Advanced

Simple

49%

23%

Comprehensive

6%

Agile Methods IntegrationConcepts for Communication and Collaboration

9

The future workplace differs from today‘s situation especially in three

areas: collaboration, mobility, and knowledge

Deep Dive – Workplace & Culture

Tomorrow

Centralized enterprise workflow management

Voice or text as main communication mean

High share of repetitive work complemented

with project work

Decentralized communication modes including

social media

Business video becoming more effective with

means of augmented and virtual reality

Increased team & project work, no classical

hierarchies. Teams change regularly over time

Co

llab

ora

tio

nM

ob

ilit

y Focus on office-work parallel to home office

options with a surge in flexible schedules

Usage of cloud solutions increasing

Place and schedule of work lose importance;

fulfillment of goals comes to the fore Cloud solutions as standard and main mode of

working

Today

Kn

ow

-

led

ge Knowledge is created and stored in silos

Access to internal knowledge databases

Community- and online-built expertise

Access to expertise in large social knowledge

networks; open sourcing mode

The new workplace

10

We have synthesized best in class cross-industry examples across the

dimensions of the ADL’s Global Digital Transformation Index


Deep Dive – G. Workplace & Culture

Strategy &

Governance

A Products

& Services

B Customer

Management

C

Workplace &

Culture

GInformation

Technology

FCorporate

Services

& Control

EOperations

& Supply Chain

D

Nike x-functional

Digital Sports

Division

Coca Cola

“Co-Founders”

Network

Cyber-Physical

Product

Service with

Peer-to-Peer

Component

SBB GoodBox

Rail-Transport

Smartization

Burberry Integrated

Customer Experience

Real-Time Dynamic

Pricing for Profit

Maximization

Quicksilver Personal

Pricing & Rewards

Gamification in

Project-based/

Knowledge

Environment

Coca Cola

Brand Dashboard

Digital Business

Launch Factory

Cloud-Based

Project Staffing

adidas Speedfactory

In-Store Production

Cold Chain

Quality

Management

Vision Picking

using Augmented

Reality

European

Telco

Layered IT Architecture

for Quick Process

Implementation

ICT to Support

Industry 4.0

Lean Culture

11

Internet Players show how to successfully “do business” in the age of the

Digital revolution – it’s also about a cultural change for Telcos

Deep Dive – G. Workplace & Culture - Best Practice Examples

Source: Arthur D. Little; Benchmarked companies: Amazon, Google, Ebay, Apple

Principles of leading Digital companies

Iteration &

excellence

Don’t go always for the carrier-grade

solution right from the beginning

But be excellent in what you are doing and

delivering

Simplify and

automate

Use technology to the most possible extent

instead of manpower. Make processes and

products simpler to enable that

Use the power

of the crowd External and internal crowd can help to get

more insights, data to get unbiased views

Customer

Engagement

Increase e-care and e-sales to highest possible

level, let the customers work for you (e.g.

customer forum)

Ensure highest customer centricity

Bias for action –

and fail fast

Speed matters in business. Many decisions

and actions are reversible and do not need

extensive study

Value calculated risk taking

Data is

apolitical

Evaluate products & projects by real data

(traffic), i.e. what consumers really want.

Instead of what managers argue for or push

internally

Use KPIs rigidly to steer

IT architecture

counts

Be rigid in securing your target Online IT

architecture. Don’t compromise it for

pretended short-term wins

Avoid the point of “no return”

Networked

organization

High degree of specialization, collaboration

and project orientation

Culture plays key role

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Description

Netflix is characterized by a

revolutionary – performance

focused, few policies, freedom

based – culture

Netflix is able to maintain its

culture even when growing

(currently 2,022 employees)

Culture triggers high success –

revenues of US$ 4.4bn in 2013

Implications

Substantial reduction in

administrative costs

Higher employee performance

More innovative culture improves

processes and products

Attraction of more talents

Ne

tflix

’ cu

ltu

ral asp

ects

1

7

2

3

4

5

6

Values are what we

value

High performance

Freedom and

responsibility

Context, not

control

Highly aligned,

loosely coupled

Pay top of the

market

Promotions and

development

Judgment, communication, impact, curiosity, innovation, courage, passion, honesty, selflessness

The keepers test of managers: “Which of my people would I fight hard to keep at Netflix?”

One single policy: “Act in Netflix’s Best Interests” No policies for tracking of hours, vacation, etc.

