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Digital Transformation: the Final Chapter an Organizational Roadmap for Digitally- Enabled Businesses 2 Digital Transformation: The Final Chapter An Organizational Roadmap for Digitally- Enabled Businesses 2 Digital Transformation: The Journey Over the past five years, traditional organizations have made Methodology extensive investments in new digital resources and capabilities such as Chief Digital Officers, data analytics, tech and platforms Russell Reynolds Associates spent the and innovation labs. Our research suggests that most of these past 18 months interviewing 50 digital companies are now trying to figure out how to align these business leaders from both B2B and capabilities with the core of their businesses and drive an B2C organizations and surveying 1,500+ integrated approach to end-to-end transformation. As evidenced digitally savvy executives about the by recent headlines (e.g., high profile succession announcements future of digital transformation and best ranging from Ford and J. Crew to Uber, and same day acquisition practices in organizational alignment and announcements from Walmart and Amazon), this is a topic of culture change. This feedback, combined immediate relevance in boardrooms today. As more and more with lessons learned from the more companies join the race to become truly digitally enabled, we’ve than 1,000 digital searches and advisory entered a new phase of digital transformation, an era we call The projects we’ve conducted over the last Final Chapter. This paper explores our research and defines a five years shaped our view on Digital roadmap to this future state organization. Transformation: The Final Chapter. Accelerated disruption across all industries Traditional transformers and digital disruptors are now competing head- to-head. New hybrid models, enabled by a centralized digital platform and a customer- centric approach, merge physical and digital Operational shis driven by a businesses to create seamless, connected operations. Though their early efforts focused focus on customers and data on scaered innovation initiatives, these organizations are finding that a reworking of traditional org structures has to be the focus of enterprise-wide change. While progressive The creation of centralized traditional companies are implementing digital operating platform strategies to achieve end-to-end groups transformations, it is clear that there is not a singular path to success. There are four factors driving the development of these strategies. Evolving corporate culture How should your organization be thinking about these factors as you embark on the next phase of your journey? 3 Step One: Press the Accelerator The pace of digital disruption is picking up significantly across all industries. Those industries that were laggards in the early days of transformation are no longer immune. OBSERVED AND ANTICIPATED LEVELS OF DISRUPTION BY SECTOR: % of executives experiencing or expecting significant digital disruption 81% Disruption (to-date) Disruption (next 12 months) 76% 77% 74% 73% 72% Accelerated disruption across 65% all industries 63% Traditional transformers and digital 62% disruptors are now competing head- to-head. New hybrid models, enabled by a centralized digital platform and a customer- 56% 55% centric approach, merge physical and digital Operational shis driven by a businesses to create seamless, connected focus on customers and data operations. Though their early efforts focused 51% on scaered innovation initiatives, these organizations are finding that a reworking of traditional org structures has to be the focus of enterprise-wide change. While progressive The creation of centralized traditional companies are implementing digital operating platform strategies to achieve end-to-end groups transformations, it is clear that there is not a singular path to success. There Technology Consumer Financial Healthcare Non-Profit Industrial are four factors driving the development of Services these strategies. Evolving corporate culture By contrast, in 2014 38% of industrial companies and 59% of technology companies How should your organization be thinking about these were anticipating similar levels of disruption. factors as you embark on the next phase of your journey? Sources: RRA 2014 and 2017 Digital Pulse. 