Dealing with Digital Disruption - · PDF fileAdapt strategy usually complements your core business ... brands, including Tide, Gain, Ariel and Downy (fabric ... • Automatic detergent

Dealing with Digital Disruption

Mohan SawhneyMcCormick Foundation Chair of TechnologyKellogg School of ManagementNorthwestern [email protected]

The Story so Far

© 2017 Mohan Sawhney 2

Jim – Accelerating Innovation

Neil – Retail Innovations

Louise – Driving Differentiation

My Story

What?So What?

Now What?3

Digital Transformation

Application of digital technologies to a company’s operations and customer interactions to improve operational efficiency, create superior customer experiencs and design innovative business models.

© 2017 Mohan Sawhney 4

Four Digital Transformation Strategies

Disrupt the

Disruptor

Acquire a Disruptor

Digitize the Enterprise

Build DigitalBusinesses

5

1. Attack - Disrupt the Disruptor• Attack digital disruptors by creating a

digital disruptor of your own• Leverage your assets and brand to

create a model disruptors cannot copy• Compete asymmetrically using a Judo

strategy

6

Best Buy takes on Amazon

Disrupting Yourself• Is your core revenue stream under

severe attack?• Will your industry inevitably move to

the disruptive model?• Is the transition to the new model

happening very quickly?• Does the leadership team have the

appetite for putting the core business at risk?

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2. Acquire – Buy the Cannibals

• Acquire a disruptive startup to buy capabilities faster than you can build the capabilities internally

• Make the acquired businesses the seeds for transforming the core business over time

• If done well, it is the best of both worlds – agility of startups and scale of a large incumbent

© 2017 Mohan Sawhney 9

Examples of Acquire Strategies

1010

Steps in Organizational Integration

ISOLATE INCUBATE INFILTRATE INTEGRATE

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When to Acquire a Disruptor• Is it better to buy than to build digital

capabilities?• Do you have a clear path to integration

between the core business and the disruptor’s business?

• Can you retain the team from the acquired disruptor long enough?

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3. Adapt – Build New Digital Businesses

• Adaptation involves creating digital business designs that are based on your core business and transform the customer value proposition

• As opposed to disrupting yourself in the Attack strategy, the Adapt strategy usually complements your core business

• Adaptation can start as a small experiment and can gradually be scaled to even become to core business over time.

© 2017 Mohan Sawhney 13

P&G: Laundry as a Service

• Procter & Gamble offers a wide range of fabric and home care brands, including Tide, Gain, Ariel and Downy (fabric care) as well as Dawn and Cascade (home care). P&G is looking at opportunities to get into the services business with its fabric and home care brands. For example, the company is currently experimenting with Mr. Clean Car Wash, a franchised car wash business.

• P&G can offer• Laundry as a service in partnership with Uber• Automatic detergent dispensers and on-demand replenishment

P&G Fabric Care

© 2017 Mohan Sawhney 14

Adapt: When and How

• The Adapt strategy is a “build” rather than “buy” strategy that requires the development of capabilities within the enterprise

• The Adapt strategy allows gradual and progressive evolution of the business into a digital business that has elements of disruptive designs

• To put the Adapt strategy into action, you need to create a stand-alone Digital Business Unit that works closely with existing businesses but has a single point of focus and leadership

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4. Absorb: Digitizethe Enterprise• Reimagine business processes end-to-end

by leveraging digital sensors, devices, networks and data analytics

• Internal focus – optimize operations and assets to improve productivity

• External focus – optimize customer touch points to improve the customer experience

• Least risky strategy and a “must-do” for all enterprises

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Becoming Digital: Where and How

• Digitization of business processes needs to begin with an analysis of the “low hanging fruit” - where digital can help the most

• Asset-intensive companies need to focus on optimizing assets and operations by leveraging IoT and big data analytics

• Customer-intensive companies need to focus on digitizing customer experience management

© 2017 Mohan Sawhney 17

Transforming your Front-End

The Mess at Your Front-End

Towards a Unified System of Engagement

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Unified TechnologyExperience Cloud

Social Experience Management

Content Planning

Content Publishing

DistributedUser

Management

GovernanceAutomationReportingEngagement

MobileCase Management

Campaign Management

Audience Management

Asset Management

Integration Listening Advertising Social DataVisualization

ContentMarketing

Benchmarking

Microsoft’s CXM Architecture

Source: Grad Conn, CMO, Microsoft USA

For never was a story of more woe than thisof Juliet and her Romeo.

Love knows no console

Source: Grad Conn, CMO, Microsoft USA

@davehinkle Best of both worlds. #Xbox #PlayStationLove knows no console

443 Retweets

Source: Grad Conn, CMO, Microsoft USA

Love knows no console

443 Retweets

5 Things to Do Monday Morning

1. Stop Stuff2. Centralize Capabilities3. Set Priorities3. Distort Resources4. Embrace Agililty

• Marginal initiatives• Pet projects• Non-core businesses• Off-target customers• Endless meetings• Analysis paralysis

1. Stop Doing Stuff: Just say NO!

Focus is about Saying NO

“People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I'm actually as proud of the things we haven't done as the things I have done. Innovation is saying no to 1,000 things.”

2. Create a Centralized Digital COE

• Digital capabilities and platforms are scattered across the enterprise• To bring focus and gain momentum, you need to create a Digital

Center of Excellence (Digital COE) • The DCOE in some cases will require the creation of a Chief Digital

Officer (CDO) role• The DCOE should be a shared service reporting directly to the CEO• Once Digital becomes embedded in the business, it is no longer

needed.

© 2017 Mohan Sawhney 29

3. Define Priorities

Hubert Joly’s 5 Point “Renew Blue” Plan

1. Create a leading edge, multi-channel shopping experience

2. Attract and grow transformational leaders3. Work with vendors to innovate and drive

value.4. Cut unproductive administrative expenses5. Focus on sustainability and access to

technology

• Companies spread resources too thinly across too many initiatives

• Resource distortion is the idea of “80-20” – focusing 80% of your resources on 20% of your initiatives

• Resources to distort:• Capital • Talent • Leadership Team Bandwidth

4. Distort Resources

• Liberate high potential people from constraints and unleash their creativity and entrepreneurial spirit

• Give selected small teams “impossible” goals with “infinite” resources within a short time frame

• Give complete “freedom within a framework”

• Let teams own the process and monitor outcomes

• Get out of the way but hold teams accountable

Giving Blank Checks

5. Embracing Agility

Hedgehogs know one big thing. Foxes know many little things. Businesses today should be a lot more like foxes. They move forward in small steps. They are permanently monitoring and measuring their environment. They incorporate ideas from different disciplines, regardless of their origin. They are tolerant of complexity, and do not try to fight it with order. Presented with new data, they are quick to adapt.

The Dangers of Not Testing

Conventional vs. Agile Thinking

36© 2016 Mohan Sawhney

Big strategy

Test with consumers

Campaign website ads

etc.

New big strategy

adjust measure

1. Conventional Thinking (big ideas, big bang launch, big budgets)

Focus groups Big launch

2. Agile Thinking (micro strategies, big insights, rapid iterations)

Little strategy

plan design launch

measure

Little strategy

adjust

insightsplan

design launch

measure

insights

Little strategy

adjust

Iterative cycle

Iterative cycle

Learning curve

Learning curve

A. continue

B.

try something else

5 Things to Do Monday Morning

1. Stop Stuff2. Centralize Capabilities3. Set Priorities3. Distort Resources4. Embrace Agililty