“When you are tempted to ‘control’ your people, ask yourself what context you could set instead”

High alignment due to a clear and specific strategy “Goal is to be big, fast and flexible” through trust

“One outstanding employee gets more done and costs less than two adequate employees”

Promotion: job big enough & employee a “superstar” “Individuals should manage their own career”

Netflix has a drastically lean culture which abdicates rules and pushes

individual responsibility

Deep Dive – G. Workplace & Culture - Best Practice Example

Source: company information

13

Deutsche Telekom has setup a leadership program to develop the digital

capabilities and culture – as a key enabler to drive digitalization efforts

Case Example: Deutsche Telekom

Deep Dive – G. Workplace & Culture – Best Practice Example

Source: Arthur D. Little, Deutsche Telekom

levelUp! ProgramA year-long program delivering specific content on the topic of

digital leadership

RationaleEnable DT Managers to develop set of leadership skills and

methods needed in digital age (as opposed to analog)

Target Employees700 Deutsche Telekom managers from Germany and abroad

Approach / CurriculumModular, flexible and personalized curriculum, mainly digital

format with some classroom training designed with Duke CE

14

Purpose is a core starting point & culture anchor for the cascade

between Business strategy and Operations/Product/Technology strategies

Source: Arthur D. Little

The ‘Y’ Strategy

r

What’s our “Raison d'etre” / Purpose?

Where do we want to be at a specific moment in the future?

What should we do, what should we not do?

What are our business objectives? Where do we invest and where

should we do business?

What role does innovation play, what are the goals, what areas should we

focus on, how can we quickly adapt when needed?

What detailed processes, resources, activities and projects

do we need in the short term?

How do we realize our business targets? What do we need to do

with our products, services, technologies and operations?

15

From “Sense of purpose” to “Why Strategy”

The Why strategy

What are the characteristics of the most successful

corporations?

“Contrary to popular wisdom, the

proper first response to a changing

world is not to ask “how should we

change? But rather to ask, “What do

we stand for and why do we exist”

This should never change” (page 20)

A “ Why strategy” …

identifies the core purpose

of the business related to its

stake-holders

finds a common language

creates stakeholder

alignment for this core

purpose

builds a sound basis for

culture, vision, strategy,

processes and behavior

Is the core driver for

corporate wed motivation

and success

16

The “Why” or “Credo” is the heart (soul) of a firm … it drives its

uniqueness and competiveness

Note: *) BHAG = Big Hairy Audacious Goals

The Why strategy

Designing a unique and differentiating company vision / BHAG* enables to

strengthen business strategy, enhance CEX and transform company

ProductExperience

Credo

WHAT

…are the provided

products & services

HOW

…do we deliver these

products & services

WHY

…are we on earth

17

Defining “Who we are” secures differentiation, common story telling to

clients and drives internal transformation


WHY

Strategy

Customer

Stickiness

Provide common language for

clients & hiring

Empower people within a clear

frame

Create strong culture

Secure strategic differentiation

Create entry barriers

Align initiatives & increase focus

Create branded customer experience

Turn client into ambassadors

The WHY Strategy benefits

The Why strategy

18

The Dynamic Innovation Strategy Model provides a valuable blueprint for

companies to shape the innovation agenda in the digital age

The Dynamic Innovation Strategy Model

Dynamic innovation strategy


Provides a clear framework for the

essential elements of a competitive

innovation strategy

Recognises the importance of speed

and agility

Balances top-down strategic direction

with bottom-up flexibility and

expediency

May be used as a quick healthcheck

diagnostic to assess current innovation

strategy

Strategic Innovation

ObjectivesLeadership, Priorities, Objectives

Opportunity CaptureEcosystem management, Startup

Intelligence, Idea capture

Market and

Operations Pull

Technology

Push Innovation

Roadmap & PortfolioResearch, Development, Launch,

Post-launch, Min Viable Product,

Fast pilots, Spin outs

Dynamic

Innovation EngineProcesses, Organization,

Resources & Tools

Targeted technology

intelligence

Customer needs,

Operational needs

Emerging digital

technologies

Big data analytics,

Customer involvement

19

Large corporations and start-ups can cooperate to boost digital

transformation, using various strategies

1) some legislations foster this behaviour with specific act to encourage cooperation with SME

Launch of venture equity

fund targeting start-ups

(joint or standalone)

Areas of investment are

generally related to the

core or adjacent

businesses of the

corporate

In addition to the direct

equity, the fund may

provide support advisory

services to the start-ups

Is a fixed-term tutorship

and mentorship program

for entrepreneur or small

companies aimed at

supporting them

developing innovative ideas

Equity investment is

possible but is generally of

a smaller share compared

to venture capital (single

digit)