4 Step Two: Reimagine the Business As companies begin to reimagine their businesses, they must also address key organizational capabilities and skills that will be necessary for transformation. Industry subset Moving from To Key skill gaps E-commerce platform Omni-channel, Retail Big box retail integration, supply chain, personalization predictive analytics Ride sharing, self- Software engineering, mobility, Automotive SUVs driving cars AI Sensors, software, data analytics, Industrial Equipment IOT, connected devices cloud services Schools and text Online education, Education Digital platforms, AI, mobile books adaptive learning Hardware and SaaS, cloud solutions, Product, engineering, new go-to- Technology software AI market capabilities FinTech, mobile, block Mobile platforms, cyber security, Banking Branches chain algorithmic investing and trading Personalized medicine, Genomics, data analytics, Healthcare Drugs connected care wearables, connected devices Personal relationships Data analytics, ecommerce, CPG Big brands with consumers supply chain 5 Step Three: Remap the Organization End-to-end transformation demands operational alignment that maps to the customer journey. Functions that have never directly partnered must now work together. From top-down decision making To collaboration with data-driven insight Partners Marketing AI Operations Ventures CEO & HR Board Sales Technology Vendors Product Finance The realignment of the organizational structure demands new capabilities within traditional functions. Supply Chain/ Product Marketing Technology Operations • Product management • Customer acquisition/ • Mobile/web apps • Digital supply chain • UI/UX retention • Soware engineering • Ecommerce • Mobile • Mobile/social • DevOps • Tech and platforms • Digital asset • Data & analytics • Digital • Predictive analytics management • User insights • Cloud/open source • Customer analytics • Omnichannel • Cyber • Omnichannel • Content marketing • Data integration New Capabilities Required • Agile development • Microservices • Ecosystem collaboration • Data driven • Quantitative • Agile • Data driven • Strategic • ROI driven • Resourceful • Reengineering mindset • Able to work a matrix • Test and learn • User centric • Customer centric • Design driven mindset • Business oriented • Transformational • Transformational • Transformational • Transformational Key Competencies 6 Step Four: Design an Operating Platform Operating platform groups are at the center of transformation; driving alignment and collaboration. S & SYSTEM PARTN ECO ERS ESS UNITS & BR SINTEMS & PA AN USYS RTN DS ECOB ERS FUNCTIONS S UNITS & INES BRMarketingA UOperationsS ND B & SalesS FUNCTIONS Marketing Operations 6 & Sales Supply PLATFORM HR Chain 6 GROUP Supply PLATFORM HR Chain GROUP Tech/Product Finance Tech/Product Finance The precise composition and reporting structure of the operating platform group varies from company to company but typically reports into the C-suite, with at least one element reporting into the CEO.6 Digital Transformation Ecosystem Program Digital Strategy Data Platform Innovation, Labs & Development Management & Product Roadmap Analytics Technologies New Ventures and6 Partnerships DigitalTrue Transformation change agent DigitalWorking Strategy with the DrivesData real-time DevelopsPlatform the Innovation,Catalyst and Labs & OrganizesEcosystem ecosystem workingProgram with the & ProductCEO and Roadmap broader analyticsAnalytics capabilities end-to-endTechnologies challengerNew Ventures to current withDevelopment partners, CEOManagement and broader team, determines and upgrades technology platform business incubating andvendors, Partnerships suppliers Trueteam, change manages agent Workingend-to-end with the digital Drivesunderlying real-time data Developsand customer- the facingCatalyst new business and models,Organizes and customers ecosystem for workingend-to-end with the CEOstrategy and broader and analyticsarchitecture capabilities to end-to-endapplications to challengerproducts/ to servicescurrent withinnovation, partners, product/ CEOtransformation and broader and team,product determines portfolio andproduce upgrades impactful technologyenable the platform businessand platforms. incubating vendors,service suppliers build and team,re-engineering. manages end-to-endroadmap. digital underlyingbusiness data use cases. andorganization customer- facing to new business models, andtalent customers acquisition for via end-to-end strategy and architecture to applicationscompete asto a truly products/ services innovation,digital technology product/ transformation and product portfolio produce impactful enablesoware-enabled the and platforms. serviceand platformbuild and re-engineering.Responsibilities roadmap. business use cases. organizationbusiness. to talentintegration. acquisition via compete as a truly digital technology • Business acumen • Business strategy • Solid business soware-enabled• Mobile/Web • Venture backgroundand• platformBusiness understanding applications development and Responsibilities • Technology • Digital strategy business. • Agile product and integration. enablement • Digital asset • Use case definition • DevOps technology partnerships • Business• Digital acumen • Businessmanagement strategy • Solid• Analytics business group • Mobile/Web• So­ware • Venturedevelopment background •
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