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#DTR9The Digital Strategy Imperative:Steady Long-Term Vision, Nimble ExecutionN°09SUMMER2016

The Digital Strategy Imperative:Steady Long-Term Vision, Nimble ExecutionCapgeminiConsulting’sEditorialBoard@capgeminiconsulwww.linkedin.com/company/capgemini-consultingChief Executive Officercyril.garcia@capgemini.com@Cyr_GarciaCyril Garciadidier.bonnet@capgemini.com,@didiebonSenior Vice PresidentDidier BonnetHead of DigitalTransformation InstituteJerome Buvatjerome.buvat@capgemini.com,@jeromebuvatdti.in@capgemini.comThe Digital TransformationInstitutewww.capgemini-consulting.comDIGITALTRANSFORMATIONINSTITUTE#DTR9N°09SUMMER2016

Contents061220EditorialCrafting a Bold and Balanced Digital StrategyThe End of Stability: Rethinking Strategy for anUncertain AgeRita McGrath, Columbia UniversityA Portfolio Strategy to Execute Your DigitalTransformation, by Capgemini Consulting3040Should You Become a Platform?A Platform Strategy: Creating New Forms of Value in theDigital AgeMarshall Van Alstyne, MIT/Boston UniversityVisa: The FinTech Giant Leading Digital’s PlatformRevolutionMark Jamison, Visa Inc.

7884Working with the Startup Ecosystem15 Startups to Watch and What Their Value PropositionCan Teach Your BusinessBrian Solis, Altimeter @Prophet506068Executing Your Digital Strategy: Acquisitions/Greenfield or Organic Growth?GE: How an Industrial Leviathan became a Digital GiantBeth Comstock, GETelstra: Securing a Bright Digital Future for One ofAustralia’s Most Iconic OrganizationsJawwy: How a Saudi Digital Venture is Rewriting theTelecom RulebookSubhra Das, Jawwy - From STCThe Rise of Innovation Empires WorldwideMonty Hamilton, TelstraBy Capgemini Consulting andAltimeter @Prophet

Digital Transformation Review N° 096Strategizing in a Digital WorldIntroduction By Capgemini Consulting’s Editorial BoardStrategizing in a Digital World – Editorial“How did you go bankrupt? Twoways. Gradually, then suddenly.”TheselinesfromErnestHemingway’sThe Sun Also Rises resonate inan economic environment whereorganizations face digital disruptionfrom agile young startups toestablished tech giants. Companiescompete in a world where FacebookFigure 1: The Great Reshaping of Industry Boundarieshas a bigger population than China,ApplehasmorecashonhandthantheUS Treasury, and Amazon is makingrapid inroads into the consumergoods sector, already boasting over3,000 private-label products1. Theaverage life span of companies in theS&P 500 has declined from 61 yearsin 1958 to about 20 years now2.Change is everywhere today. AsFigure 1 shows, industry boundariesare being redefined, access to assetsis becoming more important thanownership, and linear value chainsare becoming connected ecosystems.This new environment requires astrategic rethink. In this edition ofthe Digital Transformation Review,we examine the approaches thatorganizations can take to crafting astrategy for a digital age, focusing onthe following key questions:1. How do you design a digitalstrategy in today’s uncertain andvolatile world and understandhow much reinvention of theorganization is required?2. Should your company become aplatform, or be a part of one?3. What are the most successfulapproaches to executing digitalstrategy – acquisitions, partnerships,Greenfield?In addition to Capgemini Consulting’sanalysis, we spoke to a wide range ofexperts on these topics, from CXOs toacademics and analysts, who offeredviews from across the world, from theUS to Middle East (see Figure 2). Theacceleratingpaceoftechnologychangeis also examined through the ‘startupcorner’, where the next-generation ofdigitaldisruptorsareprofiled.Cost Leadership / Differentiation asWeaponsClosed / Industrial InnovationConsumption / Brand ControlOwned Resources / Assets, Erect EntryBarriers, Lasting Competitive AdvantageLinear Industrial Value ChainsSharp Industry / Category DeﬁnitionProduct / Service Centric ModelConnected Digital Ecosystems /PlatformsBlurring industry Boundaries /Adjacency / LateralCompetitionExperience is EverythingCo-creation / Communities /Collaborative EconomyAccess, Loaned / Shared Assets / ScaleEffect is AdvantageData Analytics / Optimization / PredictiveOpen Innovation(3rdParty, Co-Creation, Crowd Sourcing)Value is Primarily based on AssetsValue is Primarily based on Interactions& ScaleSUPPLY-SIDE ECONOMICS DEMAND-SIDE ECONOMICS

Digital Transformation Review N° 09 7DIGITAL TRANSFORMATION REVIEWFigure 2: Guest Contributors to the Digital Transformation Review N° 09Digital Strategy for anUncertain AgeThe End of Stability.We open the Review inconversation with Rita McGrath,Professor at Columbia BusinessSchoolandanacknowledgedexperton strategy. Professor McGrathexplains why organizations need tobe nimble in an age of acceleratedchange and disruption. However,nimbleness does not signal anydecline in the importance of long-term direction. As she says, “it isactually more important than everto have a long-term strategy.”A Portfolio Strategy.Creating a digital strategy raisessignificant questions. What levelof risk are we willing to take oninnovative new business models?Can we deliver our digital strategyin-house or do we need to partner?Capgemini Consulting’s articleaddresses these questions andexplains why we believe successcomes from managing digitaltransformation as a strategicportfolio. Leaders need to establisha clear way forward in three areasthat we call the how, the what andthe why of digital strategy.Should You Become aPlatform?Building a Platform Strategy.Having a great product and addingnew features to it iteratively isnot enough today. Marshall VanAlstyne, co-author of “PlatformRevolution” and a researchscientist at the MIT and professorat Boston University, believesyou need to be a platform andthat “Even a weak platform willoutperform a strong product everytime.” A platform is a combinationof rules and infrastructure thatadds ever-increasing value toMarshall VanAlstyneBoston, USARita McGrath,New York, USAMark Jamison,San Francisco, USASan Francisco, USABrian Solis,Melbourne, AustraliaMonty Hamilton,Subhra Das,Saudi ArabiaBeth Comstock,New York, USA

Digital Transformation Review N° 098Strategizing in a Digital World – Editorialall its users as usage increase, asexemplified by the likes of Airbnband Uber. Globally, platformcompanies have a market value ofover $4.3 trillion3and companieshave upended entire industries byharnessing the platform businessmodel phenomenon.“If you generate network effectsand figure out how to generatedemand-side economies of scalein your industry, then you will beon track for one of these winner-takes-all positions.” ProfessorMarshall Van AlstyneVisa: The Original FintechPlatform GiantVisa is probably one of the firstlarge financial industry playersto put its payment platform at thevery center of its digital strategy.For Mark Jamison, Global Headof New Product Development atVisa Inc., “the winning modelsin the market place are the onesthat build their business as aplatform.” The company hasalso recently announced that itis opening its platform to third-parties, giving it access to freshideas and perspectives. “There isso much creativity and ingenuityin the world that third partieswill come up with innovativeideas in payments that we hadnever thought of,” explains MarkJamison.Executing Digital StrategyGE: From Industrial Leviathanto Digital GiantGE has been in the Dow JonesIndustrial Index since the originalindex was established in 1896.But this venerable company hasalso showed itself to be extremelynimble and committed tocontinuous transformation. In thelatestchapterofitsstory,beginningin 2011, GE has embarked on adigital transformation at scale. GEis building a cloud-based platformfor the Industrial Internet, Predix,and in doing so is creating both a“network effect and an intelligenceeffect”. GE has a billion dollar runrate investment so far into itsdigital initiatives and its ambitionis to get $15 billion in revenue by2020. But these are still early days,barely a third of the way into GE’sdigital transformation, says BethComstock, the first female vicechair of GE.Telstra: Digitizing an Iconic BrandTelcoshave,inrecentyears,struggledwith flat-lining revenues, increasedcompetition from over-the-topplayers and poor levels of customersatisfaction. In this environment, anAustralian telco stands out by virtueof its rapidly increasing customersatisfaction and an ambitious digitaltransformation program. Telstra,an iconic Australian company, hasembarked on this transformationpath through its digital unit, TelstraDigital. Monty Hamilton, head ofTelstra’s digital operations, spokewith us to outline how Telstra isdriving digital innovation in itscustomer experience, crowd supportand startup accelerator.Jawwy: Rethinking Telecoms forthe Digital AgeWhat happens when your customerbase wants a Facebook-likeexperience from your traditionalbusiness? If you are Saudi TelecomCompany, then you take thatchallengehead-onandcreateadigitaltelco.AsSubhra Das, CEO of Jawwy– STC’s digital venture – explains,“When you want to reimagine andcarve out a new experience, and dothat rapidly, you have no choice butto go Greenfield.” We spoke withSubhra Das to understand whatit takes to reimagine a traditionaltelco from the ground up as a digitalservice provider.The Startup EcosystemInnovation Centers – RefreshedSilicon Valley has held themantle as the world’s capital ofinnovation for many years andfor many a good reason. However,large organizations have come torealize that no one geography has

Digital Transformation Review N° 09 9DIGITAL TRANSFORMATION REVIEWThe view from digital’s front-line“The new formula of success is that you don’t do it all yourself – you have to know what you have to beuniquely good at.” – Beth Comstock“You can invest millions of dollars in technology but if you don’t have a culture that enables you to collaborateacross the organization, then nothing will change.” – Monty Hamilton“We are building a new digital mobile operator model with the organizational DNA and agility of an internetplayer.” – Subhra Das“The importance of a long-term strategy is to give people something to hang on to and act as a broader guideduring times of uncertainty.” – Rita McGrath“The pace of technology change dictates that we need to invest in people whose full-time job is to focus onthings beyond 12 months.” – Mark Jamison“Start by asking ‘What is the minimum viable platform, what is the minimum interaction that’s going to createthe most value for your external users?’” – Marshall Van Alstynea stranglehold on digital talent.Our updated research on corporateinnovation centers reveals thatBangalore is now among thetop 5 locations where largeorganizations have opened up newinnovation centers, with financialservices firms leading the field interms of new innovation centersopened.Brian Solis – Startups to WatchA range of start-ups are challengingthe way the world works throughnew technology, offering closed-tubetravel at speed of ~970 kmph andwearable patches that continuouslymonitor your bloodstream andmeasures your metabolic activity.Brian Solis, a Principal Analystat Altimeter, a Prophet Company,offers the view from Silicon Valleyon some of the hottest startups thateveryone should have on their radar.We live in a fast-changing worldwhere disruption has changed thenature of corporate strategy andsustainable competitive advantage.Organizationshavetoaskthemselvesnewquestionsandmakeadeterminedleap forward, even if that journeycontains significant uncertainty andrisk. Large companies are inevitablytied to past successes, assumptions,cultures and systems. But we hopethis edition of the Review helpsleaders understand how to make abreak from the past and begin thecreative disruption of their business.For more information, please contact:Didier Bonnet (didier.bonnet@capgemini.com, @didiebon)Jerome Buvat (jerome.buvat@capgemini.com, @jeromebuvat)The Digital Transformation Institute (dti.in@capgemini.com)1. Bloomberg, “Got a Hot Seller on Amazon? Preparefor E-Tailer to Make One Too”, April 20162. Fortune, “Why every aspect of your business isabout to change”, October 20153. The Center for Global Enterprise, “The Rise of thePlatform Enterprise”, January 2016

Digital Transformation Review N° 0910

Digital Transformation Review N° 09 11DIGITAL TRANSFORMATION REVIEWCrafting a Bold and BalancedDigital Strategy

Digital Transformation Review N° 0912The End of Stability:Rethinking Strategy foran Uncertain AgeRita McGrathProfessor at ColumbiaBusiness SchoolRita McGrath, a Professor at Columbia Business School, is oneof the foremost experts on strategy and innovation. Her workfocuses on strategy development in uncertain environments andher latest book is called The End of Competitive Advantage: How to KeepYour Strategy Moving as Fast as Your Business. Rita McGrath has beenrecognized among the Top 10 Most Influential Business Thinkers byThinkers50 in 2015.Capgemini Consulting spoke to Rita McGrath to understand howorganizations should go about strategy development in an era ofaccelerated change and disruption.The End of Stability: Rethinking Strategy for an Uncertain Age

Digital Transformation Review N° 09 13DIGITAL TRANSFORMATION REVIEWHow Transparency isTransforming Markets andOrganizationsWe are seeing major changesacross sectors – industryboundaries are getting blurred,companies are co-creating withconsumers. In your opinion,what are the major factorsreshaping industries?If I were to pick one major shift,I would choose the impact of thetransparency of information. Thetransparency of prices, valuesand information has enabled thecreation of markets for more andmore things that never could havehappenedbefore.Youhavemarketsfor all kinds of commodities whichmeans that access to assets ratherthan ownership of assets is the keything.With markets becoming moretransparent, what is the biglearning for businesses?One of the big lessons thatcompanies need to learn is thatcustomers don’t care anymoreabout what companies do. It isa very difficult message for theindustry. Customers care moreabout getting their own needs met.They will go with the firm thatis more convenient, cheaper oruser-friendly and don’t care whatindustry the company is from.Financial services is a case in point.Silicon Valley startups are takingover parts of the bundled bankingmodel and offering just selectservices. For instance, Prosper forinvesting, TransferWise for fundsexchange and LendingTree formortgages. They are not replacingbanks, but replacing many jobsthat banks traditionally did. Andthat is an important distinction.Stick to Your Long-TermGoals but Be NimbleThe technology landscape isfast-moving and very uncertain.Is it still possible to have along-term strategy for largecorporations?I believe it is actually moreimportant than ever to have along-term strategy. The reasonfor that is that people don’t dowell under conditions of highuncertainty. People tend to beparalyzed when things aroundthem appear to be out of controland change very quickly. Theimportance of a long-term strategyis to give people something toCustomers don’t careanymore about whatcompanies do.It is actually moreimportant than everto have a long-termstrategy.hang on to and act as a broaderguide during times of uncertainty.Obviously, you will have toadjust your strategy as things goforward - you can’t just lay out thestrategies without paying attentionto your surroundings, but the keyis to have a point of view on thefuture. Intel is an interesting caseof how badly things can go whenyou miss the long-term strategy.The market was moving from PCstowards mobile devices and Intelcompletely missed that markettransition. The result – Intel saidin April that it would lay-offaround 12,000 people or 11% of itsworkforce.Intel was a giant of the PC era.What went wrong with theirstrategy?Intel was used to designing chipsfor better speed and with higherprocessing power. When theywere in a duopoly with Microsoft,higher processing speed was whatsold computers. The processingpower really limited what youcould do with your PC. AsMoore’s law progressed there were

Digital Transformation Review N° 0914quantum improvements in speedand capacity. Intel followed thattrajectory rather than working lesspowerful, low power consumptionchips. Their assumption was thatthey were making chips for devicesthat would always have accessto an electricity supply. Theywere never worried about powerconsumption.If you are a large organization,how do you create a roadmapthat is nimble enough to adaptto changes?Amazon offers us a very goodexample of a company that doesthis in a smart way. According toJeff Bezos, CEO Amazon, “Lots ofpeople get all hung up on what ischanging in the world. I focus onwhat isn’t going to change. Nocustomer will ever say I wish yourproducts were more expensive,delivered slowly and wasn’t worldclass.” When you flip that on itshead and look at it that’s brilliant.What he is basically saying is,“Let’s focus on innovations in ourlong-term roadmap around whatisn’t going to change.”The End of Stability: Rethinking Strategy for an Uncertain AgeThe importance of along-term strategyis to give peoplesomething to hangon to and act as abroader guide duringtimes of uncertainty.According to JeffBezos, CEO Amazon,“Lots of people get allhung up on what ischanging in the world.I focus on what isn’tgoing to change. Nocustomer will ever sayI wish your productswere more expensive,delivered slowly andwasn’t world class.”Can you share success storiesof companies that have beenable to stick to long-term goalswhilst being really nimble?My favorite example is a 150-year company called Schibstedin Europe. Before the internet eraSchibsted was into traditionalmedia, TV, newspapers and moviedistribution. In the late ‘90s thetop management understood thepower of the internet and begansignificant moves to convert theirpaper-based classified advertisingbusiness into a business of sellingclassified ads on the internet. Thehead of strategy of Schibsted atthe time said the internet wasmade for classifieds and classifiedswere made for the internet. Theyrelentlessly worked to convert theirsystems and structures over to theinternet-based model. Schibstedwas not afraid to cannibalize theirexisting business and rewardedsenior folks who were able toswitch the customers from theiranalog focus to their digital focus.Today Schibsted is among the topthree players in the whole world inclassified advertising.When you switch and look at themobile world we want phoneswhere the battery is going tolast for a long time. Intel missedthat inflection of going from astationary device where processingspeed was the dominant purchasecriteria to a mobile device wherelow power was the dominantcriteria. And I think they made theassumption that mobile was nevergoing to be as big a market as it hassubsequently turned out to be.

Digital Transformation Review N° 09 15DIGITAL TRANSFORMATION REVIEWThe End of Five-YearStrategic PlansCompanies spend a lot of timepreparing their three or five-yearstrategy plans. Do you see thiscontinuing in the longer run?I think we need to be very carefulabout what we are describing. Astrategy is not the same thing as astrategic plan and a budget. If youdon’t have a very clear distinctionbetween strategy and planningor budgeting, the budgeting andplanning activities drive strategyright out the door. Planning andbudgeting have specific deadlines,and it’s a very organized process.We are getting away from thisnotion of reviewing classic five-year plans full of charts andgraphs withimmovable targetsthat are basically budgetdocuments. We are movingtowards a process of developingstrategy that is more dynamicin terms of inception andimplementation.We don’t hear that manycompanies nowadaystalking about Crowdsourcingstrategy involving the entireorganization. Do you think itis still an important aspect ofstrategy development?It definitely plays a role. You needto access ideas from the frontlinebecause that’s where interactionswith customers take place andwhere the real information aboutwhat’s going on in the marketexists. However to come up with astrategy,someonehastoultimatelytake responsibility. One of the bestapproachesto this that Ihave seen was underAlanMulallywhenhecameinto Ford. He initiated a weeklyBusiness Plan Review meetingwith all his senior executives. In alot of companies, senior executivesknow about their own area, theydon’t know what’s going on inother parts of the firm. The firstthing Mulally did was to break thatdown. The meeting was mirroreddown at each senior executive’steam all the way down to theorganization. When you mirrorthe Business Plan Review meetingall the way down the organization,you get inputs at that level whichthen get crystallized at the weeklySchibsted wasnot afraid tocannibalize theirexisting businessand rewarded seniorfolks who wereable to switch thecustomers from theiranalog focus to theirdigital focus.

