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Digital Transformation Middle East
Digital
Putting Culture at The Centre of your Digital Transformation
January, 23rd, 2018
2
Putting Culture at The Centre of your Digital Transformation
What Is Organizational Culture?
“Organizational culture is the sum of
values and rituals which serve as ‘glue’
to integrate the members of the
organization.” — Richard Perrin
“In large part, culture is a product of
compensation.” — Alec Haverstick
"Culture eats strategy for breakfast" –
Peter Drucker
What Digital Transformation Means?
The meaning of “digital transformation”
has changed dramatically in just the past 10
years
In 2007, the iPhone had just been introduced.
Digital was the domain of IT, and companies
focused on data mining, search technology, and
virtual collaboration. Only 33 percent of
CEOs were champions for digital
Today, companies have digital, mobile, and social
strategies. The main areas of focus are
artificial intelligence, machine learning,
and the Internet of Things. Digital drives the
road maps and goals of entire companies as well
as functions including marketing, sales, and HR.
The number of CEOs who are digital
champions has more than doubled.Source: Harvard Business Review
3
Arthur D. Little developed a leading Global Digital Transformation Index
benchmark across industries, including telecoms: Culture is a centerpiece
Source: Arthur D. Little Digital Transformation Study
Digital Maturity Assessment
• Large panel for digital
• Cross-industry, including Telco
• Relevant to challengers & incumbents
4
Our global study reveals that despite being a key enabler of digitalization,
Telcos are still lagging in digital maturity with an average below 4/10
Digital Maturity Assessment
Source: Arthur D. Little Digital Transformation Study
DTI (Digital Transformation Index) for Telecom & Media Industry
10
9
8
7
6
5
4
3
2
1
0
Digital aware[score below 2.5]
Digital oriented[score between
5 and 7.5]
Digital adaptive [score between 2.5 and 5.0]
Digital centric[score above 7.5]
AverageEach # represents a specific company
Automotive
Energy & Utilities
Consumer & Life science
EPC & Manufacturing
Financial institutions
Telecom & Media
Travel & Transport
102 100 98 96 94 92 90 88 86 84 82 80 78 76 74 72 70 68 66 64 62 60 58 56 54 52103 101 99 97 95 93 91 89 87 85 83 81 79 77 75 73 71 69 67 65 63 61 59 57 55 53
51 49 47 45 43 41 39 37 35 33 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 150 48 46 44 42 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2
X-Axis = Indexed at Cross-Industry Ø 3.92
Y-Axis = Company Specific Deviation to Ø
5
Major Challenges for Digital Transformation
Automotive Telecom
& Media
Energy
& Utilities
Consumer
& Life
Science
Financial
Institutions
EPC &
Manufac-
turing
Travel &
Transport
1
6
8
7
8
5
6
7
8
6
2
3
4
7
8
5
3
1
6
4
2
5
7
8
3
2
1
4
7
8
6
5
1
3
7
2
8
4
6
5
Lacking financial
resources
Lacking control
system
Legal requirements 27%
32%
Lack of knowledge
39%
Lacking mgmt.
Support23%
23%
45%
50%
Excessive
complexity
Sense of urgency
40%
Goal definition
Source: Arthur D. Little Digital Transformation Study Numbers indicate frequency of answers among companies in given industries
Share of participants
Most critical challenges for Digital Transformation are 1. lack of
knowledge, 2. lacking sense of urgency and 3. excessive complexity
2
3
7
4
5
1
2
3
4
5
6
1
2
3
4
1
Highest
Digital Maturity Assessment
6
Measures Applied to Catalyze the Digital Transformation
Automotive Telecom
& Media
Energy
& Utilities
Consumer
& Life
Science
Financial
Institutions
EPC &
Manufac-
turing
Travel &
Transport
3
1
2
3
4
5
2
1
3
4
5
6
3
1
2
4
5
6
1
2
3
4
6
5
1
2
3
4
5
6
1
3
2
4
5
6
1
2
3
4
5
6
53%
VC arm/ capital
provision for incub.5%
Acquisition of
digital co.11%
Own corp. incubator/
accelarator31%
Strategic alliances
w/ digital co.44%
Hiring Digital talents 51%
Training and further
education
Source: Arthur D. Little Digital Transformation Study 2015 Numbers indicate frequency of answers among companies in given industries
Share of participants
Consequently, “hiring digital talents” and “training and further education”
dominate when it comes to capability building effort in all industries
Highest
Digital Maturity Assessment
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Survey results reveal gaps with Workplace & Culture maturity scoring low
Digital Maturity Assessment
DTI for Telecom Industry per Section
Source: Arthur D. Little Digital Transformation Study Numbers indicate frequency of answers among companies in given industries
Highest
= Telecom Virtual Star = Telecom average = Large Telco Client Sample DTI
10
9
8
7
6
5
4
3
2
1
Strategy &
Governance
Products
& Services
Customer
Management
Operations
& Supply ChainCorp. Services
& Control
Information
Technologies
Workplace
& Culture
Client Example
Many telecoms are
advanced in terms
of overall Strategy,
but have not yet
broken down their
strategy into
functional areas –
Workplace &
Culture is among
least advanced
