Driving Digital Strategy
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MANAGEMENT Gupta US$32.00 “ Sunil Gupta provides a strong point of view, a powerful framework, and a plethora of Sunil Gupta compelling examples to help think through how to compete in the digital age. This is a very stimulating and highly relevant read for anyone leading an organization seeking to thrive in Driving Digital Strategy this high-beta environment.” Digital transformation is no —Hubert Joly, Chairman and CEO, Best Buy longer news—it’s a necessity. espite the widespread threat of “ Sunil Gupta reminds us that companies need to develop a digital mindset that must be disruption, many large companies in expressed in every facet of their organizations. Driving Digital Strategy is a master class in RUSS CAMPBELL traditional industries have succeeded strategy and actionable insights.” Sunil Gupta is the Edward W. Carter Dat digitizing their businesses in truly —Ajay Banga, President and CEO, Mastercard Driving Professor of Business Administration at transformative ways. Harvard Business School. He is also Cochair The New York Times, formerly a bastion of the Executive Program on Driving Digital “Navigating digital disruption is a key strategic issue that is front and center in every of traditional media, has created a thriving Strategy. Gupta advises and speaks to boardroom and for every executive team. Understanding how to drive a compelling strategy digital product behind a carefully designed companies around the world on issues related and create the digital DNA to delight customers is an art, and Gupta’s book is a must-read paywall. Best Buy has transformed its to digital transformation. Representative guide for any company or executive who wants to make digital a tailwind.” business in the face of Amazon’s threat. John clients include Adidas, IBM, Franklin —Shantanu Narayen, President and CEO, Adobe Digital Deere has formed a data-analysis arm to Templeton, Heineken, Johnson & Johnson, complement its farm-equipment business. Novartis, PwC, TD Bank, Turkcell, and And Goldman Sachs and many others are Vodafone. “Sunil Gupta has thought deeply about transforming businesses through technology, spoken using digital technologies to reimagine their to innovators across industries, and synthesized his findings in a way that’s both compelling businesses. In Driving Digital Strategy, and understandable. This book provides much to consider for businesses of all stripes in Harvard Business School professor Sunil today’s digital age.” Gupta provides an actionable framework for —R. Martin Chavez, Executive Vice President and Chief Financial Officer, Goldman Sachs Strategy following their lead. For over a decade, Gupta has studied digital transformation at Fortune 500 companies. “ Sunil Gupta offers sage advice and the experience of moving beyond digital initiatives to a He knows what works and what doesn’t. full-on digital business. As machine learning and other technologies continue to evolve, this book is a timely resource for any leader who wants to be relevant in the next decade.” Merely dabbling in digital or launching a small independent unit, which many companies —David Kenny, Senior Vice President, IBM Watson and IBM Cloud A Guide to do, will not bring success. Instead you need to fundamentally change the core of your business and ensure that your digital strategy Reimagining touches all aspects of your organization: your business model, value chain, customer relationships, and company culture. Gupta covers each aspect in vivid detail while Your Business providing navigation tips and best practices along the way. JACKET DESIGN: JONATHAN BUSH Filled with rich and illuminating case studies of companies at the forefront of digital ISBN-13: 978-1-63369-268-8 9 0 0 0 0 transformation, Driving Digital Strategy is STAY INFORMED. JOIN THE DISCUSSION. HARVARD BUSINESS REVIEW PRESS VISIT HBR.ORG the comprehensive guide you need to take full FOLLOW @HARVARDBIZ ON TWITTER advantage of the limitless opportunities the FIND US ON FACEBOOK AND LINKEDIN HBR.ORG 9 781633 692688 digital age provides. “I’ve worked with many companies on digital transformations, and it is refreshing to see Sunil Gupta’s tight framework for what drives success. He makes clear the challenges involved, the deep underlying issues you need to attack, and the case for going big. In health care right now, I personally see the reality of everything Gupta is describ- ing and the importance of taking his all-in approach.” —DAVID EDELMAN, Chief Marketing Officer, Aetna “Highly interesting and extremely relevant, Driving Digital Strategy is an essential book for leaders struggling with the many challenges and opportunities of digitization.” —HÅVARD