Digital Transformation Review N° 0916The Winning Strategy for an Uncertain AgeFocus on What is Not Going to Change Stick to Your Long-Term Goals but Be NimbleThe Importance of a Long-Term StrategyThe importance of a long-term strategy is to give people something tohang on to and act as a broader guide during times of uncertainty.Should You Become a Platform?… if the addition of extra users addsvalue to what you are offering… and if transaction costs are lowYESGreenﬁeld, Acquisitions or OrganicGrowth?If you can’t change fast enough,you buy. - Rita McGrathYou are not goodat innovationyou haveto acquirebut if you are not goodat innovation, it’s hard tojudge the value of acquisitionsThe Innovation DilemmaDelivers world class products quicklyFocus on innovations in a long-term roadmaparound what isn’t going to changeCannibalized existing businessRewarded senior folks for switchingcustomers from analog to digitalNow top 3 player in classiﬁed adsAmazon Schibsted Media Group

Digital Transformation Review N° 09 17DIGITAL TRANSFORMATION REVIEWmeeting with Mulally. I think it’sa very structured approach togetting input from all across theorganization without having itdevolve into whoever shouts theloudest gets heard the most. Somecompanies like Swiss Re and IBMuse technologies to accomplishsome of this informationsharing. Employees are invitedto give strategy perspective on atechnology platform like enterprisesocial media or video blogs.Create a Platform Whenthe Network Effect AddsValue to ConsumersCompanies such as Facebookand Airbnb have beenimmensely successful with theirplatforms. We are now seeinglarge organizations developinga platform strategy like GEfor industrial Internet or Visafor payments. Do you reckonall companies should becomeplatforms?There is a school of thought thatsays they should. Being a platformis unavoidable if the addition ofextra users adds value to whatyou are offering. For instance,one person on Facebook has zerovalue, a billion people on Facebookhas exponential value. But if youare manufacturing office staplers,you will unlikely need a platform.If I buy an office stapler, it has acertain value to me. The fact thatyou have bought the same staplerdoes not really add a lot of extravalue to me.Being a platform isunavoidable if theaddition of extrausers adds valueto what you areoffering.The danger of beinga platform is you arenot really in control.If you aremanufacturingoffice staplers, youwill unlikely needa platform. If I buyan office stapler, ithas a certain valueto me. The fact thatyou have bought thesame stapler doesnot really add a lotof extra value to me.What are the advantages of aplatform strategy?The objective of a platform is tobe the central place where otherorganizations buy, sell, transactand communicate because you geta little bit of revenue off of eachof those transactions. The dangerof being a platform is you arenot really in control. If your usercommunity decides to go to someother platform, there is not muchyoucandotokeepthemtiedtoyou.We have seen this in MySpace orFriendster. So, platform strategiesare not without their risks.Do you think there are somesectors that are more conduciveto a platform strategy thanothers?Platforms flourish where thetransaction costs are low. If youhave high transaction costs, thenit’s going to be expensive foreach member to join and chancesof them doing that are low. Butif your transaction costs are low,then the more membership you getthe better it is for the platform.

Digital Transformation Review N° 0918If You Can’t Change FastEnough, BuyThe routes to implementingdigital strategy are many. Somecompanies are going Greenfield,others are trying to transformthe core of their operations,while others are acquiring firms.What is the best approach toimplement digital strategy?The classic answer is that if youcan’t change fast enough youbuy. The trouble with acquisitionrelative to organic growth is it isvery expensive. Companies thathave survived their startup phaseare going to charge a hefty feeto be bought by a large companythat hasn’t been able to innovatefor itself. There is a bit of aconundrum where organizationsare under incredible pressure toinnovate while at the same timemost organizations are not goodat it. The dilemma is if you arenot good at innovation, you haveto do acquisitions. But if youare not good at innovation, it’salso very hard to judge the valueof the acquisitions. MySpacewould be a case in point where anacquiring company bought themand thought that it was going tohelp them get into some massivenew opportunity, only to find thatthey didn’t know how to manageit and it fell apart. If you are in anindustry with too many playersthen acquisition may be your bestalternative – you take out some ofthe existing providers to help getsome clarity around the level ofrivalry and pricing.The dilemma is ifyou are not good atinnovation, you haveto do acquisitions.But if you are notgood at innovation,it’s also very hard tojudge the value of theacquisitions.The End of Stability: Rethinking Strategy for an Uncertain AgePlatforms flourishwhere the transactioncosts are low.

Digital Transformation Review N° 09 19DIGITAL TRANSFORMATION REVIEWIf a company decides to choosethe path of acquisitions, howshould they go about integratingan acquired company?There are three kinds of archetypesthat companies pursue whenintegrating acquisitions. The firstis the Cisco model. Cisco is quitefamous for their track record inacquisitions where the acquiredcompany’s logo disappears and itbecomes Cisco within 48 hours.That’s the kind of crash and burntheory of acquisitions whereyou buy the company and ownit completely. Some acquiredcompanies are fine with it, andmany aren’t. The second modelis to buy a company, but leaveit on its own and they let it beindependent. That is what youdo to get into a new market ortechnology. You want to let it liveits life the way it is. Amazon andZappos is a perfect example of thismodel. The third model is wherean acquisition gets merged witha two-way influence between thetwo company’s cultures. You wanta change of the culture of yourcompany by going through theseacquisitions. Nokia/Alcatel-Lucentis a good example of such a model.How can companies choosewhich path to consider –acquisitions, greenfield ortransformation?Speed is definitely a keyconsideration. Your ability tointegrate the potential acquisitionis another. You have to be carefulwith acquisitions where there isa huge cultural gap or where thecompanies bring with them hugeliabilities. For example, whenBoston Scientific bought Guidant,it was famously described as thesecond worst acquisition everafter AOL-Time Warner. BostonScientific hadn’t appreciated thecultural gaps and legal liabilitiesdue to defective medical productsproduced by Guidant.What would be your keyrecommendations to largeorganizations on their shift todigital?The first thing is to get aninventory of digital and non-digital initiatives in innovation,business development and productportfolio.Youcan’tmakeintelligentplans until you know where youstand and most organizations arenot aware of where they stand.There are bits of knowledgespread all over the organizationthat are not centralized. Step two- organizations need to develop apoint of view about the future fora five- to eight-year timeframe.They need to introspect on thebig strategy questions like whichmarkets to enter, what customerdemographics to target and howto improve or differentiate productofferings. The third step is to walkbackward from that future andask what are the actions neededto move to the envisioned future.This is also called the ‘future-back’strategy as organizations need toenvision the future and then workbackward into what needs to bedone today to deliver the futurevision.Are there companies that youadmire and that have beenable to succeed their digitaltransformation so far?GE would certainly be one as theyhave expanded their business intothe software and analytics domain.Procter & Gamble has also donesome very interesting work aroundinnovation. Delta Air Lines isstarting to leverage digital for thebenefit of their customers. Fordand the auto companies in generalare doing some really interestingthings. General Motors recentlybought a big stake in Lyft.

Digital Transformation Review N° 0920A Portfolio Strategy to Execute YourDigital TransformationBy Didier Bonnet, Senior Vice President, Capgemini ConsultingSenior Executives in pretty much allindustries have now elevated digitaltransformation to the top of theirstrategicagenda.Andthey’rerighttodoso. The risk of falling behind the curveis so great that senior leaders are notdebating whether digital technologieswill affect their competitive position,but rather how to conduct an effectivedigital transformation and how fast itcanbedone.However, an organization’sdetermination to get on the frontfoot with a bold digital strategy oftenfalters when it comes up against themulti-dimensional complexity of thequestions it faces and the risks it mustmanage. Should we prioritize short-term improvements at the expense ofpotentially larger strategic shifts? Howfast will our industry be disrupted:months, years, or even decades? Whatlevel of risk are we willing to take oninnovative new business models? Canwe deliver our digital strategy in houseor do we need to partner? The list goeson.Seniorleadersarestrugglingtocraftdigital transformations that provide abalanced approach between strategicriskandspeedofexecution.Part of the problem is that manydigital transformation roadmapsare designed as if every digitalinitiative has the same impact,time horizon, or risk level. Thatis not the real world. Successcomes from consciously managingyour digital transformation as astrategic portfolio over time. Thisrequires addressing three areas inan analytical and consistent way(see Figure 1):■■ The Why – Insight andforesight about how thecompetitive digital landscapeis affecting your industry andyour business. This is aboutnew sources of value creationaswellasthreatstoyourcurrentposition.■■ The What – Designing aportfolio of initiatives thatwill balance the need forshort-term improvementswith longer term strategic andbusiness model evolution andallow you to respond within arisk profile that you and yourstakeholders are comfortablewith.■■ The How – The ability toexecute on your strategy atthe right tempo, balancingrisk with the need for speed,and making the right trade-offs between in-house andexternal capabilities.With a command of theseframeworks, leadership teams willgain a common understanding andlanguage for how they will generatevalue from digital transformation,manage risk, and establish a robustaction plan to deliver businessresults.A Portfolio Strategy to Execute Your Digital TransformationShould we prioritizeshort-termimprovements at theexpense of potentiallylarger strategic shifts?The Why: High Stakes for theDigitally UnpreparedGetting a clear picture of howdigitization will affect your industry,organization, and competitiveposition is a complex exercise. It isabout both offense and defense.Offense is about understanding howdigital transformation can help theorganization create more value. Doyou understand how the customerexperience can be enhancedthrough digitization? What stepchanges in productivity are possiblethrough digitizing our operationsand connecting our workforceefficiently? Can we disrupt ourindustry or an adjacent industryusing our digital competencies?Success comesfrom consciouslymanaging yourdigital transformationas a strategic portfolioover time.

Digital Transformation Review N° 09 21DIGITAL TRANSFORMATION REVIEWFigure 1: Formulating and Executing Your Digital Transformation StrategyHow are my customersevolving?How is the competitivelandscape changing?How fast will myindustry/ company bedisrupted?How do I balance shortterm improvements withlonger term strategicadvantages?How do my organization’svalue chain and businessmodel need to bereconﬁgured?How do I balance riskversus execution speed?How do I acquire theresources and capabilities toexecute digital strategy?What is the balancebetween in-house andbuy/partnerThe How The WhatThe WhyConversely, defense is aboutunderstanding where yourorganization’s vulnerabilities andrisk exposures are in this stage ofdigital transition. How is digitizationimpactingthecompany’svaluechainor the business model it operatesin? How is it changing products,services, pricing, or distribution?Are there opportunities for newentrants and lateral competitorsto disrupt the established businessmodel? Do we have the right skillsand competences to respond? Whatis the likely time horizon for thesechanges?The forces at play are complex,and you will not be able to predicteverything. But you can proactivelyshape your digital transformationprogram around three types ofscenarios:■■ Digital trends where there is asignificant level of certainty.For instance, if you are inretail banking today, you cansafely assume that millennialcustomers will demand aseamless and intuitive way ofconnecting with your servicesin digital ways.■■ Digital trends where there is astrong likelihood. Once again,with retail banking, it is likelythat your branch network willreduce in size over time and/or will be revamped to cater fordifferent needs of the digitalgeneration.■■ Digitaltrendsanddiscontinuitieswhere there is uncertainty aboutthe outcome. For instance,recent development in crypto-currency could have a profoundimpact on the banking world, beit positive or negative.

Digital Transformation Review N° 0922The What: Balancing the Scopeof Your Digital transformationWith a clear picture of the digitallandscape, you are in a position toshape your digital transformationprogram. As you design the program,it is essential to frame your digitalinitiativesaccordingtotheirimpactonyour current operations. As Figure 2illustrates,twodimensionsarecritical:■■ The breadth of reconfigurationrequired within the currentvalue chain.There are large pockets of valuethat digital technologies canhelp to unlock in your currentvalue chain. These days, prettymuch every core process andOnce the digital landscape has beenanalyzed and mapped, you need toshape your digital transformationprogram accordingly—tackling thescope of the change needed andthe speed of execution that wouldmaximize value creation and/orminimizetheriskofbeingoutflankedor disrupted. Balance is key. Toomuch focus on reconfiguring theexisting operations or the short-term gains, and you might not getthe organization ready to face thereal digital threats. Too much focuson the reinvention and you mightend up in constant discovery withlittle impact, or misread the timingof disruptions and increase the riskprofile of the transformation.A Portfolio Strategy to Execute Your Digital Transformationevery function of the firm canbe reconfigured more effectivelyusing the power of digitaltechnologies. For example,specialized technologies areavailable today to automate manyof the end-to-end core processesof an HR or a finance department.The increasing availabilityof customer and operationaldata has also opened up manyopportunities for value creation,such as hyper-personalization orpredictive maintenance.■■ The level of reinvention necessaryin the core offering or businessmodel.Digital technologies have alsoopened up myriad opportunitiesto fundamentally alter the wayyour business is traditionallyconducted. This requires vision,creative skills, and more often thannot, opening up your organizationto an ecosystem of innovativepartners that can support you inthis reinvention. Reinventing thebusiness model can be a “bet-the-ranch” strategic move, suchas moving to a platform-basedmodel. GE, with its “industrialinternet”isagoodexampleofsucharadicalmove1. Butitdoesn’tneedto be a make-or-break play. Manyenhancements to your serviceoffering or business model can bedone without creating massiveshiftsandrisktocurrentoperations,while still generating significantbusinessreturns.Let’s look at each dimension of theportfolio in turn.Digital Reengineering.Some initiatives will have a narrowscope within your value chain (e.g.,a single function or process) andwill not fundamentally changeyour existing offerings or businessmodel. Although reengineering hashad bad press, the opportunitiesthat digital technology creates toreconfigure processes and functionsare numerous. Often there is a needto virtually zero-base an existingprocess and digitally reconfigureit end-to-end. The focus is onimproving operational efficiency orsaleseffectiveness,orboth.Schindler,a world leader in elevators andescalators, provided its workforcewith access to real-time updates fromsensors embedded in elevators. Ithelped them proactively respond tooutages and schedule service visitsefficiently, thus saving 40 millionkilometers of driving and preventing4,435tonsofemissionsperyear2.LilyPulitzer, a US-based fashion retailer,increased its same-period sales byclose to 25% in 2014 by rolling outmobile point-of-sale capabilities inits stores3. Some of these initiativeswill be harder than others dependingon the level of change managementrequired, but all should providea reasonably short time frame tovalue. These initiatives are thereforeessentialportfoliocomponentstofuelinvestment and demonstrate earlysuccesses.

Digital Transformation Review N° 09 23DIGITAL TRANSFORMATION REVIEWBUSINESS OFFERING / MODEL REINVENTIONVALUECHAINRECOGNITIONVALUE-CHAINTRANSFORMATIONProcesses, people, systems, dataand organizational changeCore processes / multipleCross organisation boundariesBUSINESS MODELREINVENTIONCore business model changeEcosystem-basedPlatform strategiesDIGITALRE-ENGINEERINGZero-based digital redesignSingle process / functionEnd-to-end redesignDIGITAL VALUEPROPOSITIONProducts and servicesData and analytics basedNew economic modelBROADNARROWLIMITED EXTENSIVEFigure 2: Mapping the Digital Initiatives - The “What” of Your Digital Transformation PortfolioValue-Chain Transformation.These initiatives often cut acrossorganizational boundaries (e.g.,functions or geographies) andthe change management can besubstantial. The risk profile and thetimetovaluearethereforegreater.USretailing giant Macy’s launched anambitious omnichannel fulfillmentprogram4to digitally locate andmake available for sale even the lastremaining item from a line of stock.Macy’s conducted a pilot to test thenew fulfillment process on a limitedrange of products and stores. Then,with a massive transformation effort,extended it across its supply chainnetwork. The company rolled out theprogram to all of its 775 stores across45 states in the US. Macy’s estimatesthat the program helped it reduce $1billion of inventory from its storesthat would otherwise have beenmarked down or not sold. Value-chain transformations are complexendeavors that will invariably impactprocesses, systems, data, people, andorganizations.Digital Value Proposition.Reinventing offerings or businessmodels need not be disruptive; itcan be about combining productsand services in new and innovativeways, making better use of analytics,designing new economic models,or repackaging an existing offer.Property and casualty insurer, TokioMarine, augmented its traditionalbusiness by launching One-TimeInsurance in partnership withmobile operator Docomo. The app-based offer allows customers to

Digital Transformation Review N° 0924buy insurance in narrowly definedperiods (a day, a week) for lifestyleevents such as borrowing a car orgoing skiing for the weekend. Theseinnovative services can be developedin a reasonable time frame, asthey do not necessarily demand afundamental restructuring of theexisting value chain. The risk canalso be managed by using proof ofconcepts and experimentation.Business Model Reinvention.Reinventingyourbusinessmodelisnot a decision you will take lightly.It is by far the most challengingof transitions. Organizationswill go down this path if theyare reacting to a major industrydisruption that is threatening thebusiness. Or having identifieda major opportunity, it can beabout deciding to proactivelydisrupt the business or industrybefore someone else does. Suchtransformation will invariablyinvolve an external ecosystem ofpartners, a substantial re-skillingand skill acquisition exercise, andmore often than not, some surgeryon your current organizationalmodel. GE transformed itselffrom an industrial equipmentmanufacturer to a seller ofsoftware and data-centricservices. GE’s vision is to be a top10 software company by 2020. Itsdigital business—GE Digital—grewby 20% and generated revenuesof $5 billion in 2015 with plans toA Portfolio Strategy to Execute Your Digital Transformationgrow this to $15 billion by 2020.By the end of 2016, it is expectedto have 200,000 assets undermanagement, 100 applications,and 20,000 developers5.The How: Executing at the RightTempoDeciding what digital initiatives arecritical to face the new digital futureis important. Finding the right tempoand means to execute are even morecritical. Why? Because balancingspeed, risk, competence building, andfinancial capacity is difficult, andthey are all essential ingredients of awinning digital transformation. Thedigitaltransitionneedstobothprotectprofitable assets, while making thesuccessful transition to a new digitalordigitallyenhancedbusiness.Whenfaced with executing on your digitaltransformation strategy, you will beconfronted with competences youdo not yet possess; technology youdon’t know or own; ways of workingthatare notfamiliartoyourbusiness;new untested business models; andeven cultural barriers that will haveto be overcome. It is a daunting task.Executives need to focus on twocritical dimensions (see Figure 3):■■ Time to Implementation –Understanding the speed atwhich each component ofyour digital strategy needsto be implemented. Speed ofexecution will be driven byGE transformeditself from anindustrial equipmentmanufacturer to aprovider of softwareand data-centricservices.external factors: the rate oftechnological upheaval, thepaceofchangeinyourindustry,andtheintensityofcompetitionfrom adjacent or brand newplayers. But it will also bestrongly influenced by internalfactors: the current digitalcompetences you possessversus those you need, howsuitable your organizationalmodel is versus what is requiredto be competitive, and yourfamiliarity with the coretechnologies underlying yourdigital transformation versusthose you need to learn andexperiment with.■■ Make/buy/partner – Assessingyour ability to execute with thecapabilities you currently possessversustheneedtoaccessexternalresources through acquisitions orpartnershipsiskeytosuccess.Thisis a big decision that requires acarefulanalysisoftimingandriskand its criticality will obviouslybe linked with the competitivepressuresyourcompanyisunder.

