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Breaking through the Digital Deadlock

Meredith WhalenSVP, IT Executive, Industry, Software and Services Research

© IDC

Optimized

Digital Disrupter

16%

30% 29%

20%

5%

Digital Resister Digital Explorer Digital Player Digital Transformer Digital Disruptor

3

Source: IDC, Worldwide Digital Transformation Maturity Model Benchmark, 2017; n= 1818. May 2017

Many Organizations Are at a DX Deadlock

59%

Organizations are Facing Several Challenges

Outdated KPIs

DX Performance Scorecard

Siloed DX Initiatives

DX Organization

Structure

Tactical Plans

Digital Roadmaps

Limited Expertise

Digital Capabilities

Silos of Innovation

Digital Platform

DIGITAL NATIVE

ENTERPRISE

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Accelerated Pathways to Digital Transformation

DIGITAL NATIVE ENTERPRISE – DISRUPTIVE INNOVATION IS BUSINESS AS USUAL

DX Performance

Scorecard Critical Success

Metrics and KPIs

DX Organization

Structure Embedding

Digital in the Business

DX Roadmaps

Prioritizing the Industry Use Case Journey

DX Capabilities

Reshaping Business and Technology Expertise

DX Platform

Rearchitectingfor Scale

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DX Performance


Metrics and KPIs

DX Organization

Structure Embedding


DX Capabilities


DX Platform


IDC’s DX Pathways


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DX Roadmaps


How Industry Will Transform in Next 5 Years

2020Of the top 100 retailers will be

using robots within the ship-from-store fulfillment process

2022Of manufacturers

will incorporate 3D printers/robotics

hybrids on production floor

2020Of all new

operating assets have onboard self-

diagnostics to reorder parts

2020of customers will

have experienced a customer support interaction that is

AI-based

2019Of customer

experiences include Augmented Reality

2022 Of food and beverage suppliers, providers,

retailers and restaurants track

goods using blockchain

90% 50% 30% 20% 33% 20%

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Have the vision for the full cake; but build the cake in slices and layers.

Suja ChandrasekaranCIO, Kimberly Clark Corp.

© IDC 8

Digital Roadmaps in Slices

HORIZON 1

HORIZON 2

HORIZON 3STRATEGICGOALS

Use Case

Use Case

Use Case

Use Case

Use Case

Use Case

Use Case

Use Case

Use Case

Omnichannel Order

Orchestration and Fulfilment

Real Time Inventory

Management

JIT Production

Intelligent Fulfillment

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The Tenets of Lowes Strategic Roadmap

Modular

Break the effort into chunks (use cases)

Scalable

Think through how the roadmap will evolve

Extendable

Accommodate changes as they develop

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DX Performance


Metrics and KPIs

DX Roadmaps


DX Capabilities


DX Platform


IDC’s DX Pathways


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DX Organization

Structure Embedding


Digital Organization Structures

The DX Special Projects Team

DX

Discovering DX

Define DX Mission

The Office of Digital Transformation

DX

Establishing DX Governance

Establish DX Prioritiesfor Enterprise

DX DX DX DX

The Embedded Digital Business

Accelerating DX

Implement DXAcross Enterprise

DX

The Digital Business Unit

Creating innovative offerings

Create a disruptivebusiness

30% 46% 4%20%

Source: IDC DX Leadership Sentiment Study. Worldwide sample n= 968, March, 2017.

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Digital Budgeting Approaches Vary by Structure


DX

The Office of Digital Transformation

DX

DX DX DX DX


Source: IDC DX Leadership Sentiment Study. Americas sample n= 401, March, 2017. © IDC 13

37%Part of traditional annual budgeting and planning

process.

42%Each program and

project has a business case and is funded on its

stand-alone merits

18%There is a discretionary

budget pool available for DX pilot programs and

proof of concept efforts that have been

approved.