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All industries
Today simple concepts for communication and collaboration, as well as
for agile methods, seem to prevail, hindering digitalization enablement
Deep Dive – Workplace & Culture
Source: Arthur D. Little Digital Transformation Study
Classic
19%
Simple
42%
Advanced34%
Innovative
5%
All industries
No
21%
Advanced
Simple
49%
23%
Comprehensive
6%
Agile Methods IntegrationConcepts for Communication and Collaboration
9
The future workplace differs from today‘s situation especially in three
areas: collaboration, mobility, and knowledge
Deep Dive – Workplace & Culture
Tomorrow
Centralized enterprise workflow management
Voice or text as main communication mean
High share of repetitive work complemented
with project work
Decentralized communication modes including
social media
Business video becoming more effective with
means of augmented and virtual reality
Increased team & project work, no classical
hierarchies. Teams change regularly over time
Co
llab
ora
tio
nM
ob
ilit
y Focus on office-work parallel to home office
options with a surge in flexible schedules
Usage of cloud solutions increasing
Place and schedule of work lose importance;
fulfillment of goals comes to the fore Cloud solutions as standard and main mode of
working
Today
Kn
ow
-
led
ge Knowledge is created and stored in silos
Access to internal knowledge databases
Community- and online-built expertise
Access to expertise in large social knowledge
networks; open sourcing mode
The new workplace
10
We have synthesized best in class cross-industry examples across the
dimensions of the ADL’s Global Digital Transformation Index
Source: Arthur D. Little Digital Transformation Study
Deep Dive – G. Workplace & Culture
Strategy &
Governance
A Products
& Services
B Customer
Management
C
Workplace &
Culture
GInformation
Technology
FCorporate
Services
& Control
EOperations
& Supply Chain
D
Nike x-functional
Digital Sports
Division
Coca Cola
“Co-Founders”
Network
Cyber-Physical
Product
Service with
Peer-to-Peer
Component
SBB GoodBox
Rail-Transport
Smartization
Burberry Integrated
Customer Experience
Real-Time Dynamic
Pricing for Profit
Maximization
Quicksilver Personal
Pricing & Rewards
Gamification in
Project-based/
Knowledge
Environment
Coca Cola
Brand Dashboard
Digital Business
Launch Factory
Cloud-Based
Project Staffing
adidas Speedfactory
In-Store Production
Cold Chain
Quality
Management
Vision Picking
using Augmented
Reality
European
Telco
Layered IT Architecture
for Quick Process
Implementation
ICT to Support
Industry 4.0
Lean Culture
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Internet Players show how to successfully “do business” in the age of the
Digital revolution – it’s also about a cultural change for Telcos
Deep Dive – G. Workplace & Culture - Best Practice Examples
Source: Arthur D. Little; Benchmarked companies: Amazon, Google, Ebay, Apple
Principles of leading Digital companies
Iteration &
excellence
Don’t go always for the carrier-grade
solution right from the beginning
But be excellent in what you are doing and
delivering
Simplify and
automate
Use technology to the most possible extent
instead of manpower. Make processes and
products simpler to enable that
Use the power
of the crowd External and internal crowd can help to get
more insights, data to get unbiased views
Customer
Engagement
Increase e-care and e-sales to highest possible
level, let the customers work for you (e.g.
customer forum)
Ensure highest customer centricity
Bias for action –
and fail fast
Speed matters in business. Many decisions
and actions are reversible and do not need
extensive study
Value calculated risk taking
Data is
apolitical
Evaluate products & projects by real data
(traffic), i.e. what consumers really want.
Instead of what managers argue for or push
internally
Use KPIs rigidly to steer
IT architecture
counts
Be rigid in securing your target Online IT
architecture. Don’t compromise it for
pretended short-term wins
Avoid the point of “no return”
Networked
organization
High degree of specialization, collaboration
and project orientation
Culture plays key role
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Description
Netflix is characterized by a
revolutionary – performance
focused, few policies, freedom
based – culture
Netflix is able to maintain its
culture even when growing
(currently 2,022 employees)
Culture triggers high success –
revenues of US$ 4.4bn in 2013
Implications
Substantial reduction in
administrative costs
Higher employee performance
More innovative culture improves
processes and products
Attraction of more talents
Ne
tflix
’ cu
ltu
ral asp
ects
1
7
2
3
4
5
6
Values are what we
value
High performance
Freedom and
responsibility
Context, not
control
Highly aligned,
loosely coupled
Pay top of the
market
Promotions and
development
Judgment, communication, impact, curiosity, innovation, courage, passion, honesty, selflessness
The keepers test of managers: “Which of my people would I fight hard to keep at Netflix?”