Digital Transformation Review N° 09 25DIGITAL TRANSFORMATION REVIEWTime to ImplementationMAKE/INHOUSEBUY/PARTNERRADICAL CORESIMPLIFICATIONMigration old / newCore system / process replacementModernization / automationGREENFIELD“On the side” strategyNew architecture / processesSimpliﬁed / segmented offeringEDGEEXPLORATIONOpen Innovation modelsCorporate incubationProof-of-Concept / Sandbox / AgileACQUISITIONS/PARTNERSHIPSAcquire new business modelBuild competencesAccess critical technologiesLONGER SHORTERFigure 3: Mapping the Execution Route – The “How” of YourDigital Transformation PortfolioLet’s look at each execution path inturn.Edge exploration.When technologies are unprovenand benefits unclear, the explorationroute is appropriate. Buildingincubation or innovation sandboxescan allow you to test potentiallytransformative technologies in acontrolled environment. This willmean opening up the organizationto external parties such as start-ups,incubators and universities. Forinstance, CVS Health, operator ofMinute Clinics and one of the biggestdrugstore chains in US, has opened aDigital Innovation Lab in Boston thatis intended to “be a source of newideasthatwilldrivethecompanyintothe future”6. One of the goals of theDigital Innovation Lab is to connectwith start-ups that are developinghealthcare-related products andservices and to ensure CVS can bean ideal learning lab for early-stagecompanies7.This is a speculative approach,but is a good way to mitigate highcosts of failure. However, it isnot a fast process, as identifyingpromising applications takes timein large organizations and scalingup a successful pilot is a lengthyprocess. James Patterson, ManagingVice President and Head of CapitalOne Labs, commented: “Creatingexcellence at small scale is relativelystraightforward. Doing so at scaleis extremely hard. And that’s wheremost innovation centers struggle.”8

26He added, “That’s primarily becauseyou are involving a totally differentand expanded cast of characters toget to scale compared to just gettingto pilot. It’s not good enough to justhave an idea and to get it in thehands of a few hundred people.”Radical Core Simplification.Sometimes what needs to changeis more obvious but it requires aradical overhaul of core processesand underpinning technology. Thesemajor business simplifications occur,for example, when a cost base hasbecome unacceptably high or whena technology platform has beenovertaken by much more nimble,speedier, and easier-to-maintainalternatives. In 2011, the UK’sLloyds Banking Group invested in afour-year technology program thatinvolvedautomatingandsimplifyingcomplex manual banking processes.These initiatives helped achieveannual savings of £352 million, anda 7% reduction in total costs. Theprogram reduced the number ofuniquebusinessprocessesfrom700tojust 23, helping to halve the numberof manual errors9. These businesssimplification exercises have onething in common: they are anythingbutsimpletopulloff!Theirriskprofileishigh.Tosucceed,itrequiresupmostleadership attention, strong internalprogram management, and financialcommitment to stay the course as themigration to the new core processescan take years to implement.Acquisitions and Partnerships.When the competitive pressures areso great that organic developmentwould take too long and put thecompany at risk, acquisitions orexternal partnerships become viableoptions. Several reasons drivethis external focus. Your skill orcompetencegapmightbetoobig,andthe skill set you need in short supply.You may be facing a new businessmodel that is not culturally matchedto your traditional operations, andin that case acquiring a companyfor its innovative business modelmight be the answer. In the casewhere ownership of a technology orplatform can become a true sourceof competitive advantage it mightmake sense to go for a first moveradvantage by acquiring or licensingthe technology base outright. Forinstance, since 2011, Walmart hasacquired nearly 14 start-ups toboost its digital transformation. Inthe process, Walmart gained crucialaccess to talent and technologyknow-how in data analytics, search,mobile, advertising, and socialshopping10. Acquisitions can also beusedtosecureaninnovativebusinessmodel. In 2014, BBVA acquired“Simple”, a fully digital US bankwith no physical branches. Simple’sdigital-only model eliminates allthe fees associated with traditionalbanking11. Acquisitions are of courserisky in themselves, and digitalacquisitions are no different. Theycan also be expensive. Wait toolong and the strategic importanceof the technology or the competenceset becomes obvious to all yourcompetitors—leading to a biddingwar. Acquisitions can also taketime to complete. However, in mostcases, it is a relatively shorter routecompared to organic developments.Greenfield.When simplifying the core businessprovestoodifficultorlengthy,orwhena new digital culture is required tosucceed,companiesgoforaGreenfieldoption. This is about building a newand simplified operation “on theside” of the core business—sometimesbranded differently. The aim is tomigratetheoldintothenewovertime.The Greenfield option is attractiveas organizations can start with ablank canvas, creating a companythat is digital from day one and witha highly simplified offering andoperations. Essentially, this is aboutbuildingastart-upwithinalargefirm.It requires a heavy dose of new talentand competences, many from outsidethe existing firm. It needs to be builtwith specific customer segments inmind.Italsorequiresstrongleadershipto protect the Greenfield business.“Antibodies” from the parent businessoften spring into action to workagainst the new model, particularly ascannibalization of existing businesslines will be inevitable. STC, the SaudiArabia-based telecom operator hasadopted such Greenfield approach.STC recently launched a digitalA Portfolio Strategy to Execute Your Digital TransformationDigital Transformation Review N° 09

Digital Transformation Review N° 09 27DIGITAL TRANSFORMATION REVIEWoperator, Jawwy, to target the digital-savvy, young mobile consumers ofSaudi Arabia with a completely newcustomerexperience.SubhraDas,CEOof Jawwy, explained: “At Jawwy, weare building a digital mobile operatormodel with the organizational DNAand agility of an internet player.”12Headded,“Ourstrategyisnotaboutprice.It is about designing and launching abest-in-classcustomerexperiencethatisfullydigitalend-to-end.”Of course, none of these executionroutes are mutually exclusive. Manycompanies hedge their bets bypursuing multiple portfolio options.For instance, some telcos facedwith a long timescale and uncertainoutcomesintheircoretransformation,are both radically simplifying theircore operations as well as developingGreenfieldoperations.Think Portfolio!In a constantly disrupted andevolving digital economy, toomany organizations are designingtransformation roadmaps that arestatic—not balancing strategicand competitive risks with thespeed required for successfulimplementation and businessresults. Thinking dynamicallyabout digital transformationexecution requires an executivereboot. To succeed, it is crucialthat senior executives turn theirambitions and strategy into abalanced portfolio of digitalinitiatives, with short andlonger-term outcomes. Theyalsoneedtomakesuretheyusethe full panoply of executionmodelsavailabletocopewiththepressuresandmagnitudeofthedigitaltransition.1. GE has been transforming itself from a manufacturing giant to becoming a digital master. Its Industrial Internet platform aims to bring together theindustrial network of connected machines, advanced analytics and people at work, to drive new levels of efficiency and productivity. The massivescale of Industrial Internet is expected to benefit 46% of global economy, impact 100% on energy production and 44% on global energy consumption.Likewise, GE’s Big Data platform Predix is at the heart of GE’s digital business, which is growing at 20% and amassing $5 billion revenues in 2015. Formore details on GE’s transformation, please see: https://www.capgemini-consulting.com/general-electric-and-its-digital-transformation2. CIO, “CIO is pushing the right buttons”, November 2015; Apple.com, “Elevating service and safety with real-time data”, Accessed June 20163. Innovative Retail Technologies, “Lilly Pulitzer mPOS Increases Sales 24.5%”, June 20144. GlobalNewsWire, “Retail TouchPoints Announces 2015 Store Operations Superstar Awards”, October 20155. GE 2015 Annual Report6. CVS Website, “CVS Health to Open New Digital Innovation Lab in Boston”, November 20147. The Boston Globe, “CVS to open tech hub in Boston”, November 20148. Capgemini Consulting, “Digital Transformation Review No. 8”, October 20159. Computer World, “Lloyds on track to reach savings target after back office consolidation”, May 2012; ComputerWeekly.com, “Lloyds customercomplaints plummet after automating manual processes”, June 201310. Company website11. BBVA, “Simple, how a FinTech startup creates its business model in online banking”, April 201512.Capgemini Consulting, “Unlocking Customer Satisfaction: Why Digital Holds the Key for Telcos”, April 2016

Digital Transformation Review N° 0930A Platform Strategy:Creating New Forms ofValue in the Digital AgeMarshall Van AlstyneResearch scientist at MIT and tenuredprofessor at Boston University,Questrom School of BusinessMarshall Van Alstyne – a research scientist at MIT and tenuredprofessor at Boston University, Questrom School of Business – is oneof the world’s foremost scholars of information business models.He co-developed the theory of Two-sided Networks, a major contribution tounderstanding the impact of network effects.Marshall is co-author of Platform Revolution (published March 2016), whichanalyses how seemingly disparate companies, from PayPal to Alibaba, haveupended entire industries by harnessing a single phenomenon: the platformbusiness model.Capgemini Consulting talked to Marshall to understand how these companiesare unlocking hidden resources and creating new forms of value.A Platform Strategy: Creating New Forms of Value in the Digital Age

Digital Transformation Review N° 09 31DIGITAL TRANSFORMATION REVIEWEvery Company Can Be aPlatformWhat is a platform for thosethat are new to the concept?A platform is a nexus of rulesand infrastructure that facilitatesinteractions among a network ofusers and third-party participants.As users create value for otherusers, a network effect expands thecommunity, unleashing the powerof a platform. Take Facebook,AirBnB, Alibaba and Uber. Theseseem like disparate companies,but all have a strong foundation: aplatform business model.Even a weak platform willoutperform a strong product everytime. If you are using a traditionalproduct strategy, just adding newand better features won’t work.This occurs because you won’t beable to evolve fast enough withjust your internal team.Executives often think ofcompanies like AirBnB as being‘platform-born’. Do traditionalorganizations even have achance given the radical changethat would be required to be aplatform company?There is a huge variety of hybridbusiness models. Traditionalcompanies can continue to operateEven a weakplatform willoutperform astrong productevery time.the old business model and add aplatform business model on top.It’s a mistake to think that you needto transform the entire businessstraightaway. One of the mostfamous examples is Apple. It stillproduces phones and, therefore,it still has to manage traditionalproduct designs and supply chains.That part of Apple continues tooperate as a traditional business.But, Apple has added a platformdimension. This includes the mobilephone operating system iOS and theiTunes market ecosystem.Let’s say you are one of thesehotels and are competing withAirBnB, what would you do?One thing they could do is start to jointhe platform and put their spare roomson AirBnB. However, they would thenbecome beholden to the platform inthe same way that publishers havebecome beholden to Amazon, whichis a dangerous position to be in. Theother thing they could do is buy thenumbertwoplayerandscalethat,entera partnership with Intercontinentaland Marriott, or create an industryconsortium and share the capability onAlso, imagine if hotelssuch as Marriott,Intercontinental, orHyatt had added aplatform to their existingbusiness. There is noreason they could nothave done this, sincethe business models arenot in conflict. However,they moved too slowly.

Digital Transformation Review N° 0932McCormick Spice – aUS-based companythat manufacturesspices and herbs –thought, “How amI going to build aplatform on salt andpepper?”. In a brilliantmaneuver, theyadded information,taste recipes andcommunities. Theyeffectively developeda recommender systemand have become a‘Netflix for food’.a similar platform. Those are the kindsof levers that they can try. Startingfrom scratch as an individual playerwouldbedifficultatthispointbecauseAirBnBisjusttoofarahead.Inamarketwithnetworkeffects,incumbentshavetoo few users bringing them usefulsourcesofsupply.connecting your tennis racket, yourbike, your clothing, your watch, andother apparel.McCormick Spice – a US-basedcompany that manufactures spicesand herbs – thought, “How am Igoing to build a platform on salt andpepper?” In a brilliant maneuver,they added information, taste recipesand communities. They effectivelydevelopedarecommendersystemandhave become a ‘Netflix for food’. Theplatform allows them to even designnew consumer packaged goods,expertise they can sell to packagedgoods manufacturers, grocery stores,and even restaurants.Prepare for a Winner-Takes-All MarketWhat are the advantages andrisks of launching a platformstrategy?In the Internet era we are seeinga rise of giant firms that isanalogous to the conglomeratesof the industrial era, but for theopposite reason. The industrialera was driven by giant supply-side economies of scale, leadingto huge market concentration.This occurred in electrical utilities,steel production, oil refining,auto manufacture, railroads andmany others. These firms becameso large, they are the reason wehave antitrust law. In the Internetera, we are seeing similar marketconcentration. Google has 91%market share of search in Europe;Android represents 80% marketshare in mobile; Microsoft has a90% share in desktop operatingsystems; Facebook has 1.6 billionpeople on its platform; and Alibabahas 70% of all logistics transactionsin China and 80% of all ecommercetransactions. None of these firmsare known for having industrialscale capital facilities. Instead, theirmarket concentration is driven bydemand-side economies of scaleand not supply-side -- that’s a giantnetwork effect at play!A Platform Strategy: Creating New Forms of Value in the Digital AgeTraditionalcompanies cancontinue to operatethe old businessmodel and add aplatform businessmodel on top.Besides Apple, are thereexamples of traditionalcompanies that have adopted aplatform successfully?My favorite examples are Nikeand McCormick Spice. Originally,you might think of Nike as asports apparel or shoe company.However, adding data sensors and acommunitywasaningeniousmove.They developed the Nike FuelBandto track health and sports activity,which allowed groups to track andimprove their sports performancetogether. Nike is now trying tobecome the operating system forsports gear and clothing. WhetherNike succeeds, or a competitor likeUnder Armour, this will be done by

Digital Transformation Review N° 09 33DIGITAL TRANSFORMATION REVIEWPlatform Firms are Becoming More Important in our EconomySource: Van Alstyne, Marshall, “Platforms: How Change in Industry is Driving Change in Strategy”,MIT Platform Summit 2015Platform Firms Becoming More Important in EconomyMKTCAPWeightedPlatformFirmsPercentage of Platform Firms weighted by MKT CAP(2001-2014)% of top 20 firms by market cap since 20012001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201435%30%25%20%15%10%5%0%@InfoEconIf you generate network effectsand figure out how to generatedemand-side economies of scalein your industry, then you will beon track for one of these winner-takes-all positions. If you are toolate, you lose the option to createa platform because competitorswill have created one aroundyou. Then, you will have to thenbump up against their networkeffects and you may be too late topenetrate.Besides a high-level strategy,do platforms affect day-to-daytasks for a company?You must manage a companyin the Internet era differentlythan how one used to manage acompany in the Industrial era.Functions such as marketing,strategy, logistics, finance, IT,and human resources used to behandled inside the firm, but nowmust be managed with externalversions of these same activities(see figure on the next page).If you generatenetwork effects andfigure out how togenerate demand-sideeconomies of scale inyour industry, thenyou will be on track forone of these winner-takes-all positions.