S. ABRAHAMSEN, CEO, PwC Norway “Sunil Gupta delivers a world-class guided tour on how to under- stand, design, and drive a digital strategy—an intelligent, inspiring, and intriguing call for action!” — SØREN RØSSEL, Head, PwC’s Executive Education Global Centre of Excellence “In a world where technology and new age companies have already disrupted most of the industries and businesses, it is imperative for every business to go all-in on digitization in order to compete and succeed. Driving Digital Strategy is the quintessential guide for achiev- ing that transformation.” —VIJAY SHEKHAR SHARMA, founder and CEO, Paytm FM Page a 31/05/18 6:30 PM FM Page b 31/05/18 6:30 PM Driving Digital Strategy FM Page i 31/05/18 6:30 PM FM Page ii 31/05/18 6:30 PM Sunil Gupta Driving Digital Strategy A Guide to Reimagining You r B u s i ne s s Harvard Business Review Press Boston, Massachusetts FM Page iii 31/05/18 6:30 PM HBR Press Quantity Sales Discounts Harvard Business Review Press titles are available at significant quantity discounts when purchased in bulk for client gifts, sales promotions, and premiums. Special editions, including books with corporate logos, customized covers, and letters from the company or CEO printed in the front matter, as well as excerpts of existing books, can also be created in large quantities for special needs. For details and discount information for both print and ebook formats, contact [email protected], tel. 800-988-0886, or www.hbr.org/bulksales. Copyright 2018 Sunil Gupta All rights reserved Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to [email protected], or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. The web addresses referenced in this book were live and correct at the time of the book’s publication but may be subject to change. Library of Congress Cataloging-in-Publication Data is forthcoming. The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Publications and Documents in Libraries and Archives Z39.48-1992. eISBN: 9781633692695 FM Page iv 31/05/18 6:30 PM To Kamal for your love and inspiration and Tarun and Kunal for bringing so much joy and happiness to my life FM Page v 31/05/18 6:30 PM FM Page vi 31/05/18 6:30 PM Contents Introduction: Framework for Reinventing Your Business 1 PART ONE Reimagine Your Business . 1 Business Scope 13 . 2 Business Model 31 . 3 Platforms and Ecosystems 59 PART TWO Reevaluate Your Value Chain . 4 Rethinking R&D and Innovation 83 . 5 Operational Excellence 97 . 6 Omnichannel Strategy 117 PART THREE Reconnect with Your Customers . 7 Acquiring Customers 135 . 8 Engaging Consumers 155 . 9 Measuring and Optimizing Marketing Spend 173 FM Page vii 31/05/18 6:30 PM viii Contents PART FOUR Rebuild Your Organization 10. Managing Digital Transition 189 11. Designing an Organization for Innovation 203 12. Skills, Capability, and Talent Management 213 Notes 229 Index 247 Acknowledgments 263 About the Author 269 FM Page viii 31/05/18 6:30 PM Introduction Framework for Reinventing Your Business Disruption and transformation get a lot of hype, and for good reason. Digital technologies have had a profound impact on the world, disrupt- ing entire industries while also enabling companies such as Facebook and Amazon to achieve exponential growth. There’s no doubt that incumbents have struggled as new and nimble players have emerged with innovative business models. But there’s also a more important story to tell: as much as digital has posed a threat to the old guard, and continues to do so, it also presents an endless number of opportunities for companies from traditional industries. The Weather Company is a case in point. When consumers moved away from TV to mobile phones but did not stay long enough to generate ad revenues, the company execs pivoted and created a service called WeatherFX, which uses data from its app to help retailers predict how the weather will affect consumer purchasing behavior. And other com- panies are finding success, too. Faced with declining print subscriptions and the loss of revenue from classified ads, theNew York Times built a Introduction Page 1 31/05/18 8:09 PM 2 Introduction highly successful digital-subscription business with over 2.5 million sub- scribers, and the company is on track to generate $800 million in digital revenue by 2020. Car companies such as Cadillac are experimenting with subscription services, Sephora and other retailers are using apps to enhance the in-store experience, and Goldman Sachs has created an online platform (and asked its competitors to join in as well). As a business leader, you’ve no doubt had “digital” on your mind for quite some time, and you’ve probably started new initiatives and run experiments in an effort to “digitize” your business.