This is a republication of the paper “Successful Digital Transformation is All About Value”, with the title above.
Harvard Business Review
by Stephanie L. Woerner, Peter Weill, Ina M. Sebastian
October 21, 2022
Chief Researcher and Site Editor:
Joaquim Cardoso MSc.
the health transformation
October 28, 2022
Summary:
In the digital era, how firms create and capture value has changed profoundly.
But with digital transformation, many firms are leaving substantial value on the table, getting caught up in “doing” digital transformation rather than staying focused on how they will create and capture value with digital.
To do this, first companies need to understand the three different types of digital value:
- value from customers (cross-selling, increased loyalty, great customer experience);
- value from operations (increased efficiency, modularity and reuse of components, automating processes); and
- value from ecosystems (leveraging partners for both access to more customers and range of products and services).
With these types of value in mind, firms can then take action to create digital value by:
- identifying domain opportunities;
- building mutually-reinforcing capabilities;
- tracking digital value with a dashboard;
- recruiting digital partners; and
- investing in digital savviness of everyone at the firm.
Companies that do this will become truly “future ready.”
Three Types of Digital Value [excerpted]
In helping leaders and their firms shift to a future ready mindset, a key step is recognizing three types of digital value — these types represent where and how value can be created, as well as the areas where there is a risk of leaving value on the table.
We’ll use the global building materials firm CEMEX to illustrate.
- 1.Value from customers.
- 2.Value from operations
- 3.Value from ecosystems.
1.Value from customers.
This encompasses increased revenue from cross-selling and new offerings, as well as more customer stickiness and loyalty.
Helping customers meet their needs, providing a great customer experience, and acting consistently and with purpose helps create value.
CEMEX started their transformation by focusing on customer value. Recognizing that construction site managers are key customers with a tough job, in 2017 the firm created the CEMEX Go mobile app, a single place for those managers to get everything they need from CEMEX such as advice, pricing, ordering, and an Uber-like tracking experience for cement delivery.
CEMEX Go was the breakthrough initiative for the firm, resulting in a strong increase in revenue for the channel as well as a substantially higher net promoter score.
2.Value from operations.
The foundation of digital business, value from operations includes reduced cost and increased efficiency and speed.
Firms can create this type of value by developing modular components, creating digital components that can be reused, automating processes, and becoming more open and agile.
CEMEX focused broadly on operational efficiency and reducing the app’s cost-to-serve while continuing to improve customer experience.
Firms can create this type of value by developing modular components, creating digital components that can be reused, automating processes, and becoming more open and agile.
3.Value from ecosystems.
This includes revenue from a company’s ecosystem participants plus new value from customers and operations through partnering.
This type is the most overlooked, or deferred as risky, but as firms move to more digitally-enabled and partner-based models, value from ecosystems becomes more important and influential on the bottom line.
Almost any firm can generate substantial value from ecosystems in which they leverage partners for both reach (to access more customers) and range (to add more products and services).
…value from ecosystems … is the most overlooked, or deferred as risky, …
… but as firms move to more digitally-enabled and partner-based models, value from ecosystems becomes more important and influential on the bottom line.
CEMEX does this with its building materials distribution network, Construrama, the largest retail building material store chain in Mexico, and in other Latin American countries where CEMEX operates.
In 2018 CEMEX launched its Construrama Online Store to continue efforts to transform the construction industry using an ecosystem approach.
About the authors & affiliations:
Stephanie L. Woerner is Principal Research Scientist at the MIT Sloan School of Management and Director of MIT CISR. She is a renowned researcher and speaker, and coauthor of Future Ready: The Four Pathways to Capturing Digital Value and What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise, both published by Harvard Business Review Press.
Dr. Peter Weill is a Senior Research Scientist at the MIT Sloan School of Management and Chairman Emeritus of the Center for Information Systems Research (CISR) .
Dr. Ina M. Sebastian is a Research Scientist at the MIT Sloan Center for Information Systems Research (MIT CISR). Ina studies how large enterprises transform for success in the digital economy. Her current research areas are digital partnering (including strategies to grow with digital partners and partnering strength), and value creation and value capture in digital models. In previous research projects at MIT CISR, Ina focused on ecosystem business models, digital strategies and organizational redesign, and digital workplace and talent.
Originally published at https://hbr.org