Digital Transformation Review N° 0934Take operations and finance asexamples. Marriott and Hyatthave property that they own.Airbnb doesn’t own property, butproperty is traded outside the firm.Finance used to value the assetsowned by the company. But howare you going to value AirBnB orUber based on their assets if theydo not own them? Instead, youmust value the transactions thatthird parties bring to the platformas well as the feedback thatpulls more transactions onto theplatform. So valuation methodsmust shift from owning capital toattracting and husbanding capital.Notice that Airbnb and Uber haveSource: Van Alstyne, Marshall, “Platforms: How Change in Industry is Driving Change in Strategy”,MIT Platform Summit 2015Network Effects & Inverting the Firm Changes…@InfoEconInternal Employees External communitiesExperts & Specializeddepartments Crowdsourcing & OpenInnovationEntry Barriers & InimitableResources  Ecosystemhusbandry & Long TailShareholder Value Stakeholder ValueIncorporate network effectsBack Office (ERP)  Front Office(CRM)  Out-of-Office (Social & BigData)Push  Pull, Outbound  Inbound Uber: biggest taxi company, no taxis,Airbnb: biggest accommodations butno real estateFacebook: biggest media firm butcreates no contentAlibaba: biggest merchant but hasno inventoryFinance Human Resources R&D StrategyMarketing IT Operations & LogisticsA Platform Strategy: Creating New Forms of Value in the Digital Agedone something remarkable. Theyhave shed even the variable costsof production. This allows themto scale at a staggering pace.If your industry is going to betransformed by platforms, you aregoing to have to understand thesecomplementary scales.Network Effects & Inverting the Firm Changes…

Digital Transformation Review N° 09 35DIGITAL TRANSFORMATION REVIEWFirms Should Fear Firms Outside their Immediate IndustrySource: Van Alstyne, Marshall, “Platforms: How Change in Industry is Driving Change in Strategy”,MIT Platform Summit 2015Isn’t afraid of... But should fear...DeliveryCarsElectronicsWatchesBroadcastPublishing Houghton MifﬂinHarcourtMc Graw HillNBC CBSToshiba PhilipsUnited States PostalService FedExToyota FordSwatch TimexAmazonNetFlixNest (Google)FacebookUber, GoogleSamsungCompetition in your BlindSpotHow does this changecompetition for companies?In the Internet economy, it canfeel like competition comes out ofnowhere. Swatch and Timex aresuddenlycompetingwithSamsung.Ford is suddenly competing withGoogle in self-driven cars or withUber in a way that they neveranticipated.TheUnitedStatesPostalService is used to competing withFedEx and not Facebook. However,it now finds itself competing withFacebook because its core businessmodel is based on bulk mail for adsand ads are vastly more effective onGoogle and Facebook.How do these new players keepcoming in and taking over anexisting business? Incumbentskeep looking at product features,overlapping product features andoverlapping services, but that’s thewrong way to view competitionin the Internet economy. The rightway to view competition is, “do youhave overlapping users?”. Considerthat it is far easier to add a productto a platform than to add a platformto a product. If an adjacent platformcan add your product or service toits user base in a way that feels free,you will be out of business. Amazonsells Amazon prime, which is freeshipping. But then it’s easy to addfree video as well and cut into thecable business. If the market is“multisided,” meaning that it offersmanydifferentkindsofinteractionsacross different kinds of users,then it can give away one typeof interaction in order to provide

Digital Transformation Review N° 0936another one for free. For example,LinkedIn facilitates professional-to-professional interactions but itcharges recruiters for the recruiter-to-professional interaction. Thisclobbered Monster’s business thatfocused on recruiting alone and hada much smaller network. Playersinside the traditional industry willprobably be in the same positionyou are, so it is easier to anticipatetheir moves. However, it’s harder toanticipate the moves of companiescoming from an adjacent platform.It’s those firms you really have tostart worrying about.What’s an example of a firmusing its platform to compete inan adjacent ecosystem?As another example, Alibaba’sstrategy team is starting to offermicroloans. They will be in a positionto offer microloans better than banksbecause they can observe accountsreceivable, transactions history, andhowfrequentlypeoplepayforthings.Not only will they be able to vetloans in a new and interestingway, but will also have a differentincentive structure. Traditionallending institutions must makemoney from the loan itself, butAlibaba can make its money fromsubsequent transactions. This meansit can afford a lower-priced loanthan a bank. By the time banks seewhat’s happening, they are alreadyAs technology becomesmore connected, the size ofoverlapping users is increasing.How can companies distinguishwhich users they should cater to?Look at who is closer to therelationship. Apple is really goodat reaching customers throughAT&T systems. They took over thecustomer relationship and thenmulti-homed across both the Macand Windows operating systemsusing iTunes. Apple built a layeron top of the network and tookcontrol of the relationship so usersaffiliate with Apple more thanwith AT&T. It’s really who gets tocontrol the customer interaction,who can reach through and dothat in a better way. Those areyour biggest threats.How can traditional companies,such as telcos, ever enjoy asstrong a relationship with theircustomers as firms like Apple?They need to do a better job ofbecoming more than just pipesand tap the network effectsin their data. They need thetransaction data and preferencedata for starters. For example,telcos have some opportunitiesbecause they already havebusinesses and consumers onboard. Now the question is, “Canwe design marketplaces andinnovation ecosystems wherewe are the market as opposed tosomeone sitting on top of ourbackbone?” Their problem is thatthey have effectively been pusheddown the stack. They have beencommoditized and they need toreach up through that stack andsee what kind of services that theycan provide closer to the customer.Alternatively, they may be able toparticipate by acquiring certainexisting platform companies,operating over the top, and thengrowing through them.If an adjacentecosystem platformcan add yourproduct or serviceto its user base in away that feels free,you will be out ofbusiness.A Platform Strategy: Creating New Forms of Value in the Digital Agecheck-mated because it’s too late.Alibaba will already be a dominantplayer. It’s far easier for Alibaba toadd microloans to their transactionsplatform than it is for banks to add atransactions platform to their loans.At that point, the banks wouldn’twant in, because they won’t be ableto recover unless they can somehowparticipate in the downstreamtransaction ecosystem.

Digital Transformation Review N° 09 37DIGITAL TRANSFORMATION REVIEWEmbrace a PlatformMindset Built on Fairnessand CommunityHow do you know which areaof your business could benefitfrom a platform?Start with your key valueproposition. In Lean Startup youhad a minimum viable product.The exact analog here is yourminimum viable platform. Whatis the minimum viable platform,what is the minimum interactionthat’s going to create the mostvalue for your external users? Youneed something that’s going toattract people. From there, thenlayer on further interactions to getnew data and create incrementalnetworkevents.Again,thisisusingconsumer data to create valuefor other consumers. At the sametime, ensure that new interactionsadd value rather than interferewith existing interactions. As youlayer on new interactions, youmust address the intricacies ofeach of those interactions with fairgovernance of interactions takingplace on the platform. It’s very,very complex.What do you mean bygovernance? Is an example ofgovernance, “I am Apple, I take50% of all revenue of Appsmore or less?”We like to define governance asa combination of three things: 1)who gets to participate, 2) how doyou create and divide value, and3) how you resolve conflict. Youhave highlighted one element ofit: do they keep 10%, 2% or 70%?But participation and conflictissues also matter. If firms alwaysdecide in their own self-interest,as opposed to deciding fairlyin the interests of ecosystempartners, participants won’tparticipate or invest.My favorite example is IntelArchitecture Labs (IAL).Intel created aseparate divisionequal in statureto its other productdivisions in order torepresent the voiceof ecosystempartners.Wisely,this representative voice ofecosystem partners meant thatprojects launched by partnerscouldn’t be killed or absorbedby Intel. If you do not look afterthe health of the ecosystem, ormanage cannibalization in such away that the ecosystem wins andnot just internal product divisions,you won’t get ecosystem partnerinvestment. A platform strategyfails if every time someone inventssomething really valuable, the firstthing you do is take it away.

Digital Transformation Review N° 0938One of the biggest mistakes I seefirms make is asking, “How arewe going to monetize?” as thefirst question instead of “What’sthe best platform design?”. If thisoccurs, your monetization strategywill put friction on your networkeffects. Then, your competitorwill design a better platform, takeyour users and then monetizelater. Rupert Murdoch made thisvery mistake when he acquiredMySpace. He immediatelythought of ads, based on hisnews experience, and he droveusers away, killing the platform.MySpace has never recovered.What skills do executives anda workforce need to ensureplatform success?It takes people skills in communitymanagement. They tend to be muchmoresociallyawareandunderstandthe interests of ecosystem partners.When something goes wrong,you fix it quickly and openly andmanage the external relationshipso that the community continuesto participate. To ensure platformsuccess, you have to be comfortablemanaging without controlling andthat’s not traditional managementpractice.The Platform Revolution:The Near Future for AllIndustriesIs there any industry immune tointegrating platforms into theirstrategy?Most industries will be affected, butthe order of transformation will takeplace in proportion to the amountof value created by information andby the external community. Mediaand software industries are obvioustransformations. Services industrieswill also follow. Even though thereis a lesser proportion of value that’sbeing created by information andby community, there are pocketswhere a platform approach has beenvaluable even in heavy industries.One of the biggestmistakes I see firmsmake is asking,“How are we goingto monetize?” as thefirst question insteadof “What’s the bestplatform design?”A Platform Strategy: Creating New Forms of Value in the Digital AgeWhat is theminimum viableplatform, whatis the minimuminteraction that’sgoing to create themost value for yourexternal users?The norm in traditionalmanagerial practices is if valueis seen, then try to take itall. Why is this different forcompanies with a platformstrategy?Thesimpleargumentisthat5%ofatrillion-dollar market is much morevaluable than 95% of a million-dollar market. For example, SAPand Salesforce explicitly thinkabout what percentage of the totalecosystem value they take. It’s not95%, it’s much lower. So the realquestion is how much ecosystemvalue does a firm create and whatgovernancemechanismsallowyouto take value at a slow and steadyrate that keeps the ecosystemhealthy and growing. How do youlook after the ecosystem partners,especially the small ones, so thatthey continue to invest and grow?

Digital Transformation Review N° 09 39DIGITAL TRANSFORMATION REVIEWTo ensure platformsuccess, you haveto be comfortablemanaging withoutcontrolling andthat’s not traditionalmanagement practice.Do you need a long-termvision, strategy and investmentprogram to integrate a platformstrategy? For example, GeneralElectric, a traditional appliancescompany, invested in Predix,its software platform, which isseen as having great potential.However, GE also invested forfour years in building a team of1,500 software engineers.Platform design is art. AfterJohnson Controls built PANOPTIXsystems for buildings, theyeventually pulled back. Theyweren’tabletoconvincedevelopersto come and join their ecosystem.There are a variety of differentfailure points because it’s such acomplex problem with so manydifferent moving parts. You mustmanage the cannibalization in aThere are pocketswhere a platformapproach has beenvaluable even inheavy industries.A good example is Red Lake Mine,a mining company that is morethan 50 years old. The analyststhought that its mines were maxedout and its stock price began todwindle. The CEO opened up itsmining data and offered openinnovation challenges. A fewthousand people around theworld took on the challenge andidentified new veins of gold inmines, tripling the amount ofextraction in the next coupleof years. One might imagine aheavy industry as one immuneto platform transformation buteven here it is possible. Energy isanother industry that, despite itshuge capital costs, will undergoplatform transformation. In thiscase, the need to manage sparecapacity and trade on productionsurplus will force the transition.judicious way. You must managethe interactions among yourgrowing ecosystem partners. Youmust manage value being createdexternally and you must alsomanage external quality controland fraud prevention. That’s hardand that’s not what firms are usedto doing. All these activities mustrealign and adjust, and it’s a long-term investment to get it to work.Strategyinplatformsislikeplayingthree-dimensional chess. You haveto look at the strategic choices ofyour ecosystem partners just asmuch as you look at 3D choicesof your own platform internally.Conceiving all those multi-partyinteractions and getting it rightgets complicated and it’s not goingto happen by accident.

Digital Transformation Review N° 0940Visa: The FinTech GiantLeading Digital’s PlatformRevolutionMark JamisonGlobal Head of New ProductDevelopment at Visa Inc.Visa is a global payments technology company that connectsconsumers, businesses, banks and governments. In 2015, thecompany processed 112 billion transactions1and $7.4 trilliondollars’ worth of goods and services. Visa has built one of the world’s mostadvanced processing networks, capable of handling more than 65,000transactions per second.Mark Jamison is the global head of new product development for Visa. Hisrole is to understand, prototype, test and commercialize new paymentsand commerce capabilities. Prior to Visa, Mark’s roles include GlobalHead of Customer Experience at BBVA and Chief Digital Officer at CapitalOne Bank, where he was responsible for delivery of digital products, userexperience and design standards across all channels for Capital One Bank.Mark was also the founder and executive leader of Capital One Labs.Visa: The FinTech Giant Leading Digital’s Platform Revolution1As of March 31, 2016

Digital Transformation Review N° 09 41DIGITAL TRANSFORMATION REVIEWDigital Transformation atthe Original FinTech FirmWhat is Visa’s approach todigital transformation?Visa did not require as radical atransformationasmanyothersinourindustry. Digital was already in ourDNA.WeliketosaythatVisawasoneof the original FinTech companies.Since the 50s, we have been atechnology-based organization thatallows instantaneous transfer ofvalue anywhere in the world in nearreal-time.VisaisalsoaSanFranciscoheadquartered company and digitalis part of our culture.Another major digital initiative welaunched is the Visa Token Service(VTS) – terminology for whatwe consider to be a reinventionof the account number. TheVTS replaces sensitive accountinformation, such as the 16-digitprimary account number, with aunique digital identifier called atoken. The token enables paymenttransactions to be processedwithout exposing actual primaryaccount number details that couldpotentially be compromised. Forinstance, if I want to add my cardto Android Pay, they ping Visaand Visa takes that card numberand passes them back a tokenthat represents that card numberwith security and intelligencebuilt into that token. So, from thatpoint on, Android Pay can use thetoken to enable transactions whenyou buy things. But, if someonewere to steal that token, it willbe completely worthless. Issuers,merchants, and wallet providerscan deliver secure mobile paymentapplications, gain access to third-party digital payment experiences,or securely maintain cards on filein order to offer their customerssafe ways to shop online and withmobile devices.You have already invested insome FinTech companies like‘Stripe.’ How is Visa workingwith the FinTech ecosystem?Visa’s mission is to ensure that everyInternet connected device, applianceor wearable, can become a secureplace for commerce. And to do that,collaboration with the ecosystemis essential and comes in the formof partnerships, investments,acquisitions and collaboration.We like to say that Visawas one of the originalFinTech companies.Collaboration with theecosystem is essentialand comes in theform of partnerships,investments, acquisitionsand collaboration.Could you give us someexamples of the digitalinitiatives you launched?Let me start with Visa Checkout –an initiative we launched to helpimprove online purchase conversionrates. We found there was a clearneed to make online buying easier.Visa Checkout brings the simplicityof the swipe to the online world socustomers can complete a purchasewith just a username and password.Wehavehadalotofsuccessgloballywith this initiative.We have set up innovation centersglobally where co-creation withpartners is the goal. We also havean active team that evaluates newventures and decides if we want tohelp guide or accelerate the venture.We collaborate with the ecosystemfor rapid prototyping and testingof new technologies and we havemade investments in a number ofcompanies. We have also invested inadditional companies such as Chain,a San Francisco-based companythat is a leader in implementingBlockchain infrastructure anddeveloping applications using theBlockchain protocol.

Digital Transformation Review N° 0942The pace oftechnology changedictates that we needto invest in peoplewhose full-time jobis to focus on thingsbeyond 12 months.levers. Second, we explore newtechnologies and utilize human-centered design with the aim tosupport solutions that could deliverreal benefits to people. Third, wecollaborate and experiment withVisa’s technology, Visa DeveloperPlatform in particular, for rapid-prototyping using Visa APIs andSDKs. It’s a very applied processmeant to deliver tangible results.Visa: The FinTech Giant Leading Digital’s Platform RevolutionWhen you cedeinnovation to a smallgroup of innovators,it is doomed to failure.Innovation has to bepart of the DNA ofthe company – it iseveryone’s job.What is the rationale forlaunching innovation centersand what role do your centersplay?The pace of technology changedictates that we need to invest inpeople whose full-time job is tofocus on things beyond 12 months.Our global network of innovationcenters – in San Francisco, Dubai,Singapore and Miami – are animportant part of our overallapproach to fostering innovationwith clients. The innovation labshelp us develop a point of view onwhat the future might look like andhelp us work back from there.Our innovation centers focus onthree things. First, they engageclients in a conversation aroundwhere our industry is going andhelp them understand the bigMany companies now haveinnovation centers or labs.How do you actually encouragepeople in the business toexperiment and be moreinnovative?Many companies indeed have someform of innovation group. A fewwork and, frankly, most don’t. Inmy experience, when you cedeinnovation to a small group ofinnovators, it is doomed to failure.Innovation has to be part of the DNA

Digital Transformation Review N° 09 43DIGITAL TRANSFORMATION REVIEWVISA & the Platform RevolutionA network capable of handling more than65,000 transactionsper second112 billiontransactionsVISA’snew winning model=From proprietary technology capabilities to aplatform open to third-partiesworth of transactions (FY15)US$7.4 trillionwinner-takes-allkind of modelsPlatforms areWinning modelsare the ones that build theirbusiness as a platform40 million merchantsaround the worldAccess to the world’slargest paymentnetworkInteroperability with 13,700ﬁnancial institutionsIn 200 countriesThe advantage of VISA’s platformWhy become an open platform?Should companies become aplatform?The Importance of a Long-TermStrategyYES if “you believe you can be aplatform for your industry like iOS or Android”Successful companies understand the purposeof their existenceANDROIDiOS

Digital Transformation Review N° 0944The winning modelsin the market placeare the ones thatbuild their businessas a platform.Open Platform:The Future ofVisaVisa recentlyannouncedthe openingof its paymentplatform tothird-parties anddevelopers. What isthe rationale behindthis move?Let’s take a step back to understandthis.Thewinningmodelsinthemarketplace are the ones that build theirbusiness as a platform. For instance,iOS is a platform that other peoplebuild apps on. Android is anotherWhat is the value propositionfor the ecosystem?The benefit when you build ontop of Visa’s platform is that youget security, scalability and accessto the world’s largest paymentnetwork. When you build tothese standards and access ournetwork, you can have immediateinteroperability with over 13,700financial institutions in over 200countries and over 40 millionmerchants around the world. Noother company in this space hasthe customer density, global reachand scale that is available throughVisa’s open platform.Visa: The FinTech Giant Leading Digital’s Platform Revolutionof the company – it is everyone’s job.In our case, we have heavily investedin methodologies like HumanCentered Design or Design Thinkingto help you rapidly prototype anditerate your products with realcustomers. It’s a powerful model andwe use this approach with clients andacross our entire company.exampleofaverysuccessfulplatform.Due to the network effect, it can be awinner-takes-all kind of model. Thereisonebigwinnerineacharea. Wewanttobethewinnerofthepaymentsectorand create a standardized platformfor the payments community. Beinga key player in the payments space,we are very well positioned to win theplatformgame.Making proprietary technologyservices and capabilities open tothird-parties is clearly a massiveshift for Visa. We believe this will bea winning model.

