Digital Organization of the Future May 22, 2014

Didier Bonnet Vice President, Capgemini Consulting

Deborah Soule Research Scientist, CDB

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From 2011 – 2013, we have focused our joint research on understanding digital transformation

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Beyond transformation, we aim to understand the digital organization of the future

Dig

ital c

apab

ility

Leadership capability

DIGITAL MASTERS FASHIONISTAS

BEGINNERS CONSERVATIVES

How could pervasive digital capabilities change how we organize? What “digital

dispositions” might companies need to develop to sustain success in a digital world?

? ?

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Our belief is that digital will change how we organize

Historical evidence of past technology shifts leading to radical changes in work practices, firm strategy and organization

Academic evidence (theory and empirical findings) that ubiquitous, powerful digital technology will change possibilities for coordination and cooperation by changing information constraints

Contemporary evidence of digital firms and digitally-enabled organizing that contrast with more traditional approaches

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Our research approach

Develop conceptual framework from cross-disciplinary literature

• Identify organizational design characteristics • Select focal set of design dimensions

Conduct interviews to test/extend framework

Analysis of interview and secondary data • Compare and contrast organizational design choices • Identify design choice “clusters” • Explore relationships between design and performance

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Organization: design for productive interaction Organizational design characteristics

• Make or buy • Wide or narrow span of authority • Centralization or decentralization of decision rights • Differentiation or integration of skills

Organizing possibilities have been limited, often by information constraints

Fundamental Proposition: Digital capabilities can reduce or eliminate many traditional constraints, making different organizational design choices possible

… reflect efforts to manage complexity and interdependence

… embody tradeoffs around traditional design tensions

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Digitization relaxes organizing constraints by growing capability in four areas…

Bigger, Better, Data •Mobile

•Social

•Location

•Sensor

•IOT

Connected Everything • People to

People • Machine to

People • People to

Machine • Machine to

Machine

Meaningful data insights • Descriptive and

predictive Analytics

• Machine Learning & AI

Data-driven automation • Process and

Decision automation

• Advanced physical automation

• Artificial Intelligence

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Focal Organizational Design Choices …

• No touch High touch (customer interaction) • Standardization Personalization (product customization) • Consumption Co-creation (customer engagement) • Individual-brand relationship Community membership (customer retention)

Customer experience

• Routinization Adaptability (operations capacity) • Hierarchy Network (communication structure) • Centralized direction Decentralized discretion (worker autonomy) • Internal/Secretive Open/transparent (innovation and learning)

Internal operations

• Make Buy (specialization) • Owned Loaned assets (production resources) • Contract Collaboration (partner/supplier engagement) • Supplier/partner integration Platform orchestration (value contribution)

Supplier/partner

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Case: UPS Customer Experience Lo-touch Personalization ↑ Co-creation/self-service ↑ Individual-level retention ↑

Driver / Operations Routinization ↑ Hierarchical communication Decision centralization ↑ Driver discretion ↓ Internal innovation

Digital Capabilities • Data and analytics:

lat/long. mapping of 200M addresses

• Just-in-time delivery info via EDI/UPS MyChoice, handheld connected scanning devices

• Prescriptive delivery analytics/vehicle routing

• Mobile alerts and notifications

• RFID on pallets, parcels

• RFID on vehicles and vehicle telematics (sensors and analytics)

Suppliers/Partners Owned assets Contract Integration

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Case: Airbnb Customer Experience Lo-touch Standardization Consumption Community network effects

Internal Operations Routinization

Digital Capabilities • Website facilitates

visibility and coordination between travelers and hosts

• Mobile offers real-time

validation, alerts and updates

• Use of social

technologies to establish trust and legitimacy of travelers and hosts

Suppliers/Partners Leverage partner’s assets Relationships become

assets Orchestration

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Case: P&G Customer Experience Lo-touch Personalization ↑ Consumer input ↑ Individual-brand

relationship

Operations Decision discretion ↑ Open innovation ↑ Network communication

Digital Capabilities • Bayesian analysis of

social commentary to generate “Consumer Pulse” by brand

• Virtual store display to

communicate presentation standards

• Connected, automated (GDSN) ordering applications

• Data modelling and virtual simulation

• Connectedness to innovation contest sites

Suppliers/Partners Owned assets Contract Integration

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Identify organizational design profiles Customer interaction No-touch High-touch

Service customization Standardized Personalized

Customer engagement Consumption Co-creation

Customer retention Individual

switching costs Community

network effects

Communication Network Hierarchy

Worker autonomy Centralized/

Direction Decentralized /

Discretion

Operational capacity Routinization Adaptability

Specialization Make Buy

Innovation and learning Internal Open

Resources Owned Loaned

Partner / Supplier engagement Contract Collaboration

Value contribution Integrator Orchestrator

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Moving forward… Digital capabilities will allow firms to make new choices about how to produce value

• Many viable strategic and organizational design choices • Emergence of novel combinations of design choices • Evidence of digital imperatives

Effective digitally-enabled organizational design choices will be reflected in effective performance

Pre-digital Organizational

Choices

Digital Capabilities

New Organizational

Choices

Performance Outcome

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Thank you Contact Information:

• Didier Bonnet • Vice President at Capgemini Consulting • didier.bonnet@capgemini.com

• Deborah Soule • Research Scientist at CDB • dsoule@mit.edu