IT Organizations Evolve as DX Maturity Evolves

DX DX DX DX


AgileDesign thinking

New DX Business Models

90 days or less

Integrating Innovation


DX

WaterfallStart up Practices

Everything

Months

IT DevelopmentApproach

IT Priorities

IT Delivery Cycles

Finding Right External PartnersIT Challenges

Source: IDC CIO Sentiment Survey, June, 2017 – 150 IT Executives

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Your Focus Will Change as Your IT Organization Evolves

65%

26%47%

91%

Adopt startup-like practices to increase

speed and agility

Help IT workers understand how their work

affects business outcomes

The DX Special Projects Team The Embedded Digital Business

Source: IDC CIO Sentiment Survey, June, 2017 – 150 IT ExecutivesQ: What approach(s) has your IT organization taken to better support enterprise digital transformation?

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By 2020, 60% of CIOs will implement an IT business model and culture that

shifts focus from IT projects to digitally oriented products.

2020

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Northwestern Mutual Reorganized IT from Projects to Products

Karl GourverneurNorthwestern Mutual

VP and Head of Digital Innovation and Workplace

IT ORG NOW CALLED CLIENT AND DIGITAL EXPERIENCE GROUP

▪ 3500 IT professionals shifted focus from IT projects and support to digital products and engineering

▪ Functional org. replaced with “experience value streams”.

▪ Offshored commoditized infrastructure and development.

SELF-AUTONOMOUS TEAMS FOCUSED ON BUSINESS OUTCOMES

▪ 20+ job descriptions down to 7 core jobs

▪ Teams are assembled and reassembled by workload needs

▪ All in with Agile/Lean and DevOps

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Your Most Important New Role – Product Manager

“These are people who see and calculate risk and can see dependencies,” CIO, Steve Zerby

▪ Created a project management center of excellence within IT

▪ Product Managers assess market needs, make customers aware of the product and know how to support products.

▪ They look across months and years and oversee consistent product management and delivery

▪ For 20% of portfolio, deliver capabilities to enhance value streams. Goal is 60%-70% of portfolio

▪ Projects begin and end. But capabilities continually evolve according to customers needs and market opportunities

▪ Capabilities are considered a product and overseen by a product manager.

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IDC’s DX Pathways


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DX Performance


Metrics and KPIs

DX Organization

Structure Embedding


DX Roadmaps


DX Capabilities


DX Platform


By 2020, 60% of all enterprises will be in the process of implementing an organization-wide Digital Platform Strategy

2020

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The New Digital Platform

EXTERNAL PROCESSES

ConnectedProcesses

Assets

People

INTERNAL PROCESSES

INTELLIGENTCORE

Mobile

IoT

AR/VR

BOT

API

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IDC’s DX Pathways


© IDC 22

DX Performance


Metrics and KPIs

DX Organization

Structure Embedding


DX Roadmaps


DX Platform


DX Capabilities


Digital Capabilities Need to be Developed

DataTechnologyProcesses

TalentGovernance

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Techniques Employed By IT Organizationsto Meet the Needs of Customers

62% 54% 47% 43%

DESIGN THINKING

VALUE STREAMMAPPING

STARTUPPRACTICES

JOURNEYMAPS

MEASURE LEARN

BUILD

Source: IDC CIO Sentiment Survey, June, 2017 – 150 IT ExecutivesHow do you ensure that IT digital transformation work meets business and customer needs?

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Vanguard IT Now Uncovers Moments of Truth

John MarcanteCIO, Managing DirectorVanguard

HOW VANGUARD’S IT ORGANIZATION LEARNS ITS CUSTOMERS NEEDS

▪ Previously used client-focused systems design practices

▪ Adopted design thinking principles and dispatched developers to learn directly from customers

▪ Now uncovering “moments of truth” - where stepping up the client experience could represent a defining moment

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IDC’s DX Pathways


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DX Organization

Structure Embedding


DX Roadmaps


DX Capabilities


DX Platform


DX Performance


Metrics and KPIs

Financial KPI

Business KPI

Operational KPI

40% of company capital budget allocated for DX initiatives by 2020

80% of DX Innovation Initiatives approved for implementation by 2020

Companies spend 10% less per year on DX failures over 3 years

20% more profitable customers each year for 3 years

Improve customer NPS score to positive 50/100 by 2019

Increased customer interactions for 50% of non-profitable products within 1 year

Platform strategies drive data-related IT investments to exceed 25% of total IT by 2019

Platform-related revenue accounts for 10% increase in total revenue each year over 5 years.