Digital Transformation Review N° 09 45DIGITAL TRANSFORMATION REVIEWThere is one bigwinner in eacharea. We want tobe the winner of thepayment sector andcreate a standardizedplatform for thepayments community.Making proprietarytechnology servicesand capabilities opento third-parties isclearly a massiveshift for Visa. Webelieve this will be awinning model.How will you assess the successof your platform strategy?That comes down to a couple ofthings. One is how many API-related queries you are getting.The second is to understand ifimportant clients are using ourplatform. Customers always havean alternative to do things theold way or the new way. If webuild a better platform they willall convert to this agile way ofconsuming capabilities.Instead of having tobuild a bunch of newcapabilities themselves,they can just consumethe capability usingour platform in arelatively short time.The value proposition for ourenterprise clients, such as banks,is that they get the speed andagility that comes with consumingcapabilities via formatted APIs.Big enterprises have a hard timekeeping pace with changes intheir market place. So, instead ofhaving to build a bunch of newcapabilities themselves, they canjust consume the capability usingour platform in a relatively shorttime.Also, there is so much creativityand ingenuity in the world thatthird parties will come up withinnovative ideas in payments thatwe had never thought of. This iswhat successful platforms havediscovered. It will open up our listof who our clients are to a wholenew universe of independentsoftware vendors.Do you have any examples ofinitial applications developedafter the opening of theplatform?There is a really good examplethat is in production today. Wecollaborated with the EmiratesNational Bank of Dubai (EmiratesNBD) for a challenge they faced.Emirates NBD’s customers includea lot of high net worth customers.When those customers travelaround the world, they facechallenges in getting their cardaccepted. For instance, fraud andsecurity rules decline transactionfrom the same card in differentcountries in a short time period.It wasn’t a great experience forthe customers, so they integrateda new capability we put on theplatform called Mobile LocationConfirmation. The consumer canaccept the option to ping theirphone when travelling. When

Digital Transformation Review N° 0946A Radical Re-Imaginationof The Business, NotIncremental StepsDo you think it is possible todevelop a long-term strategy inan organization given the paceof technology-driven changetoday?Of course it is possible. Successfulcompanies understand the purposeof their existence. They reallyunderstand what their purpose is,the ‘why’, and they don’t get caughtupoverthelongterminthe‘what’. Icall it ‘freedom within a framework’,a strategy that tells you where youare going. It might not give youevery explicit step. In the worldthat we now operate in, things arechanging so quickly that you reallycan’t set an operating plan that goesbeyond a couple of years. But thatdoesn’t mean that you can’t havethe processes in place that allow youto adjust really rapidly over time tomake sure you get to the right point.If you are driving from SanFrancisco to LA at night, your lightscan only give you visibility so faron the road - you can only see withclarity so far in the near-term. Butyou still have the confidence thatconsistently following the path yourlights illuminate will get you to LA.Visa: The FinTech Giant Leading Digital’s Platform RevolutionI think a platformstrategy makes sensefor companies thathave the belief theycan become theindustry’s leadingplatform.Customers alwayshave an alternativeto do things the oldway or the new way.If we build a betterplatform they will allconvert to this agileway of consumingcapabilities.Do you think every companyshould become a platform?I think a platform strategy makessense for companies that have thebelieftheycanbecometheindustry’sleading platform. If you believe youcan be a platform for your industrylike iOS or an Android are for theirrespective customers and partners,go for a platform strategy. If you area developer, you will go where thereis distribution and scale.There is so muchcreativity andingenuity in theworld that thirdparties will come upwith innovative ideasin payments that wehad never thought of.the customer is in Sao Paulo andtries to buy something, we pingthe phone, and if the customer’sphone is there in Sao Paulo, therisk of it being fraud drops by asignificant magnitude and thisenables transaction approval. Thiscapability is in production, and weare very happy with the success ofthis application.Digital Transformation Review N° 0946

Digital Transformation Review N° 09 47DIGITAL TRANSFORMATION REVIEWCould you name an organizationthat you truly admire thathas succeeded in its digitaltransformation?BBVA has been a real visionary inthe banking industry. FranciscoGonzalez, Chairman and CEO ofBBVA, has often publicly1said thatBBVA will be the first bank in theworldtobecometrulydigital.They’vemade strategic and investmentdecisions to achieve that visionranging from building a real-time,single instance banking backendto implementing a comprehensiveservices-oriented architecture androbust Big Data analytics. Theyeffectively built the infrastructure ofa modern technology company witha large investment over multipleyears. It’s an incredibly impressivefeat to achieve.What digitaltransformationrequires is a radicalre-imagination ofyour business.1Euromoney, “Digital banking:BBVA’s González – The digitalbanker”, September 2014What would be your keyrecommendations to bigorganizations for initiatingdigital transformation?Be really bold in your thinking.You won’t succeed if you makeincremental steps. It’s all aboutlooking at where the future is andworking backwards; not trying totake incremental steps forward.And that has implications for talent,cultureandinvestments.Whatdigitaltransformation requires is a radicalre-imagination of your business.

Digital Transformation Review N° 09 49DIGITAL TRANSFORMATION REVIEWExecuting Digital Strategy:Acquisitions/ Greenfield orOrganic Growth?

Digital Transformation Review N° 0950GE: How an IndustrialLeviathan became aDigital GiantBeth ComstockVice Chair of GEBeth Comstock is the first female vice chair of GE. She leads theorganization’s Business Innovations unit, which seeks to accelerategrowth from new service models. Prior to her current role, Beth servedas GE’s chief marketing and commercial officer, and before that was Presidentof Integrated Media at NBC Universal, where she oversaw the company’sdigital efforts, including early development of hulu.com, Peacock Equity, andacquiring ivillage.com.GE is a highly diverse business and a venerable 140-year-old organizationthat occupies a significant place in the US’ corporate history. How did thiscorporate giant take such giant strides in its digital transformation to positionitself as one of the top ten software companies globally by 2020? CapgeminiConsulting spoke to Beth Comstock to understand more about GE’s strategyfor shifting from industrial leviathan to digital giant. Incubating state-of-the-art technology, investments in startups, and strategic partnerships are some ofthe ingredients GE has used to propel its digital transformation.GE: How an Industrial Leviathan became a Digital Giant

Digital Transformation Review N° 09 51DIGITAL TRANSFORMATION REVIEWThe Journey So FarWhat have been the keymilestones in your digitaltransformation journey?We started our journey about fiveyears ago. We were already pickingup a lot of signals between 2008 and2011 and understood that digitaldisruption was going to impact theindustry in a big way. We started byincubating digital expertise via ourtechnology group. We embeddeda software analytics team at ourglobal research center for example.It was around 2013 when wedecided to meld the best of ourdigital capabilities with the best ofour physical capabilities. Hardwareand advanced materials sciencehave always mattered a great dealin our business, but we startedfocusing on the intersection ofthe two and began digitizing themanufacturing process, not justthe things that we made. The visionstarted to coalesce around a digitaltransformation, from designing toproducing to shipping and in-the-field services. Our biggest impacttoday has been on our servicebusiness because you are suddenlyselling everything as a service.Where is GE now in its journeytowards a digital industrialcompany?This is a long journey for us. I thinkwe are about a third of the wayin our digital transformation. Webuilt an industrial-strength cloudto power all of the data needs thatour industries are going to have.We have really great use cases,especially in the energy sector andin transportation.Can you give us an idea of thelevel of investments you aremaking in digital across thebusiness?We have a billion dollar run rateinvestment so far into our digitalefforts. And our goal is get $15billion in revenue by 2020.This is a longjourney for us. Ithink we are abouta third of the wayin our digitaltransformation.We have a billiondollar run rateinvestments so far intoour digital efforts.Can you share some examplesof digital initiatives you havelaunched?A great example is our “DigitalWind Farm”1, which connects theembedded sensors and controls inthe actual wind turbine, providingconnectivity across multiple layers.The blades of the turbine are ableto sense the environment. Usingtechnologiessuchasradarandlidar2,theyknowwherethewindiscomingfrom and motors shift the pitch ofthe blade to react to the wind. So,the whole wind farm is orchestratingand communicating and optimizingfor that specific environment, evenfor microclimates that may bedifferent within the wind farm. Theyare then able to send informationabout the cost and the quality of theenergy being generated to the utilitycompany. This way, the utility canplan to not use other energy sources,such as coal or gas, when wind ismore efficient. It’s all done with1GE’s Digital Wind Farm is a comprehensive hardware & software solution comprised of GE’s customizable 2 & 3MW wind turbine products,a predictive analytics software platform, and performance optimization controls technology that, over the course of a wind farm’s life, canimprove its energy output by up to 20% (as compared to an average, North American wind farm.) Source: https://renewables.gepower.com/wind-energy/technology/digital-wind-farm.html2Lidar is a detection system which works on the principle of radar, but uses light from a laser

Digital Transformation Review N° 0952GE’s Predix Platform –The Cornerstone Of GE’sDigital StrategyPredix is very much at the coreof your digital transformation.Can you explain the concept ofPredix and why you want tobecome a platform company?IfyouthinkoftherangeofindustriesthatGEisin–energy,transportation,healthcare – you realize that someof the basic capabilities are similar.You want to connect your machines,know how they are performing andpredict failure and maintenance.That’s the vision.To do that, we needed a platformthat would ingest, analyze, andpredict a vertiginous volume ofindustrial data with the right kindof security capability. It hadn’treally been built at industrial scale,so it needed to be.Why did you decide to open upyour platform?The more people that can bebuilding and contributing non-confidential data to the stack,the better the outcomes are. Thisis why we have opened up ourPredix platform to our customers –and even competitors – to enablethem to write applications on theplatform. We already have 11,000developers at this stage.We needed aplatform that wouldingest, analyze, andpredict a vertiginousvolume of industrialdata with the rightkind of securitycapability. It hadn’treally been built atindustrial scale, so itneeded to be.GE: How an Industrial Leviathan became a Digital GiantPredix, our cloud-based platformfor the Industrial Internet, whichprovides a digital infrastructure forthe wind farm, enabling collection,visualization and analysis of unit-and site-level data.With Predix, we arecreating a networkeffect and anintelligence effect.The more people youhave on the platformcontributing, thesmarter the wholesystem gets.So you wanted to create anetwork effect?With Predix, we are creating anetwork effect and an intelligenceeffect. The more people you haveon the platform contributing, thesmarter the whole system gets.You mentioned technologythat’s industrially scalable.How does Predix scale up withincreasing data volumes?We have created the concept of a“digital twin”, where we simulate inthe cloud every piece of machine wemake. As data comes in, the cloudconstantly runs simulations to makethe models that will one day predictserviceneeds.Theywillpredictthingsbefore they become catastrophic orbefore it costs a lot of money.

DIGITAL TRANSFORMATION REVIEWImplementing TheStrategy: Building,Acquisitions Or GreenfieldHow do you operationalizeGE’s digital strategy? Investing,Greenfield or acquisitions?I think we have done a little bit of all.What we have done especially wellis investing in digital startups thatwe can embed in our technicalstack. An example is Maana,which acts like a search engine forthe Industrial Internet. We haveinvested in startups from a ventureperspective and are also using theirtechnology as a part of our offering.So, as they grow, we grow.The creation of our new GE startup,Current, powered by GE – whichfocuses on energy efficiency, energymanagement, and on-site power– is an example of us launchingGreenfield operations. It can be aprettyprofoundshiftfora140-year-old business. Our startup goes tomarket in a different way. Themeasurements for the organizationare different, as is the way we driveour commercial strategy.While we have focused lesson acquisitions, we recentlyannounced the acquisition ofDaintree Networks, which leadsthe market in smart buildingcontrol, sensing, andenterprise IoT applications.Together, we will makebuildings of allsizes smarter,The creation of ournew GE startup,Current, powered byGE, is an exampleof us launchingGreenfieldoperations.Digital Transformation Review N° 09 53more energyefficient, and bethe gateway to newservices that create valuefor customers both in energyand beyond it.In the past, GE grew a lot throughacquisitions. Recently, we havefocusedontheorganicroute.Whensomething is new, you have togrow it. You can’t buy everything.We invested in technology andinnovation to grow from within –to grow ourselves.

Digital Transformation Review N° 0954The new formula ofsuccess is that youdon’t do it all yourself– you have to knowwhat you have to beuniquely good at.The new formula of success is thatyou don’t do it all yourself – youhave to know what you have to beuniquely good at. We may partnerwith some companies helping usdo some of the simulation andmachine learning. These can bethings that are not necessarily coreto our capabilities but which areimportant for the stack.GE: How an Industrial Leviathan became a Digital GiantPartnerships havehelped us advanceour capabilitiesreally rapidly.In the past, GEgrew a lot throughacquisitions. Recently,we have focused onthe organic route.When somethingis new, you have togrow it. You can’t buyeverything.With technology evolving sofast, is it still possible to havea long-term strategy? Do youstill have three- or five-yearstrategy plans?You still need to have a vision ofwhere you want to go or understandyour differentiation. But you haveto be much more adaptable. Maybeyour vision stays the same, but howyougettheremaychangefasterthanyou could have imagined. So, I thinkthe three- to five-year plans aremore vision setting. They are morelike scenario planning that tells youwhat the world might look like.In the fast-moving digitalenvironment, how can you buildquickly enough?Partnerships have helped usadvance our capabilities reallyrapidly. We are now working withCisco, Intel, Pivotal and manystartups. A lot more partnershipsare happening at GE and it doesn’talways require an ownership stage.

Industrial Leviathan to Digital Giant2011when GE started its digitaltransformation(source: https://www.ge.com/digital/sites/default/files/predix-platform-brief-ge-digital.pdf)-Beth ComstockGE’s DIGITAL JOURNEY in NUMBERSyear old company140We are about a third of the wayin our digital transformation1 billion USD run rateinvestments so far intodigital effortsObjective of15 billion USDin digital revenue by 202011,000 developersalready writingapplications on Predix50 million dataelements of industrialassets secured andmonitored everydayGreenﬁeldGE startup “Current,powered by GE”,focusing on energyefﬁciencyAcquisitionsDaintree Networks,smart buildingcontrol/ enterpriseIoTamongst othersOrganic GrowthInvestingMAANACurrent,powered by GEDaintreeNetworksPivotalMicrosoftOracleIntelCiscoin digital startups –Maana, a searchengine for theIndustrial InternetPartnershipsBeth ComstockWe invested intechnology andinnovation to growfrom withinGE’S DIGITAL STRATEGY

Digital Transformation Review N° 0956GE: How an Industrial Leviathan became a Digital GiantCultureGE is well over a century old.How did you adapt GE’s cultureto the digital world?We had to get leaner, more agileand react faster. We told ouremployees - “We are going to holdyou accountable for being faster.You can try something. It doesn’thave to be perfect every time.”Of course, this does not apply toeverything that we do – we wanta perfect flight for a jet engine.But for some of the other things,perfection is not required.We told ouremployees - “Weare going to holdyou accountable forbeing faster”.We launched FastWorks, ourlean startup method, which is allabout launching something in aminimally viable way. The keyprinciple is that you only fund whatyouneedtogettothenextstage of development.It’s like having ourbusiness leadersact like venturecapitalists – fundingthings earlierand faster,killing thingsquicker.You still need to havea vision of whereyou want to go orunderstand yourdifferentiation. Butyou have to be muchmore adaptable.

Digital Transformation Review N° 09 57DIGITAL TRANSFORMATION REVIEWHow do you encourage peopleto experiment and accept a veryiterative process?We did a massive overhaul ofGE’s incentive structure to betterreflect what we are trying to do.We are also changing how we fundprojects – implementing this seed/launch/ growth stage gate funding.Business units in the past mighthave said, “I made $5 million infive years.” Now, we would havea series of iterative questionsinstead. For example, “What canyou do with $50,000 in five weeksto validate that this is even a needin the marketplace?” And “Whatcan you do with $150,000 in threemonths to validate that we evenhave the technology that’s goingto be required?”We have not figured it all out butthat’s the transformation that’shappening real-time here.We did a massiveoverhaul of GE’sincentive structure tobetter reflect what weare trying to do.The companyhas to be morecollaborative, moreopen and reacteven faster.What is the culture you wouldlike for GE? How would youdefine it?I think the company has to bemore collaborative, more openand react even faster. We wantto instill a culture of permanentiteration – a culture obsessed withconstant improvement; a cultureof perseverance.Does the move of GE’s HQto Boston play a role in thischange of culture?Yes, I think it’s a great manifestationof our new culture and theacknowledgementthatweareamuchmore distributed company. We haveturned our headquarters into centersof expertise that are connected tothe outside world. The role of ourheadquarters is now more aboutbringing in new models from theoutsideandfindingwaystoadaptandtranslate them for our business units.Boston is also a city where there is alot of Industrial Internet capabilitydevelopmentgoingon.GovernanceYou created GE Digital. Whatwas the rationale behindcreating this new unit?We needed to get to scale fast. Youcan’t have five different businessesbuilding five different technologystacks and clouds. It does not makesense. We centralized the digitalcapabilities until we felt confidentwe had the heft we need while at thesame time creating that connectivityto the business unit and the market.So, it’s a tension. It’s neithercentral nor distributed, and you areconstantly toggling back and forth.Is there a dual reportingstructure?We have Chief Digital Officers (CDOs)for each line of business and theyare all part of the centralized digitalunit. They report in to our head ofdigital and their business units. Weneed to have that dual oversightto make sure the business needsare represented, but also the digitalneeds are not underwhelmed. OurCDOs have revenue numbers andproductivity numbers. Those roll upto the business leaders’ P&L. So, theyhave accountability in both places.They’ve got to get it built, and theyhave to make sure it gets rolled in away that the customer finds value.