One single policy: “Act in Netflix’s Best Interests” No policies for tracking of hours, vacation, etc.
“When you are tempted to ‘control’ your people, ask yourself what context you could set instead”
High alignment due to a clear and specific strategy “Goal is to be big, fast and flexible” through trust
“One outstanding employee gets more done and costs less than two adequate employees”
Promotion: job big enough & employee a “superstar” “Individuals should manage their own career”
Netflix has a drastically lean culture which abdicates rules and pushes
individual responsibility
Deep Dive – G. Workplace & Culture - Best Practice Example
Source: company information
13
Deutsche Telekom has setup a leadership program to develop the digital
capabilities and culture – as a key enabler to drive digitalization efforts
Case Example: Deutsche Telekom
Deep Dive – G. Workplace & Culture – Best Practice Example
Source: Arthur D. Little, Deutsche Telekom
levelUp! ProgramA year-long program delivering specific content on the topic of
digital leadership
RationaleEnable DT Managers to develop set of leadership skills and
methods needed in digital age (as opposed to analog)
Target Employees700 Deutsche Telekom managers from Germany and abroad
Approach / CurriculumModular, flexible and personalized curriculum, mainly digital
format with some classroom training designed with Duke CE
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Purpose is a core starting point & culture anchor for the cascade
between Business strategy and Operations/Product/Technology strategies
Source: Arthur D. Little
The ‘Y’ Strategy
r
What’s our “Raison d'etre” / Purpose?
Where do we want to be at a specific moment in the future?
What should we do, what should we not do?
What are our business objectives? Where do we invest and where
should we do business?
What role does innovation play, what are the goals, what areas should we
focus on, how can we quickly adapt when needed?
What detailed processes, resources, activities and projects
do we need in the short term?
How do we realize our business targets? What do we need to do
with our products, services, technologies and operations?
15
From “Sense of purpose” to “Why Strategy”
The Why strategy
What are the characteristics of the most successful
corporations?
“Contrary to popular wisdom, the
proper first response to a changing
world is not to ask “how should we
change? But rather to ask, “What do
we stand for and why do we exist”
This should never change” (page 20)
A “ Why strategy” …
identifies the core purpose
of the business related to its
stake-holders
finds a common language
creates stakeholder
alignment for this core
purpose
builds a sound basis for
culture, vision, strategy,
processes and behavior
Is the core driver for
corporate wed motivation
and success
16
The “Why” or “Credo” is the heart (soul) of a firm … it drives its
uniqueness and competiveness
Note: *) BHAG = Big Hairy Audacious Goals
The Why strategy
Designing a unique and differentiating company vision / BHAG* enables to
strengthen business strategy, enhance CEX and transform company
ProductExperience
Credo
WHAT
…are the provided
products & services
HOW
…do we deliver these
products & services
WHY
…are we on earth
17
Defining “Who we are” secures differentiation, common story telling to
clients and drives internal transformation
Source: Arthur D. Little
WHY
Strategy
Customer
Stickiness
Provide common language for
clients & hiring
Empower people within a clear
frame
Create strong culture
Secure strategic differentiation
Create entry barriers
Align initiatives & increase focus
Create branded customer experience
Turn client into ambassadors
The WHY Strategy benefits
The Why strategy
18
The Dynamic Innovation Strategy Model provides a valuable blueprint for
companies to shape the innovation agenda in the digital age
The Dynamic Innovation Strategy Model
Dynamic innovation strategy
Source: Arthur D. Little
Provides a clear framework for the
essential elements of a competitive
innovation strategy
Recognises the importance of speed
and agility
Balances top-down strategic direction
with bottom-up flexibility and
expediency
May be used as a quick healthcheck
diagnostic to assess current innovation
strategy
Strategic Innovation
ObjectivesLeadership, Priorities, Objectives
Opportunity CaptureEcosystem management, Startup
Intelligence, Idea capture
Market and
Operations Pull
Technology
Push Innovation
Roadmap & PortfolioResearch, Development, Launch,
Post-launch, Min Viable Product,
Fast pilots, Spin outs
Dynamic
Innovation EngineProcesses, Organization,
Resources & Tools
Targeted technology
intelligence
Customer needs,
Operational needs
Emerging digital
technologies
Big data analytics,
Customer involvement
19
Large corporations and start-ups can cooperate to boost digital
transformation, using various strategies
1) some legislations foster this behaviour with specific act to encourage cooperation with SME
Launch of venture equity
fund targeting start-ups
(joint or standalone)
Areas of investment are
generally related to the
core or adjacent
businesses of the
corporate
In addition to the direct
equity, the fund may
provide support advisory
services to the start-ups
Is a fixed-term tutorship
and mentorship program
for entrepreneur or small
companies aimed at
supporting them
developing innovative ideas
Equity investment is
possible but is generally of
