Digital Transformation Is Not About Technology—It’s About Change

digital transformation

Digital transformation is not about technology—it’s about change. And it is not a matter of if, but a question of when and how. The role of the chief executive is fundamental to transformation and the rewards are high. The 23% of firms that have successfully digitally transformed in our MIT Center for Information Research survey of 413 companies globally, achieved 16 percentage points higher margin than the industry average.

In our conversations with CEOs and their leadership teams, we focus on six questions that they have to get right in order to transform successfully:

  1. How strong is the digital THREAT or opportunity to your business model?
  2. Which business MODEL is best for your enterprise’s future?
  3. What is your key competitive ADVANTAGE?
  4. How will you use mobile technologies and the Internet of Things (IoT) to CONNECT and learn?
  5. Do you have the crucial CAPABILITIES to reinvent the enterprise?
  6. Do you have the LEADERSHIP at all levels to make transformation happen?

Although most important, we tackled leadership last because we first wanted to provide a common language to CEOs and other senior executives so they can communicate the why and what of a digital business transformation.  A digital business transformation is not going to happen without the CEO and senior leadership setting and communicating a vision. CEOs have to pick the leadership team, determine and help change to the “to-be” culture and communicate, coach and course correct. And the CEO has to make the hard choices about decision rights and organizational restructuring.

“Digital transformation mandates a strong vision, with the CEO and senior leaders’ hard decisions guided by company purpose.”

Let’s look at BBVA, a Spanish bank facing significant digital disruption. Several years ago, Francisco González, Group Executive Chairman of BBVA, noted there was a rapidly growing gap between customer behavior and retail banks. In 2014 he declared, “We are building the best digital bank of the 21st century,” setting the vision for the company. Gonzalez articulated six strategic priorities to help achieve the vision:

  • Create a new standard in customer experience
  • Drive digital sales
    • Develop new business models
    • Optimize capital allocation
  • Obtain an unrivaled efficiency
    • Develop, inspire, and retain a first-class workforce

BBVA has invested heavily in reusable global platforms since 2007. The company worked hard to remove “digital spaghetti”—a tangled set of partially digitized business processes, constructed over time from many different systems and versions of data—and replace it with efficient, scalable global digital platforms. These platforms combine optimized business processes, efficient technology, and easily accessible data, all at a low-cost relative to industry competitors’ platforms, and meet regulatory needs.

As part of its digital-first focus, BBVA made the mobile device the customer’s remote control for the bank. The mobile app offers simple, fully digital new customer onboarding in less than five minutes. It functions as a digital wallet, and offers easy, automated purchase from a self-service suite of products—including consumer loans and investment funds—with each purchase in under a minute.

In July 2015, BBVA announced a fairly radical organizational surgery. This new structure moved BBVA from a more traditional brick-and-mortar bank with good digital capability to a fully integrated bank with people-based and self-service engagement models. And it places talent where it can have most impact.

The results have been very encouraging. Some outcomes to date:

  • Digital banking accounts for 36% of all products and services sold
  • BBVA is #1 in NPS in eight core markets
  • The digital customer base grew by 44% in 2017, to approx. 18m customers

Digital transformation mandates a strong vision, with the CEO and senior leaders’ hard decisions guided by company purpose. Digital transformation requires a single team with a single plan and enterprise leaders have to find the right balance between pragmatism and a visionary approach. Finally, CEOs must get the entire organization onboard—every employee has to play a role in the new digitally transformed enterprise—so they feel like part of the team and that their contributions matter.

RelatedWhat CEOs Need To Know About Embracing Digital Transformation

Peter Weill is a Senior Research Scientist and Chair of the Center for Information Systems Research (CISR) at the MIT Sloan School of Management. His writing and research have appeared in Harvard Business Review, Sloan Management Review, and the Wall Street Journal. His books include IT Savvy, Enterprise Architecture as Strategy, and IT Governance, all published by Harvard Business Review Press. Stephanie Woerner is a Research Scientist at MIT's CISR. Her research centers on how companies manage organizational change caused by the digitization of the economy. In 2016 she was a subject matter expert on enterprise digitization for the Wall Street Journal CEO Council. They are the authors of "WHAT’S YOUR DIGITAL BUSINESS MODEL? Six Questions to Help You Build the Next-Generation Enterprise."

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