We have ChiefDigital Officers(CDOs) for each lineof business and theyare all part of thecentralized digitalunit.Just get started –don’t over-analyzethings.The FutureHow do you see GE evolving inthe next ten to twenty years?We will still be selling hardware.You can’t fly a plane without anengine. You can’t create electricitywithout some kind of electricitypower generation. These industrieswill continue to exist. But more andmore of our revenue will be comingfrom new service models, from “asa service” and not just from the purehardware.Can you give us some examplesof these new service models?Let me give you an example of anew service we are incubating –inspection done by drones. Dronessurveying oil rigs in the sea andwind farms. There will be newapplications, new kinds of mash-upof the hardware and the software.But GE will continue to remain inits core industries, perhaps lookingat being more of a system partnerthan just a machine partner.What would you recommendto companies on how to handletheir shift to digital?Just get started – don’t over-analyze things. Pick an area to getsmart. The more you do, the smarteryou get. I also think partnering withothers who have the expertise is thefastest way to get there.Digital Transformation Review N° 0958GE: How an Industrial Leviathan became a Digital Giant

SHOULD YOU BECOME A PLATFORM?– Rita McGrath– Rita McGrath– Mark Jamison- Marshall Van Alstyne- Beth Comstock“Even a weak platform will outperform a strongproduct every time. If you are using a traditionalproduct strategy, just adding new and betterfeatures won’t work. This occurs because you won'tbe able to evolve fast enough with just yourinternal team.”“With Predix [GE’s cloud-based platform for theIndustrial Internet], we are creating a networkeffect and an intelligence effect. The more people youhave on the platform contributing, the smarter thewhole system gets.”“Being a platform is unavoidable if theaddition of extra users adds value towhat you are offering.”“The danger of being a platform is you are notreally in control. If your user communitydecides to go to some other platform, there isnot much you can do to keep them tied to you.”“I think a platform strategy makes sense forcompanies that have the belief they can becomethe industry’s leading platform. If you believeyou can be a platform for your industry like iOSor an Android are for their respective customersand partners, go for a platform strategy.”

Digital Transformation Review N° 0960Telstra: Securing a BrightDigital Future for One ofAustralia’s Most IconicOrganizationsMonty HamiltonDirector of Digital Operationsat TelstraTelstra is Australia’s leading telecommunications company, withrevenues of $26.6 billion in 2015 and 36,000 employees across20 countries, offering a full range of communications services andcompeting in all telecommunications markets. It aims to make digitalthe default channel for all key customer-facing activities, such as billing,payments and customer enquiries.Monty Hamilton is Director of Digital Operations at Telstra. He is responsiblefor the day-to-day running of Telstra’s Digital business across customersegments – Consumer, Business, Enterprise and Government channels. Priorto joining Telstra, Monty co-founded UBank – ubank.com.au – a direct bankowned by National Australia Bank. At Telstra, he also co-founded the largestdigital event in Australia – The Australian Digital Summit.Capgemini Consulting spoke to Monty Hamilton to understand more aboutTelstra’s shift to digital and the transformation of its customer experience.Telstra: Securing a Bright Digital Future for One of Australia’s Most Iconic Organizations

Digital Transformation Review N° 09 61DIGITAL TRANSFORMATION REVIEWWhen we started in2011, less than 20%of our customertransactions weredigital compared to56% in H1 2016.We are now a moredigital companythan we are aphysical company.Learning from Five Yearsof Digital TransformationHow and when did Telstra’sdigital transformation begin?We began five years ago with thecreation of Telstra Digital as abusiness unit. We brought togetherour online, mobile, social andecommerce initiatives to bolsterdigital sales and service capability.We first decided to focus ondelivering a much better experiencefor our customers through digitaltechnologies. Many of our customersactually prefer interacting withus using digital channels. Wehad to deliver on our customers’expectations of interacting with usdigitally. There are also considerableproductivity benefits for theorganization which can be realizedfrom a digital transformation.What have been some of the keyachievements so far?One of our key measures of successis the share of customer transactionsconducted on digital channels.When we started in 2011, less than20% of our customer transactionswere digital compared to 56% in H12016. We passed the 50% milestonein October 2015. We are now amore digital company than we are aphysical company.the very close collaboration betweenthe product or channel teams andthe digital unit that has helped us toattain our objectives.Can you say a word aboutTelstra Digital?Telstra Digital is not a separateentity or a separate organization.It’s a business unit tasked with theresponsibility of helping Telstratransform digitally. It’s not about onearea controlling the transformation– it’s about enabling the digitaltransformation base plan acrossthe organization. This is absolutelycritical as I have seen approacheswhere a digital unit alienates itselffrom the rest of the organization.But Telstra’s Digital Unit is here tohelp the broader organization – it isa center of excellence for digital. It isIt is the very closecollaborationbetween the productor channel teamsand the digital unitthat has helped us toattain our objectives.You started by investingmassively in IT systems. Whywas it so critical for your digitaltransformation?Like many incumbent organizations,our IT systems were built for ourthousands of team members to use inretailstoresandcontactcentersratherthan for our millions of customers.We had to completely transformour systems to enable direct digitalinteractions.We initially focused on three corecapabilities. First, we had to makesure that our systems would beresilient and support direct customertransactions. Second, we needed acapability in identity management tobringourcustomersandtheirproductholdings together into a singlecustomer view. The third piece was

Digital Transformation Review N° 0962the customer channel. We providedweb and app-based customer servicesthrough the Telstra 24x7 app. Today,over 2.9 million customers activelyuse the Telstra 24x7 app. It’s thenumberoneAustralianapplicationontablet, and the second most popularAustralian application on smartphone. Our objective is to minimizethe effort required for our customerswhen they interact with us.Telstra launched its ‘Digital First’program in 2014. What was theobjective of this initiative?We began our digital transformationin 2011 by focusing on the customerexperience.In2014,westartedthinkingmore broadly: how could we use thedigital design, build and run modelin place with our customer facingdigital transformation to change theexperience of the Telstra employees,contact center team members or thefield technicians who are visiting ourcustomerseveryday?Our Customer Advisor Tool (or CAT asit’s known internally) took the exactsame design principles for customerfacing digital apps and applied these toour internal workforce. Today 1,800 ofourstoreteamand7,000ofourcontactcenter team use the Customer AdvisorTool each day. Ahead of traditionalCRM interfaces, the application isoperated on our digital architecturewith a responsive interface so it workson tablets - in our stores we’re havingconversationsontheshopfloorinsteadofbehindthecounter,theapplicationisalsofasterandeasierforourconsultantsto get all the relevant information tohelp a customer saving around 2 and ahalfminutesoncertaincalltypes.We also thought about how we couldtruly connect our customers betweendigitalchannelsandretailstores.Today,over300Telstrastoreshavelow-energyBluetooth beacons installed. When acustomer walks into a store with theTelstra 24x7 app and with Bluetoothenabled on their phone, the store isaware that our customer has enteredand customers can interact with thestore from their phone. We’re in theearlydayshere,howeverwehavesomegreat use cases planned to benefit ourcustomersintheyearahead.Telstra also launched acommunity / crowdsourcedcustomer support approach. Howdoes it work and how successfulhas it been?Crowd sourcing has been part of ourdigital journey since day one . Today,nearly one million Australians visitourcustomercommunityeachmonth.In our digital community, customershelp other customers resolve theissues they face. More than 60% ofvisitors to the community now findthe answer to their questions fromsomeone within the community.It is a win-win scenario for everyone– less effort for our customers anda productivity benefit for us andour shareholders. And, even moreimportantly, it enables us to getcompletely transparent feedbackfromourcustomersinacollaborativeenvironment. This helps us improveour products.Crowd sourcing hasbeen part of our digitaljourney since day one.60% of visitors tothe community nowfind the answer totheir questions fromsomeone within thecommunity.In the spirit of our ‘Digital First’program, we decided to extend thiscrowd support model to our internalorganization. If an initiative works sowell with customers, why not createsomething similar internally? So, webuilt a peer support community to tapinto the knowledge of our employees.Today, over 17,000 of our employeeshaveusedthispeersupportcommunity.It is transforming the way we deliverTelstra: Securing a Bright Digital Future for One of Australia’s Most Iconic Organizations

Digital Transformation Review N° 09 63DIGITAL TRANSFORMATION REVIEWservices and launch our products. It isnow easier to train, coach and developour employees with the peer supportcommunity.Telstra’s Digital Strategy– The Long-Term OrganicRouteTelcos have chosen differentstrategic paths for their digitaltransformation. Some arelaunching digital brands oradopting a Greenfield approach.Telstra clearly chose the long-term transformation route.What was the rationale for thischoice over say a Greenfieldapproach or digital sub-brands?It’s important to understandthe significance of Telstra as anorganizationinAustralia.Weareoneof the most recognized brands in thecountry and there is an enormoussense of national pride in ourcentury-old history.Over 17,000 of ouremployees have usedthis peer supportcommunity.If an initiativeworks so well withcustomers, why notcreate somethingsimilar internally?Our vision for digital was – and stillis today – to create a bright future forTelstra in a digital world. It wasn’tabout building something new andreplacing things we’ve got. We havean incredible brand, culture, historyand technology infrastructure. Ourmobile network is consistently ratedas one of the best in the world. Wehave an incredible work process.We didn’t have a starting point ofbroken assets. We wanted to builda resilient organization – transformour company for the very long-term.It was a logical decision to buildupon the organization we had ratherthan through a brand strategy or aGreenfield approach.

Digital Transformation Review N° 0964Many companies are goingdown the acquisition route toaccelerate their transformation.Large organizations like Wal-Mart have acquired dozens ofstartups. Is Telstra consideringthe acquisition route?We have and will continue to makestrategic investments to help ustransform our business. TelstraVentures, our corporate venturecapital group founded in 2011,invests in high-growth opportunitiesthat enable us to offer new productsandservicestoourcustomers.During2015,wemadeninenewinvestments.Telstra Ventures’ portfolio nowconsists of investments in 20companies in Australia, the UnitedStates and Asia. The end objectiveis to help our customers throughbetter experience and shareholders inmaking the right investment.These investments present anincredible portfolio of capabilityfor us to leverage internally to helpaccelerate our digital transformation.For example, we’re using capabilityfrom investments in Box forenterprise storage, DocuSign forcontractacceptance,Ooyalaforvideowith our customers and TeleSign forsecurity.You talked about ventures, couldyou say a word about yourstartup accelerator?We launched our startup acceleratorprogram called muru-D four yearsago. ‘Muru’ is an aboriginal wordmeaning “path” and the ‘D’ standsfor “Digital”. muru-D identifies andsupports startups to create valuabletechnology products and servicesthrough a six-month accelerationprogram. We provide the facilitiesand support such as real estate,technologyandaccesstotheresourcesof Telstra and we take a small equityshareupfrontinthebusiness.muru-Dlaunched in Singapore in 2015 andwe hope to attract the region’s bestdigital talent and successful startups.No Digital Transformationwithout a Change inCultureIn our research, we foundthat culture is one of themajor obstacles to digitaltransformation. How did youcreate a digital culture atTelstra?The culture at Telstra was wonderfulbut we didn’t have a digital culture.And this was clearly an issue. Youcan invest millions of dollars intechnology but if you don’t have aculturethatenablesyoutocollaborateacross the organization, then nothingwill change.Telstra: Securing a Bright Digital Future for One of Australia’s Most Iconic OrganizationsYou can invest millionsof dollars in technologybut if you don’t have aculture that enables youto collaborate acrossthe organization, thennothing will change.

Digital Transformation Review N° 09 65DIGITAL TRANSFORMATION REVIEWTelstra’s Digital JourneyKEY RECOMMENDATIONSIn 2015$26.6employeesbillion revenue36,000 across 20countriesFocus on employeesand culture ﬁrst“Rapidly iterate” –customer service app:29 releases in 4 yearsBecome an enabler to digitizationin the organization and not acontroller or retailer of digitization1 2 3Digital InteractionsCrowdsourcing – For CustomersCrowdsourcing – For EmployeesTelstra’s Investments in StartupsDigital customer transactions were< 20% 56%in 2011 in H1 2016Over 17,000 of Telstra'semployees have used the company'speer support community60% Telstra Ventures’portfolioinvestments in 20companies inAustralia, the UnitedStates and Asia=of visitors to the community ﬁnd theanswer to their questions from someonewithin the community20112014onwardsDigital TransformationLaunched – Focus oncustomer experienceLeveraging digitalcapabilities created toimprove the experienceof employeesKEY DATESSOME KEY ACHIEVEMENTS OF TELSTRA’S 5-YEAR DIGITAL JOURNEYTELSTRA’S KEY FIGURES

Digital Transformation Review N° 0966There is not one specific activitythat enables a cultural change. It isa series of initiatives, be it hiring ornew work approaches. For example,one of the changes we enabled in ourdigitalteamisrapidprototyping.Thatwas critical as you can’t spend threeyears building something. What youinitiated three years ago will not bewhat a customer wants today. Youhave to be prepared to rapidly iterateand have a number of release cycles.We operate through an agile modelwhen it comes to our technologyand digital development practice.And this has really helped us createa culture of agility and collaborationwithin the organization.There is another very fundamentalculture change that we implementedin our organization. For over fiveyears now Telstra has put ‘improvingcustomer advocacy’ – measured byour net promoter score – at the topof our strategic pillars. All employeescan view the net promoter scorefor the specific channel they areresponsible for on a daily basis.Every morning our executive teamreceives the net promoter score forthe previous day. It serves as a verysignificant cultural proof point.You don’t make decisions withoutcustomers’interestatheart.Itenableschange in traditional decision-making processes. People at all levelsof the organization can speak up onthe importance of our customers.I would say that’s one of our mostsignificant cultural changes acrossthe organization.Every morning ourexecutive teamreceives the netpromoter score forthe previous day.Focus onemployees andculture first.Telstra: Securing a Bright Digital Future for One of Australia’s Most Iconic OrganizationsAre there traditional companiesthat you admire for their digitalachievements?I have been impressed by thetransformation of the travel industry.Qantas, for example, has been doingsome really interesting things onthe digitization of their customerexperience–connectingtheirphysicalpresence at check-in, around theairport and on the plane withsmartphone apps that make traveleasier and more enjoyable – andprobably saving them a lot ofmoney at the same time.

Digital Transformation Review N° 09 67DIGITAL TRANSFORMATION REVIEWWhat would be your keyrecommendations to largeorganizations on how to handletheir shifts toward digital?One, focus on employees and culturefirst – it is the people and the culturethat will enable the transformationand put technology to work.Encourage your team to embracetechnology to solve problems andimprove customer experience.Two, rapidly iterate and have anumber of release cycles alongsideyour traditional or legacy IT –experiment with selective customersand industrialize when there is atrue need. Our web-based customerservice app ‘My Account’ is a greatexample – between our IT and digitalteam, we have had 29 releases of thisapp over the last four years.Three, become an enabler todigitization in the organizationand not a controller or retailer ofdigitization. The opportunities togrow and succeed as a result ofdigital transformation are available toeveryone in your organization – notjust a digital business unit.

Digital Transformation Review N° 0968Jawwy: How a SaudiDigital Venture is Rewritingthe Telecom RulebookSubhra DasChief Executive Officer,Jawwy from STCJawwy is a new digital mobile service that was launched by Saudi TelecomCompany (STC) in May 2016. STC is the largest telecommunication servicesprovider in the Middle East & North Africa, with revenues of $13.52 billion in2015. It has some 100 million customers worldwide and owns a fiber-optic cablenetwork spanning 137,000 kilometers across Asia, the Middle East, and Europe.STC is the leading telecom operator in the Kingdom of Saudi Arabia and itsinternational presence extends across Kuwait, Bahrain, Turkey, Lebanon, Jordan,Malaysia, India and South Africa.Subhra Das is the CEO of Jawwy – STC’s digital venture. Previously, he was EVPof the Consumer and Digital Business Unit and Head of Innovation at du, UAE’spremier telecom operator. At du, Subhra successfully developed and executed aninnovation-led strategy to drive du’s rapid ascent to a record 45% market sharewithin 5 years from launch in one of the world’s most highly penetrated mobilemarket. Subhra has led 6 mobile operator start-ups in various capacities acrossthe globe and is also a digital entrepreneur. He is an alumnus of Harvard BusinessSchool where he studied innovation under leading thinkers such as Dr ClaytonChristensen and Dr Michael Tushman.We spoke to Subhra to understand how a digital-only mobile operator can bettermeet consumers’ evolving needs.Jawwy: How a Saudi Digital Venture is Rewriting the Telecom Rulebook

Digital Transformation Review N° 09 69DIGITAL TRANSFORMATION REVIEWGoing Greenfield – theOnly Way to Rapidly MeetConsumers’ Digital NeedsSTC is the largest telecomoperator in the Kingdom ofSaudi Arabia (KSA). Whydid you decide to launch anindependent digital venture?The market in KSA stands out inmany respects. Sixty-seven percentof the population is below 30 yearsof age. Saudis are some of the mostprolific users of social media in theworld and have an ever-increasingappetite for all things digital, with190 million YouTube videos viewedin KSA daily. That translates to sixYouTube views per-citizen per-day,which is the highest in the world.Saudi Arabia also has the world’shighest penetration of Twitteramong internet users.As Saudi millennials are so digital-savvy, they expect a completelynew kind of experience that isvery different from what today’soperators can provide. They expectan experience that is real-time, on-demand, online, DIY and social (or‘ROADS’ for short). This is very muchon par with the experience offered bythe likes of Google, Apple, Facebookand Amazon – seamless, intuitive andverysimple.Currentoperatorsstruggleto meet these needs as they are oftenconstrained by their legacy systems,mindset and culture. This creates animmense frustration for consumersat every stage of the experience –from buying to using the service orcontactingcustomersupport.We concluded that we neededa completely different way toreach out to Saudi millennials. Weneeded to reimagine the mobileservice experience for the digitalgeneration. This was not somethingthat could be done overnight givenexisting organizational and systemsrealities. So, STC decided to create acompletely new digital venture/BU –Jawwy. When you want to reimagineand carve out a new experience, anddo that rapidly, you have no choicebut to go Greenfield. You don’t wantto be constrained in any way by theexisting organization’s operatingmodel, culture and systems. Hencethe Greenfield route was a naturalchoice. We are building a new digitalmobile operator model with theorganizational DNA and agility of aninternetplayer.Webelievethisishowwe will positively disrupt the mobileservice experience in Saudi Arabia.What is Jawwy’s valueproposition and ultimateobjective?Jawwy is a complete re-imaginationof the mobile service experience forthe digital generation in KSA. InArabic Jawwy means ‘my own wayof doing things’ or ‘my own style’.Customers order the Jawwy SIM,have it delivered to their doorstepor pick up from a convenient Collectlocation, and download the Jawwyapp to start using our services.They can build, share and managetheir plans in real-time via the app.Other features of the app includeinstant service activation throughthe product catalogue and real-timecontextual offers and notifications.New pricing plans and offers canbe launched within a day or two.The customer care model is digital,featuring self-help, online, socialand peer-to-peer support usingcrowd-sourcing. All our marketingcommunications are online andWe are building anew digital mobileoperator model withthe organizationalDNA and agility ofan internet player.