a smaller share compared
to venture capital (single
digit)
Accelerators/Incubators
offer working facilities for
start-up either free or for a
small fee
Companies could
cooperate with start-up
outsourcing R&D with
several options:
– Direct sourcing:
corporate acquire
services from start-up as
from any other
company1
– Crowdsourcing: assign a
specific task to a pool of
start-up / innovators
– Open innovation:
cooperate with start-up
to develop joint
innovation
Partnership on innovation
or sales for a mutual
benefit
Multiple forms of
partnerships exists:
– Bundling of services
– Joint sell effort
– …
Aim is to benefit from
innovative companies
without participating in their
development
Corporate and start-up cooperation
Corporate Venture
Capital (CVC)Accelerator / Incubator Procurement of service Partnership
Deep Dive – G. Workplace & Culture – Cooperation with Start-ups
20
Corporations are not designed for disruptive innovation and often face
hurdles for innovation
Deep Dive – G. Workplace & Culture – Cooperation with Start-ups
Source: Found Fair
Startup
Basic orientation Tailored for stabilized operation
Optimized risk management
Focus on efficiency and control
“Six Sigma”
Corporate
Typical risk profile
Tailored for Innovation & disruption
Search and discovery mindset
Focus on agility & speed
“100x multiple” (cash on cash)
Too slow and cautious to change effectively High risk of failure
Basic orientation “No Failure” culture
Structured and stable environment
Formal governance
Strong health and vision benefits
(pensions…)
“Fail fast”: innovation first, hedging later
“You never know what’s next” surprise
attitude
Young people with several hats
High exposure & organizational impact
Temporary organization designed to
search Find & build rising stars
Permanent organization designed to
execute Milk & protect business
21
External and internal disruptions increase the pressure to digitally
transform and lead to a race of innovations
Deep Dive – G. Workplace & Culture – Cooperation with Start-ups
Source: Found Fair
Disruptive
innovation
Startup Instant decisions
Fast iterations
Agile structures
Entrepreneurial spiritOut-of-the-box thinking
Corporate
22
To manage the existing hurdles, corporates can apply disruption as a
service and build a bridge for innovation
Deep Dive – G. Workplace & Culture – Cooperation with Start-ups
Source: Found Fair
Input: “Raw ingredients”
Strategic objectives
Funding (may be leveraged
by 3rd party funding)
Ideas
Access to resources
Output: A functioning
business – Profitable &
scalable company
Team
Product
Customer base
Processes
Entrepreneurial drive / experience
Out-of-the box thinking
Methodology for finding & building
business model
Startup network & talent pool
Effective supervisorship
Market intelligence & ideation
Expert network
Integration / adaption / change
management expertise
Disruption as a service
Input: “Raw ingredients”
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Putting Culture at The Centre of your Digital Transformation
Leading Digital companies differ in culture –agile, collaborative, more empowered individuals / decision
making, proactively building on new & changing digital technologies, etc.
To become digital, transforming business & operating model are not enough – employees need to be taken
along the journey / Culture change is required– Definition: "Culture is how people behave when nobody is watching“
– "Culture eats strategy for breakfast" – Peter Drucker
– “People are reluctant to Change: Change is hard at first, messy in the middle, and beautiful in the end” – R. Sharma
Arthur D. Little’s Digital Transformation study reveals: Culture is a key area lagging behind – yet, critical to get
right– Examples from OTT/digital companies to learn from, yet each company needs to define their own transformation path
To tackle culture change holistically, Arthur D. Little typically addresses three areas to help companies succeed in
change: – Purpose of company / the underlying ‘Why?’: clarifies aspirational values and lays foundation for culture change
– Formal guidelines (processes, governance, committees, delegation of authority, incentive systems, office design, etc.)
– Informal rules & structures (decision making culture, trust in employees, work ethics, etc.)
Leading from top down to instill change, install leadership training program which not only changes culture
but at the same time also adds new capabilities (e.g. DTAG)
Start a holistic change program… before your business gets disrupted by a company with digital culture!
Today’s Key Messages
Source: Arthur D. Little Analysis
Arthur D. Little has been at the forefront of innovation since 1886. We are an acknowledged thought leader in linking strategy, innovation and transformation in technology-intensive and converging industries. We navigate our clients through changing business ecosystems to uncover new growth opportunities. We enable our clients to build innovation capabilities and transform their organization.
Our consultants have strong practical industry experience combined with excellent knowledge of key trends and dynamics. Arthur D. Little is present in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading firms and public sector organizations.
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Digital Transformation Middle East
Contact:
Tim Peters
Partner, Dubai
+971 (0)56 188 4321
ADL digital™