Accelerators/Incubators

offer working facilities for

start-up either free or for a

small fee

Companies could

cooperate with start-up

outsourcing R&D with

several options:

– Direct sourcing:

corporate acquire

services from start-up as

from any other

company1

– Crowdsourcing: assign a

specific task to a pool of

start-up / innovators

– Open innovation:

cooperate with start-up

to develop joint

innovation

Partnership on innovation

or sales for a mutual

benefit

Multiple forms of

partnerships exists:

– Bundling of services

– Joint sell effort

– …

Aim is to benefit from

innovative companies

without participating in their

development

Corporate and start-up cooperation

Corporate Venture

Capital (CVC)Accelerator / Incubator Procurement of service Partnership

Deep Dive – G. Workplace & Culture – Cooperation with Start-ups

20

Corporations are not designed for disruptive innovation and often face

hurdles for innovation


Source: Found Fair

Startup

Basic orientation Tailored for stabilized operation

Optimized risk management

Focus on efficiency and control

“Six Sigma”

Corporate

Typical risk profile

Tailored for Innovation & disruption

Search and discovery mindset

Focus on agility & speed

“100x multiple” (cash on cash)

Too slow and cautious to change effectively High risk of failure

Basic orientation “No Failure” culture

Structured and stable environment

Formal governance

Strong health and vision benefits

(pensions…)

“Fail fast”: innovation first, hedging later

“You never know what’s next” surprise

attitude

Young people with several hats

High exposure & organizational impact

Temporary organization designed to

search Find & build rising stars

Permanent organization designed to

execute Milk & protect business

21

External and internal disruptions increase the pressure to digitally

transform and lead to a race of innovations


Source: Found Fair

Disruptive

innovation

Startup Instant decisions

Fast iterations

Agile structures

Entrepreneurial spiritOut-of-the-box thinking

Corporate

22

To manage the existing hurdles, corporates can apply disruption as a

service and build a bridge for innovation


Source: Found Fair

Input: “Raw ingredients”

Strategic objectives

Funding (may be leveraged

by 3rd party funding)

Ideas

Access to resources

Output: A functioning

business – Profitable &

scalable company

Team

Product

Customer base

Processes

Entrepreneurial drive / experience

Out-of-the box thinking

Methodology for finding & building

business model

Startup network & talent pool

Effective supervisorship

Market intelligence & ideation

Expert network

Integration / adaption / change

management expertise

Disruption as a service

Input: “Raw ingredients”

23


Leading Digital companies differ in culture –agile, collaborative, more empowered individuals / decision

making, proactively building on new & changing digital technologies, etc.

To become digital, transforming business & operating model are not enough – employees need to be taken

along the journey / Culture change is required– Definition: "Culture is how people behave when nobody is watching“

– "Culture eats strategy for breakfast" – Peter Drucker

– “People are reluctant to Change: Change is hard at first, messy in the middle, and beautiful in the end” – R. Sharma

Arthur D. Little’s Digital Transformation study reveals: Culture is a key area lagging behind – yet, critical to get

right– Examples from OTT/digital companies to learn from, yet each company needs to define their own transformation path

To tackle culture change holistically, Arthur D. Little typically addresses three areas to help companies succeed in

change: – Purpose of company / the underlying ‘Why?’: clarifies aspirational values and lays foundation for culture change

– Formal guidelines (processes, governance, committees, delegation of authority, incentive systems, office design, etc.)

– Informal rules & structures (decision making culture, trust in employees, work ethics, etc.)

Leading from top down to instill change, install leadership training program which not only changes culture

but at the same time also adds new capabilities (e.g. DTAG)

Start a holistic change program… before your business gets disrupted by a company with digital culture!

Today’s Key Messages

Source: Arthur D. Little Analysis

Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought leader in linking strategy, innovation and transformation in technology-intensive and converging industries. We navigate our clients through changing business ecosystems to uncover new growth opportunities. We enable our clients to build innovation capabilities and transform their organization.

Our consultants have strong practical industry experience combined with excellent knowledge of key trends and dynamics. Arthur D. Little is present in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading firms and public sector organizations.

For further information please visit www.adlittle.com

Copyright © Arthur D. Little 2016. All rights reserved.

Digital Transformation Middle East

Contact:

Tim Peters

Partner, Dubai

+971 (0)56 188 4321

[email protected]

ADL digital™

value proposition: digital transformation · for agile methods,seem to prevail, hindering...

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