Digital Transformation Review N° 0970Our objectives are threefold. One,capturetheKSAyouthmarketwhereSTC can do more. Two, future proofSTC’s market position. And three,establish STC as a lead innovator onthe global stage.This is atransformation of thecore of how telecomservices are designedand delivered.social media based. We havedesigned a best-in-class customerexperience that is fully digital end-to-end. And we are addressing thecore business of telecom operators.We are not undertaking digitalinitiatives at the edges yet, such asmobile health or mobile money. Thisis a transformation of the core ofhow telecom services are designedand delivered.Jawwy: How a Saudi Digital Venture is Rewriting the Telecom RulebookWhen you wantto reimagine andcarve out a newexperience, and dothat rapidly, youhave no choice butto go Greenfield.How different is Jawwy fromthe second brands launched bytelecom firms in Europe?Operators in Europe have launchedtheir second brands mainly to createlow-costalternativesandasareactionto the price pressure comingfrom MVNOs. But, Jawwyis not a price play, but adigitalexperienceplay.Can you describeJawwy’s operatingmodel and systems?Jawwy is a BU within STCwithfulllatitudeandsignificantautonomy to design, develop,deliver and operate this unique end-to-end digital experience. A specialSupervisory Board oversees theworkingoftheBU.Jawwyhasitsownstrategy, commercial, technology andsupport functions while being reliantonSTC’snetworkandregulatoryareas.Jawwy employs a lean organizationstructure and puts special emphasison recruiting top global talent andfostering an organization culturesimilar to the DNA and agility of aninternetplayer.

Digital Transformation Review N° 09 71DIGITAL TRANSFORMATION REVIEWJawwy has fullcontrol andownership ofIT systems thatintegrate withSTC’s network.Jawwy is not a priceplay, but a digitalexperience play.Design a CustomerExperience Digitally fromthe Ground UpHow did you design thecustomer experience?We hired a leading team ofethnographers from New York whoconducted ethnographic researchon the digital habits of millennialsand their telecom pain points. Thesepain points included - confusingtariff plans, data usage tracking,rechargeissues,billingandpaymentchallenges, poor buying experience,disillusionment with one-waybrand communication, andnew digital technologies to movethe smartness of telco back-endsystems to the front-end usingan app, thereby enabling real-time and unprecedented masspersonalization experiences whenit comes to service activation andusage management of plans. Toaddress the buying experience, webuilt full e-commerce capabilitiesfrom the ground up, complete withintegration with several ‘last-mile’delivery firms and a nationwidenetwork of Click & Collect outlets.On the support side we invested inseveral social media technologiesand new age contact centersolutionsincludingcrowd-sourcing.The challenge is about making theexperience seamless across thecustomer journey. We accomplishedthis by using approaches like singlesign-on and login using socialmedia credentials. Our customeraccounts are also linked to theirsocial IDs, which enables a greatexperience.Jawwy has full control andownership of IT systems thatintegrate with STC’s network. Giventhe need to provide an end-to-enddigital experience, Jawwy partnerswith several new-age SaaS, PaaSand IaaS providers. This providesmultiple benefits, including fastertime-to-market and responsiveness,agility, faster scaling and bettereconomics.extremely weak service support.We also looked at the evolvingneeds and wants of this segment.Millennials are already used to asignificantly enhanced level ofexperience delivered by over-the-top (OTT) players.It was very clear that millennialsseek a real-time experience offeredonline and through an app andwith do-it-yourself (DIY) andsocial features. We then had torely on creativity, great design andcutting-edge tech to address thepain points and their needs usingthe power of digital. We focused onsimplification of the experience andpartnered with leading design firms.How did you use digitaltechnologies to enhance the userexperience?Early in our journey we designedthe systems architecture for adigital telco based on reimaginationof the customer experience. Wethen looked at cutting-edge techavailable in the market and movedforward with the right partnerships.Some of the key partners are SiliconValley firms with new age tech,app and online solutions backedby cloud-based and virtualizedplatforms. Our partnership withItsOn is an example of using

Digital Transformation Review N° 0972The Importance ofHaving an IndependentGovernance StructureCould you elaborate on thegovernance aspects of runningGreenfield operations within alarge organization?Given the need to have a freshapproach to the operating model,culture and systems – which willbe different from the approach youTelecom operatorshave to figure outways to keep theexploitation businessand the exploratorybusiness apart.Jawwy: How a Saudi Digital Venture is Rewriting the Telecom RulebookCustomer supportin the telecommarket is very timeconsuming andhighly frustrating.We opted not tohave an inboundcall center and havecompletely movedthe support serviceexperience to digital.How about the customersupport?Customer support in the telecommarket is very time consuming andhighly frustrating . Customers haveto select the correct options and arekept waiting to talk to an agent.We opted not to have an inboundcall center and have completelymoved the support serviceexperience to digital. Our supportfeatures include new age self-help,social, peer-to-peer, online chatand email-based applications.We also have an excellent searchoption, which is dynamic, andhelps customers troubleshoot alot of issues themselves. We wantour customers to help each other.We have therefore created a usercommunity similar to Giffgaff,the UK-based MVNO, which reliesmostly on community-basedcustomer service.What was the timeframe frominception to launch for Jawwyand the investment involved?Jawwy BU was set up in in Q12015. It has been about fivequarters since inception and welaunched in May 2016. STC’sinvestment in Sapphire to date hasbeen extremely modest and is inline with lean start-up approaches.will find within large organizations– it is important to have a fairlyindependent governance structurewith a Supervisory Board. In ourcase,theSupervisoryBoardischairedby STC Group’s CEO, which ensuressmooth working with the wider STCorganization and reduces friction.We are also privileged to have CEOsof other STC Group companies onour Supervisory Board, which givesus access to a broad repository ofexpertise. Our Supervisory Board isalso diversified, with young digitaltalent,andincludingaBoardmemberfrom one of the world’s leadingSilicon Valley-based digital firms.

Digital Transformation Review N° 09 73DIGITAL TRANSFORMATION REVIEWThe Saudi Market = A very Digital-Savvy PopulationWhy Set Up a Greenfield Digital Venture?A Lean StartupApproach190mof the population isbelow 30videos viewed dailythe highest in the worldvideos/day/citizen,6Highest penetration ofTwitter among InternetusersSTC – the largest telecom operatorin the Middle-East and North AfricaJawwy - How a Saudi Digital Venture isRewriting the Telecom RulebookUSD 13.5bnrevenue100 millioncustomersMillennials expect a newkind of experience - onpar with what Google,Apple and Amazon offerAn experience that isReal-time,On-demand, Online,DIY and SocialNot something that canbe offered overnightgiven the organizationaland systems constraintsGoGreenfield5 Quartersto Set Up a Greenfield OperatorModestInvestments }} &

Digital Transformation Review N° 0974Incumbent OperatorsNeed to Carve OutCompletely Digital EntitiesTelecom operators arestruggling with their digitaltransformation. What do youthink are the main reasons andwhat advice would you offerto large telecom operators inEurope or the US?Digital transformation is, of course,anarduoustaskfortelecomoperators.Onewondersifdigitaltransformationis actually an oxymoron, because itrequires a change in the DNA of anexisting organization.Existing telecom organizations areessentially in exploitation modewhenthedigitalagendaisactuallyanexploratory business. In the words ofWith the rightgovernance andoperating model, awell balanced teamof digital and telcoprofessionals, and theright partnerships,one can makesignificantinroadsand fast.DrMichaelTushman,myprofessoratHBS, an “exploitation business killsthe exploratory business when theyare together.” So telecom operatorshave to figure out ways to keepthe exploitation business and theexploratory business apart.Operators in Europe and the US arevery familiar with the issues theyface, and the options they have, indigital transformation. One optionis around creating what Dr MichaelTushman and Dr Charles O’Reilly callthe “ambidextrous” organization –one organization, two cultures. Theother option is to create a spinoff.Or a combination of both. The finalsolutionalsodependsontheoperator’sdigital maturity and the regulatoryconditionsinthelocalmarket.Our experience has shown that withthe right governance and operatingmodel, a well balanced team ofdigital and telco professionals, andthe right partnerships, one can makesignificant inroads and fast.Jawwy: How a Saudi Digital Venture is Rewriting the Telecom Rulebook

– Subhra Das–Rita McGrath- Mark Jamison- Beth Comstock“Be really bold in your thinking. You won’t succeedif you make incremental steps. It’s all about lookingat where the future is and working backwards; nottrying to take incremental steps forward. And thathas implications for talent, culture andinvestments. What digital transformation requiresis a radical re-imagination of your business.”“One, focus on employees and culture first – it is thepeople and the culture that will enable thetransformation and put technology to work. [...]Two, rapidly iterate and have a number of releasecycles alongside your traditional or legacy IT –experiment with selective customers andindustrialize when there is a true need. [...]Three, become an enabler to digitization in theorganization and not a controller or retailer ofdigitization.”“Just get started – don’t over-analyze things.Pick an area to get smart. The more you do, thesmarter you get. I also think partnering withothers who have the expertise is the fastest wayto get there.”“Existing telecom organizations areessentially in exploitation mode when thedigital agenda is actually an exploratorybusiness. […] Telecom operators have tofigure out ways to keep the exploitationbusiness and the exploratory business apart.”“The first thing is to get an inventory of digitaland non-digital initiatives in innovation,business development and product portfolio. […]Step two - organizations need to develop a pointof view about the future for a five- to eight-yeartimeframe. […] The third step is to walk back-ward from that future and ask what are theactions needed to move to the envisioned future.”YOUR RECOMMENDATIONS TO LARGE ORGANISATIONSON HOW TO HANDLE THEIR DIGITAL TRANSFORMATION– Monty Hamilton

Digital Transformation Review N° 09 77DIGITAL TRANSFORMATION REVIEWWorking with the StartupEcosystem

Digital Transformation Review N° 0978The Rise of Innovation Empires WorldwideThe Rise of Innovation Empires WorldwideBy Brian Solis – Altimeter @ Prophet, Jerome Buvat and Amol Khadikar, Capgemini ConsultingSilicon Valley No Longerthe Capital of CorporateInnovationFast forward a 100 years from HenryFord’s assembly line innovations,which sent shockwaves through themanufacturing industry, and youwillfindFordinthemidstofanotherfundamental transformation: fromautomobile company to provider ofmobility services.A significant factor in thistransformation is the company’sSilicon Valley innovation center.The center has very quickly becomean audition stage for technologystartupsthatarelookingtoshowcasehow their interface technologies canenhance the driver experience forFord customers. A Ford executiveexplains how this inflow of ideasprovides a great forum for jointlyexploring new possibilities, saying:“We get hundreds coming to ourdoors in a year in our SiliconValley office alone […] Sometimeswe think that the ideas are a littleoff the wall and they might not beready for a vehicle yet, but it’s stillreally interesting to see what peopleare looking at1.” Ford opened thisfacility in 2012, expanded it inJanuary 2015, and now housesnearly 100 employees who focus onacceleratinginnovationinmobility,connectivity, autonomous vehicles,customer experience and big data2.The center has launched fourteenmobility hackathons since 2014and is partnering with Nest andother local initiatives to reimagineurban transportation.This ability to build fruitfulrelationships with a widespectrum of technology startupsis one of the key reasons thatlarge and traditional companiesset up innovation centers. Therising importance of innovationcenters is a development thatwe (Capgemini Consulting andBrian Solis of Altimeter Group, aProphet company), studied as partof the industry’s first analysis of theglobal trend in July 2015. Almostone year later, the time is right toupdate our research to examine thecenters that have opened since thenand identify new developments.Silicon Valley still remains thehub of the world’s most dominantinnovation “empire” – a locationof a thriving innovation ecosystemwhere innovation centers cluster.However, as the innovation centerphenomenon has continued tospread globally, a number of new‘empires’ have emerged whereinnovation centers are flourishing.From July 2015 (when our previousresearch was published) to February2016, 56 new innovation centershave opened in 20 countries and 11more centers are planned to opensoon (see Figure 1).Over the last year, we witnessed therapid rise of Asia as a destinationfor innovation centers (see Figure2). Compared to our previousresearch, Asia has seen a 29% risein the number of innovation centersbeing launched:

Digital Transformation Review N° 09 79DIGITAL TRANSFORMATION REVIEW*Maps not to scaleBangalore (4)Mumbai (1)Nashik (1)Dubai (1)Abu Dhabi (1)Herzliya (1)Yakum (1)Beijing (2)Singapore (3)AsiaToronto (1)Kitchener (1)Ferndale (1)Everett (1)Boston (2)Medellin (1)Sao Paulo (1)Atlanta (3)Melbourne (2)Sydney (2)North and South AmericaAustraliaParis (2)Naas (1)Belfast (1)London (4)Gloucestershire (1)Merseyside (1)Western EuropeSilicon Valley (5)Irvine (1)Pasadena (1)Berlin (1)Darmstadt (1)Figure 1: Innovation Centers Launched Between July 2015 and February 2016Source: Capgemini Consulting and Altimeter Analysis

Digital Transformation Review N° 0980The Rise of Innovation Empires Worldwide■■ Singapore: The city state isfast emerging as a Fintechhub in Asia. UBS launched aninnovation center in Singapore,focusing on creating innovativecustomer propositions arounddigitalwealthmanagement3.■■ India: The country has seen asignifiantincreaseinthenumberofinnovation centers, often centredon Bengaluru, which some havedubbed the “Silicon Valley ofIndia”.Itisestimatedthat$9BillionwasinvestedinstartupsinIndiain20154. In this fertile environment,Airbus and Visa have set upinnovationcentersinIndia.■■ Australia: The country is a newentrantontothelist,withHuaweiTechnologies choosing to locatea center there. In addition, localcompanies Telstra and InsuranceAustralia Group also set upinnovation centers in SydneyandMelbourne.Top 10 LocationsIn July 2015Top 10 Locationsin February 2016Silicon ValleyLondonParisSingaporeTokyoShanghaiBerlinMunichTel AvivChicagoSilicon ValleyLondonParisSingaporeBangaloreTokyoShanghaiBerlinMunichBoston02030405060708090110Figure 2: Top 10 Locations for Innovation Centers, WorldwideSource: Capgemini Consulting and Altimeter Analysis

Digital Transformation Review N° 09 81DIGITAL TRANSFORMATION REVIEWIndia: The New Innovation Destination of ChoiceIndiahasbeenrisingintheranksoffavoritedestinationstoopeninnovationcenters.OurpreviousresearchidentifiedeightinnovationcentersinIndiainJuly2015.Indiahassinceseeneightmoreinnovationcentersopen their doors. Bangalore has been the most favored city with four new innovation centers. Bangaloreis home to several billion-dollar Indian startups such as: Flipkart, InMobi and Mu Sigma, and attractsworld-class technology talent and investments. Among the new innovation centers opened here are:Airbus’ BizLab, which indends to bring together startups and Airbus’ internal entrepreneurs; and Visa,whose new technology center in Bangalore will house 1000 developers accelerating development of nextgenerationpaymentsolutions.GlobalfirmsareshowinginterestinotherIndiancitiesaswell.Forinstance,TriMas Corporation – a diversified global manufacturer of engineered and applied products – opened aninnovation center in Delhi to focus on driving innovation across its range of packaging solutions, whilePuratos, a leading global food ingredient company, launched an innovation center in Mumbai.Source: Travel Daily Media, “Airbus opens innovation centre in Bengaluru”, November 2015; BusinessWire, “VisaOpens Technology Center in Bangalore; Accelerates Digital Commerce Globally”, August 2015; TriMas Corp,“TriMas’ Rieke Establishes Global Innovation Center in India”, December 2015; IIFL, “Puratos India launches a FoodInnovation Center in Mumbai”, July 2015How can Innovation CentersSuccessfully Scale the Slippery Slopeof Digital Innovation?It is extremely challenging to makea success of innovation centers. Aseasoned innovation expert andsenior executive at a leading globalbank told us: “About 80 to 90percent of innovation centers fail,and end up being a massive wasteof resources.” Such high failurerate results from a slippery slope ofchallenges that innovation centersmust overcome to succeed in digitalinnovation. The challenges rangefrom lack of leadership supportand an unclear focus to companies’inability to scale the innovationat an enterprise level. Leadingcompanies avert these perils byfactoring critical success factorsinto their journey. These factorsbroadlyfallintothreephases:layingdown the foundation of vision andgovernance, harnessing talent andpartnerships and delivering on thecore promise of innovation (seeFigure 3).

