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January 21, 2023
This is an Executive Summary of the article “UNLOCKING NEW DIGITAL VALUE”, published by MIT Center of Information Systems Research, and authored by Peter Weill, Chairman and Senior Research Scientist, MIT Center for Information Systems Research (CISR) Stephanie L. Woerner, Director and Principal Research Scientist, MIT Center for Information Systems Research (CISR)
Abstract
The top-performing companies on growth in the MIT CISR study used four distinct organizational levers to unlock value.
- The authors found that the companies in the top quartile of effectiveness at performing organizational surgery using these four levers were also top financial performers, growing 12 percentage points above their industry average;
- and leaders in innovation, with 45 percent of their annual revenue coming from new products introduced in the last three years.
- The authors describe the four levers and illustrate them with examples from financial services companies ANZ and Standard Bank Group.
Executive Summary
The MIT Center for Information Systems Research conducted a comprehensive study on how companies can unlock new digital value through organizational changes.
The research analyzed over 700 companies and identified four distinct organizational levers that top-performing companies used to unlock value.
These companies were not only top financial performers, growing 12 percentage points above their industry average, but also leaders in innovation, with 45 percent of their annual revenue coming from new products introduced in the last three years.
The Four Levers to Create New Digital Value
1.Identifying Unique Customer Types: Top-performing companies focused on understanding and empathizing with their customers by identifying unique customer types, their personas, customer journeys, data models, and engagement channels.
For instance, financial services companies ANZ and Standard Bank Group described various customer types, each with tailored customer journeys and specific needs.
2.Driving a Shared Capability as a Service: Companies achieved speed and efficiency by identifying common capabilities across customer types and standardizing, automating, and reusing them as shared services.
This consistency in providing a common experience across products led to better insights and increased efficiencies.
Standard Bank Group, for example, created a new group called Client Solutions to service client segments with banking, insurance, and investment services.
3.Commercializing What the Company is Great At: Companies selected internal capabilities they excelled at and commercialized them as services to create new revenue streams.
This anything-as-a-service (XaaS) model, exemplified by ANZ’s efforts in anti-money laundering (AML) and international payments, allowed companies to drive more value from their expertise.
4.Embedding, Nurturing, and Reusing Digital Modules: Companies drove consistency and speed to market by developing fully self-contained digital modules that were fine-tuned, automated, and reused in various applications.
Such modules, like establishing customer identity or assessing compliance in financial services, significantly improved time to market and contributed to generating revenue from new products.
Companies focused on these four levers to unlock new digital value:
- Customer: Identifying unique customer types
- Capability: Driving a shared capability as a service across customer types
- Commercialization: Commercializing what the company is great at
- Component: Embedding, nurturing, and reusing digital modules of self-contained business capabilities
Each lever produced a specific type of value:
- Value from Customer: Delivering tailored customer journeys
- Value from Capability: Generating consistency and efficiency
- Value from Commercialization: Creating new revenues
- Value from Component: Moving faster to market using best practices
Association Between Combined Lever Effectiveness and Growth
The study found that companies effectively using the four levers individually grew faster than their peers.
However, companies that excelled in all four levers combined achieved even greater growth, growing at 11.7 percentage points above the industry average.
Standard Bank Group, the largest financial services group in Africa, successfully employed all four levers in its strategic transformation, resulting in record revenue and earnings in 2022.
The Importance of Lever Governance in Unlocking Value
To unlock value effectively, each lever requires a specific governance approach. The Customer lever is typically governed by business unit heads, the Capability lever by a shared services group or COO/CIO, the Commercialization lever by a combination of B2B solution sellers and specific business service owners, and the Component lever by business owners of embedded capabilities, often in partnership with technology leaders.
The Key to Realizing Value from the Four Levers
Top quartile growth in the digital era demands a focus on all four levers to create digital value. Companies need to iterate to get the levers to work together and implement a governance model that encourages nurturing and reuse.
Real-time metrics measuring lever effectiveness, impact on performance, and required capabilities, shared widely via a dashboard, are crucial.
Ultimately, the support and vision of the CEO, top management team, and board are vital to exploiting the levers company-wide.
By leveraging these four organizational levers effectively, companies can unlock new digital value, achieve exceptional growth, and become leaders in innovation, as demonstrated by top-performing financial services companies ANZ and Standard Bank Group.
To read the full version of the original publication
Originally published at https://cisr.mit.edu on July 20, 2023.
MIT Center for Information Systems Research
BY PETER WEILL AND STEPHANIE L. WOERNER
July 2023