APIs reduce data acquisition and sharing costs by 50% over 3 years

Achieve 50% market share for target DX product or service by 2020

Introduce 1 new DX product or service each year for the next 3 years

Delivery of each competitive DX product meets 80% expectations for sales, customers, and scalability each year.

50% of executive compensation tied to digital MBOs

Percentage of on-demand, knowledge worker labor hour increases by 10%/year over 3 years.

10% of repetitive enterprise interactions are augmented by AI each year for 3 years.

The New Digital KPIs

Innovation Rate

Customer Advocacy

Data Capitalization

Business Operations

WorkforceSuccess Metrics

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0% 10% 20% 30% 40% 50%

Increase in return on

investment

Market share growth

Compete in at least a set

number of digital

marketplaces

Digital business reaches a

certain percentage of total

organization's revenue

DX KPIs Your Peers Are Using

© IDC 28

42%2017

% of Business that is Digital (% of revenue/transactions from digital products,

services, or channels)?

53%2020

KPIs for Overall DX Success

Source: IDC DX Leadership Study. Americas sample n= 401, 2017.

29

2018 U.S. Digital Transformation Tech Spending by Dimension

Leadership Transformation

1%

Omni-Experience Transformation

26%

InformationTransformation

25%

Operating ModelTransformation

46%

WorkSourceTransformation

3%

Healthcare (54%)

Retail (43%)Fed Govt (33%)Education (30%)State Govt (30%)

Banking (57%)Teleco (49%)Wholesale (45%)Insurance (44%)Cap Markets (34%)State Govt (34%)Fed Govt (33%)Media (33%)

Transportation (76%)Discrete Mftg (61%)Utilities (60%)Process Mftg (58%)Construction (49%)

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Who is Now Funding Technology Initiatives

Business LedIT AwareFunding comes from your functional budget. IT is not involved in implementing or supporting the project, however, IT is aware of the project.

Joint IT & BusinessBusiness Funds Project IT and functional area work together on the project. Project funding comes entirely from functional area budget.

Joint IT & BusinessIT Funds ProjectsIT and functional area work together on the project. Project funding comes entirely from IT budget.

IT only ProjectsIT only works on the project and funds it entirely.

24% 21% 19% 20%

Shadow Spending Represents 16% of All Tech Spending

31

© IDC

Of new technology investments will be driven by digital transformation

32%

Source: IDC LOB Study. N.A. sample n= 1067, 2017.

0% 10% 20% 30% 40%

Risk/Security

Supply Chain

Legal

Sales

Industry Specific Ops

HR

R&D/Eng.

Marketing

Finance

Customer Service

Which Functions?

32

© IDC

1. AI – 20%

2. Robotics – 18%

3. Blockchain – 14%

4. Drones – 13%

5. AR/VR – 12%

Peer Adoption Rates of DX Tech

Source: IDC LOB Sentiment Study. NA sample n= 1502, 2017Showing % for tech currently in use, or being implemented.

Once Through the Challenges, You are Cleared to Digitally Transform

20202017 2027

Full Digital Transformation

2022

Innovation Realization

Getting Digital Done

The DigitalDeadlock

59%of Worldwide

organizations are still in stage 2 or 3

80% of revenue growth will

depend on digital offerings and operations

75% of organizations will

have digitally transformed

50% of total technology

spending will be data related investments

© IDC 33

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