Digital Transformation Review N° 0982Garner CEOSupportEnsure BusinessUnits’ InvolvementHarness Talent andPartnershipsDeliver on the CoreInnovation PromiseLay Down the Foundationof Vision and GovernanceCreate aCross-Functional TeamHire Employees thatThrive in BothStructured andUnstructuredEnvironmentsEngage withDiverse Partnersbut Use SoundJudgment WhenSelecting ThemMaintainFocus by CullingUnfeasible ProjectsDeﬁne the RightPurpose and FocusSet Up aGovernance ModelExtendInnovationAcross theEnterpriseProve Value withQuick Wins andFollow ThroughConclusion: the inexorable rise ofinnovation centers worldwideStudies of empires often focuson their “rise and fall”. Butfor innovation centers, we arewitnessing a phenomenon of“rise and rise some more” aslarge, established companiesseek a proactive approach tocompetitivenessandalsoastrategicdefense and offense around digitaldisruption. As the changing focusareas show, organizations areprepared to transition to the nextlevel of their innovation empire-building. The days of limitedexperimentation are disappearingquickly, and companies arereaching out far and wide to buildgenuine partnerships and turncreative ideas into tangible results.It’s now becoming a matter ofinnovating large or risk fallingbehind.Figure 3: Critical Success Factors for Innovation CentersSource: Capgemini Consulting and Altimeter, “The Innovation Game: Why and How Businessesare Investing in Innovation Centers”, July 20151. Tech Times, “Ford’s Research And Innovation Center Has Become An Audition Stage For Startups’ Interface Technology”, April 20162. Company website; Ford, “Driving Innovation in Silicon Valley”, Accessed May 20163. Business Times, “UBS launches innovation centre in Singapore”, June 20154. The Hindu, “2015 was the biggest year for Indian Startups”, January 2016The Rise of Innovation Empires Worldwide

– Beth Comstock– Rita McGrath– Subhra Das- Beth Comstock- Beth Comstock“In the past, GE grew a lot through acquisitions.Recently, we have focused on the organic route.When something is new, you have to grow it. Youcan’t buy everything. We invested in technologyand innovation to grow from within – to growourselves.”- Rita McGrath“The dilemma is if you are not good at innovation,you have to do acquisitions. But if you are not goodat innovation, it’s also very hard to judge the valueof the acquisitions.”“Partnerships have helped us advance ourcapabilities really rapidly. We are now workingwith Cisco, Intel, Pivotal and many startups. A lotmore partnerships are happening at GE and itdoesn’t always require an ownership stage.”“The new formula of success is that youdon’t do it all yourself – you have toknow what you have to be uniquelygood at.”“If you can’t change fast enough you buy. The troublewith acquisition relative to organic growth is it isvery expensive. Companies that have survived theirstartup phase are going to charge a hefty fee to bebought by a large company that hasn’t been able toinnovate for itself.”“When you want to reimagine and carve out anew experience, and do that rapidly, you have nochoice but to go Greenfield. You don’t want to beconstrained in any way by the existingorganization’s operating model, culture andsystems. Hence the Greenfield route was anatural choice.”EXECUTING YOUR DIGITAL STRATEGY – ACQUISITIONS,ORGANIC GROWTH, GREENFIELD OR PARTNERSHIPS?

Digital Transformation Review N° 098415 Startups to Watch andWhat Their Value PropositionCan Teach Your BusinessBrian SolisPrincipal Analyst at Altimeter@ProphetBrian Solis is principal analyst at Altimeter, a Prophet company.Brian has written several best-selling book on the future ofbusiness. His latest book, X, explores the intersection wherebusiness meets design and how businesses can architect meaningfulexperiences for the 21st century (Xthebook.com). He’s also the co-authorof several research projects on innovation with Capgemini Consulting.You can follow him at his site (briansolis.com), on Twitter (@briansolis),Facebook (TheBrianSolis) or on any popular platform (briansolis).In this edition, Brian shares his perspective on 15 startups to watch thisyear.15 Startups to Watch and What Their Value Proposition Can Teach Your Business

Digital Transformation Review N° 09 85DIGITAL TRANSFORMATION REVIEWEvery year, digital innovation maintains its amazing momentum. New technology trends emerge that captivateourattention.Existingbreakthroughsthatwe’vewatchedgrowanddevelopfinallytipintomarketproliferation.In just the last year alone, we’ve witnessed huge strides in augmented and virtual reality, artificial intelligence,robotics, and transportation. All of these new areas of innovation are blurring the line between science fictionand reality. Yet, they’re just some of the trends changing everything in our work and life.So, who are the companies changing the world right now? Honestly, the answer is more than we can includein one list. There are incredible companies all over the world paving the way for revolutions and evolutionsin every industry. I assembled a short list of “15 Startups to Watch,” but there are so many more that deserveattention.The moment Elon Musk introduced the concept of Hyperloop - anew high-speed transportation initiative where passengers andgoods are propelled in capsules through tubes via linear inductionmotors and air compressors - entrepreneurs and investors jumpedon board. For now, two companies to watch are Hyperloop-Oneand Hyperloop Technologies (HTT). Hyperloop-One demonstratedan open air test in the Nevada desert recently. At the same time,HTT revealed the creation of a new composite that is purportedly10x stronger than steel and 5x lighter than aluminum. Bothcompanies are very young, but determined to deliver operationaltransportation systems as soon as 2020.Imaginehavingaccesstoallofthehotteststartupsandproductsbeforethe rest of the world knew about them, including the major investors.That’s Product Hunt. It’s a Reddit-like community of hyperactiveusers who all work in new tech in some shape or form. They submittheir latest discoveries or creations and let the community take itfrom there. Every day, visitors “up-vote” new products, startups,apps, podcasts, books and websites to collaboratively define what’smost popular that day. Because the community is so high-energy andcommitted, they help shape tech trends much in the same way Reddithelpspushinternetmemes.Ifyouwanttolearnmoreaboutthestartupworld, it’s also a great place to simply hang out. For example, manyentrepreneurs, investors, authors and well-known tech personalitieshost AMAs (ask me anything) to engage in dynamic conversations.

Digital Transformation Review N° 0986This is yet another one of those “Uber of…” startups but wow ifit doesn’t really nail one of life’s everyday challenges. Because ofapps like Uber and Tinder, I believe that consumers are becomingaccidental narcissists. They’re taught to expect things (products,services, information, people) to come to them on demand. Filld isbasically an on-demand app for gasoline. Need fuel while you’reat work or home and don’t have time to hit the station? Then openup the app, select your location, choose your fuel type and leaveyour cap open. The service will arrive within a specific window andtake care of the rest. Depending on where you live, there are otheroptions too, including WeFuel and Purple.This one I’m sure is going to sound strange, but give it a minute. Ifyou’ve ever communicated with someone who lives an active digitallifestyle, GIFsaare a normal way of sharing thoughts and reactionswithout having to explain them in your own words. More so, GIFsmake the moment that much more exceptional. Giphy is a searchengine for GIFs to help you find the right one for the right momentquickly. But that’s not the only reason why it’s on this list. It’s aplatform for bringing people who communicate via GIFs together. It’severyone from everyday media to bloggers to digital storytellers to meand you. More so, it’s a community for GIF creators and fans. Thisstands to become something much more and perhaps an aggregatorfor other mainstream social networks.aGIF is an image format that allows creation of short video clips and animations15 Startups to Watch and What Their Value Proposition Can Teach Your BusinessDigital Transformation Review N° 0986In an era of social media, the entire ecosystem for content, from productto consumption to community, has been upended. While many differentsocial networks offer platforms for users to share their ideas, creativityand content, few facilitate the monetization of that work. Patreon hopesto solve that problem by offering creators a platform to earn recurringvenue. It operates a bit like Kickstarter where creators, musicians, poets,painters,photographers,etal.,designahomepageandcreatesubscriptionpackages to earn support. In times where artistry’s value is compromisedby disruptive models, Patreon is a refreshing way to empower artists tobuild and monetize engaged communities.

Digital Transformation Review N° 09 87DIGITAL TRANSFORMATION REVIEWApple’s most innovative app of the year in 2015, Workflow,is a very creative solution to complex or semi-complex tasks.Workflow offers a visual, drag and drop way of connecting appsand actions together to automate things you do on your device. Ifyou’re familiar with “If This Then That (aka IFTTT), it’s a DIY wayof automating the things you often do that require multiple steps.You can then turn those processes into an app so you can launch itdirectly. There’s also a gallery of complex or popular workflows foryou to use and further customize.Sano Intelligence is building a wearable sensor that measuresmetabolic activity. Founder Ashwin Pushpala set out to build adevice that continuously monitors blood glucose level in what’sdescribed as a completely painless manner. The challenge withglucose monitoring is that diabetics have to test glucose levelsby pricking their finger for a drop of blood several times perday. Then they insert a strip into a machine to get a read out.In an Uber-ized, GIF-driven world - where half of Silicon Valleyeither wears an Apple or Android watch - clearly there are otherways to do this. Specifically, Sano is developing a small patchthat continuously monitors your bloodstream. Essentially it’smonitoring for abnormalities and then alerts you and your doctoraccordingly when attention is needed.Postmates can be described as either the Uber for your favoritelocal businesses or the UPS for on-demand delivery logistics. It’sactually both. If you want something delivered from a supportinglocal store, use the app. At the same time, Postmates offers an APIand platform for local retailers, from small businesses to Starbucksand Wholefoods, to allow you to order your goods and havePostmates fulfill the order.

Digital Transformation Review N° 098815 Startups to Watch and What Their Value Proposition Can Teach Your BusinessDigital Transformation Review N° 0988When Twitter co-founder Ev Williams left, he did so with a new butfamiliarplanthatwastheoppositeapproachtobrevity.Ratherthanholdpeople to 140 characters, he created a platform for long-form sharingcalled Medium. For those who don’t remember, Ev and company builtone of the earliest blogging platform, Blogger, which was later acquiredby Google. This time around, Medium set out to provide a mediaplatform for thoughtful content creators and a social network to bringpeople, shared interests and conversation together around content.The platform aimed to democratize media and publishing for everyone(which was, essentially, the original promise of blogs and social media).Butwithitscleanandelegantdesign,thesimplicityitofferedincreatingand publishing content, and a strong network of thoughtful and prolificusers, Medium is a media platform and a democratized media outlet atthe same time. It’s lured some of the most influential people in everyindustry to share their thoughts, experiences, views, reactions, et al.,to important moments, events and news. Medium has also thrived bycreatingavarietyofpopularchannelsthatfeaturehand-selectedcontentfrom its staff of editorial curators.The paradox of choice can be time consuming and evenoverwhelming. Spending time searching out products or optionsand then reading countless reviews to narrow decisions is taxingat the very least. Co-founded by Garret Camp (co-founder ofUber) and former Zynga executive Robin Chan, Operator is apioneering entrant to the emerging concierge category. Operatorbalances human capital and AI to create “operators” as a servicefor everyday consumers. Operator looks and feels like a messagingapp but it’s essentially a personalized shopping service. You simplysay what it is you need and an operator begins to work on it foryou. Essentially it combines the functionality of a task rabbit,virtual assistant, chat bot and personal shopper to help you findor do what you’re in the market for. Chan shared the premise forOperator to Techinsider recently, saying “We always dreamed ofthis as a routing layer or switchboard for goods and services.”

Digital Transformation Review N° 09 89DIGITAL TRANSFORMATION REVIEWFrench startup Snips is an app that organizes your meetinglocations, reservations and recent visits so you can findeverywhere you need to be in one simple place. Once you installthe app, Snips goes through pretty much everything on yourphone to learn all it can about you. And it continues to do so themore you use it. The goal is to allow Snips’ AI engine to seamlesslyconnect the dots between what you want to do and how to do it.In its initial incarnation, the app aims to help you while you’reon the move. You can instantly find any location you need, frommeeting addresses and reservations, to a friend’s house or localrestaurant/bar. Automatically, Snips will show you every way youcan get to your destination. Over time, Snips will learn how youmove through your city and suggest where you might be headingnext. The app also keeps a timeline of where you’ve been. Note,the company is very serious about personal data and privacy andinsists you and only you are in control.I’ve been watching AR darling MagicLeap for a couple of years now.They’re not alone in the game nor are they the only one to watch inthis space. Meta is also making incredible leaps in an augmented andreal world. And by incredible, I mean groundbreaking. Based in myhome city of Redwood City, Meta has developed an innovative headsetthat promotes a 90-degree field of view with the type of design andusability attention to detail that you might expect to see from Apple.But it’s more than a headset (tethered to a PC). It’s a complete ecosystemthat also allows for developers to build applications that enablecomplete immersion. For example, rather than interacting with a largemonitor, the entire headset field of view becomes the screen. You canalso maneuver through the applications using natural gestures ratherthan having to learn new behaviors. More so, the platform recognizesthose gestures to not only navigate objects but also grab, move andmanipulate them. This is ‘Minority Report’ but in real or augmented life.Developers are building apps now for almost every industry you canimagine, ranging from manufacturing, design, engineering, medicine,modeling and education.

Digital Transformation Review N° 099015 Startups to Watch and What Their Value Proposition Can Teach Your BusinessNo customer will ever claim that they “loved calling customerservice!”. Unfortunately, many of us have reluctant relationshipswith companies we do business with. Think about your wirelessor cable provider or any airline for that matter. The thought ofhaving to call them to complain, get support or cancel the servicecreates an incredible and unnecessary amount of anxiety in all ofus. Until companies figure out that customers are important andthat call centers are not cost centers (they’re investments), there’sa startup that’s ready to help you. Meet @Service. Using the app,consumers tell @Service the problem that they’re having, providedetails/documents, their goals, and the app then reaches out to thebusiness on your behalf. They make no guarantees, they take on“reasonable” cases, but they do save you the hassle of spendingyour valuable time, energy and emotions having to deal withbroken systems and inhumane contact centers.Ha. If you’re thinking what I’m thinking when you hear the name,it’s not that at all! Burner is a new startup that lets people create new“burner” phone numbers for voice, SMS, and MMS communications.While this isn’t new, burner phones were often linked to dubiousdealings, but this is about helping people control privacy andconversations in ephemeral engagements/scenarios. For instance,Burner is gaining big traction among buyers and sellers on ebay,Craigslist and Airbnb hosts who’d rather not give out their personalnumbers. Oh, it’s useful for Tinder and other dating apps too (youscoundrels!) Here’s where the service gets even more interesting.Like all good platform plays, Burner introduced plug-ins for Slackand Dropbox so that small businesses or entrepreneurs can use themfor online customer support and feedback lines. What does that looklike? For example, with Evernote, users can create an auto-replybot so if an Airbnb guest texts “what’s the wi-fi?,” it can respondautomatically. Users can connect their number with Dropbox to auto-save voicemails and messages with pictures, route and reply to textmessages, and sync with Google and back-up your texts and contactsto a spreadsheet even when you burn the number.

Digital Transformation Review N° 09 91DIGITAL TRANSFORMATION REVIEWVisiting a doctor is never an appealing prospect, but Heal can takesome of the pain out of it, Heal is an app that allows people tofind doctors and specialists who do house calls on-demand. Theambitious new service already has a network of 100 (and growing)doctors in Los Angeles County, Orange County, San Franciscoand Silicon Valley who offer house calls at a flat rate of $99 perpatient. Most Anthem and Blue Shield PPO members are typicallycharged the same co-pay as when they go into their doctor’s office.This type of approachability has the power to change the practiceof medicine from one of being arduous and something that youhave to do when you’re really sick, to that of being preventativeand even proactive. Imagine people willingly getting their healthchecked to bolster their fitness regime. Imagine people who getthat flu shot just because it was easy. It’s apps like this that start tochange behavior in ways that benefit the user…and the app.

Digital Transformation Review N° 099215 Startups to Watch and What Their Value Proposition Can Teach Your BusinessTravel startups go back to the days of Web 1.0. And just when youthink that you’ve seen it all in travel sites and apps, here comesLola. Lola is part of a new breed of intelligent agent-poweredservices that combines artificial intelligence and human power toprovide personalized, concierge-like level of personalized travel.Think Kayak, travel agent, and personal assistant all wrappedtogether with an elegant UI. In fact, the co-founder of Lola isthe co-founder of Kayak. While AI will over time learn and thenpredict behaviors in travel so that information can be accessedquickly (flight changes, for instance), the app is also enablingagents to focus on providing exceptional customer service. Inan interview with VentureBeat, co-founder English vocalized arecurring theme with many of today’s startups…service. “Whatwe’re doing now with Lola is we’re not bringing back the oldschool travel agent,” he explained “We’re trying to reinvent thetravel agency.”What do you think of this list? What did we miss? Let us know by contacting us at: brian@briansolis.com

THE IMPORTANCE OF A LONG-TERM STRATEGY INTODAY’S UNCERTAIN ENVIRONMENT“Financial Se- Rita McGrath– Beth Comstockel Botsman- Rita McGrath– Mark Jamison“It is actually more importantthan ever to have a long-termstrategy.”“The importance of a long-termstrategy is to give people somethingto hang on to and act as a broaderguide during times of uncertainty.”“Successful companies understandwhat their purpose is, the 'why', andthey don’t get caught up over the longterm in the 'what'. I call it 'freedomwithin a framework', a strategy thattells you where you are going.”“You still need to have a vision ofwhere you want to go or understandyour differentiation. But you have tobe much more adaptable. Maybe yourvision stays the same, but how you getthere may change faster than you couldhave imagined.”

DIGITAL TRANSFORMATION REVIEWAbout Capgemini ConsultingAbout CapgeminiCapgemini Consulting is the global strategy and transformationconsulting organization of the Capgemini Group, specializing inadvising and supporting enterprises in significant transformation,from innovative strategy to execution and with an unstinting focus onresults. With the new digital economy creating significant disruptionsand opportunities, the global team of over 3,000 talented individualswork with leading companies and governments to master DigitalTransformation, drawing on their understanding of the digitaleconomy and leadership in business transformation andorganizational change.Find out more at: www.capgemini-consulting.comWith more than 180,000 people in over 40 countries, Capgemini is oneof the world's foremost providers of consulting, technology andoutsourcing services. The Group reported 2015 global revenues ofEUR 11.9 billion. Together with its clients, Capgemini creates anddelivers business, technology and digital solutions that fit theirneeds, enabling them to achieve innovation and competitiveness. Adeeply multicultural organization, Capgemini has developed its ownway of working, the Collaborative Business ExperienceTM, and drawson Rightshore®, its worldwide delivery model.Learn more about us at: www.capgemini.com

Digital Transformation ReviewGuest ContributorsBeth ComstockMark JamisonMarshall Van AlstyneRita McGrathSubhra DasBrian SolisMonty Hamilton

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