Summary Digital transformation in IB – playbook
Chapter 1 - The Five Domains of Digital Transformation Customers, Competition, Data, Innovation,
Value
Digital technologies change how we connect and create value with our customers. The relationship is
much more two-way: customers’ communications and reviews make them a bigger influencer than
advertisements or celebrities, and customers’ dynamic participation has become a critical driver of
business success.
Digital technologies transform how we need to think about competition. We are competing not just
with rival companies from within our industry but also with companies from outside our industry
that are stealing customers away with their new digital offerings.
Digital technologies have changed our world in how we think about data.
Digital technologies also transforming the ways that businesses innovate.
Digital technologies force us t think differently about how we understand and create value for the
customer.
Taken together, we can see how digital forces are reshaping five key
domains of strategy: customers, competition, data, innovation, and
value.
These five domains describe the landscape of digital transformation for
business today.
Across these five domains, digital technologies are redefining many of the underlying principles of
strategy and changing the rules by which companies must operate in order to succeed.
,Customers
In traditional theory, customers were seen as aggregate actors to be marketed to and persuaded to
buy. The prevailing model of mass markets focused on achieving efficiencies of scale through mass
production (make one product to serve as many customers as possible) and mass communication
(use a consistent message and medium to reach and persuade as many customers as possible at the
same time).
,Competition
How businesses compete and cooperate with other firms. Traditionally, competition and cooperation
were seen as binary opposites: businesses competed with rival businesses that looked very much like
themselves, and they cooperated with supply chain partners who distributed their goods or provided
needed inputs for their production.
Today, we are moving to a world of fluid industry boundaries, one where our biggest challengers may
be asymmetric competitors— companies from outside our industry that look nothing like us but that
offer competing value to our customers.
At the same time, we may need to cooperate with a direct rival due to interdependent business
models or mutual challenges from outside our industry.
Data
How businesses produce, manage, and utilize information. Traditionally, data was produced through
a variety of planned measurements (from customer surveys to inventories) that were conducted
within a business’s own processes—manufacturing, operations, sales, and marketing. The resulting
data was used mainly for evaluating, forecasting, and decision-making. By contrast, today we are
faced with a data deluge. Most data available to businesses is not generated through any systematic
planning like a market survey; instead, it is generated in unprecedented quantities from every
conversation, interaction, or process inside or outside these businesses.
Innovation
the process by which new ideas are developed, tested, and brought to the market by businesses.
Traditionally, innovation was managed with a singular focus on the finished product.
Today’s start-ups have shown us that digital technologies can enable a very different approach to
innovation, one based on continuous learning through rapid experimentation. As digital technologies
make it easier and faster than ever to test ideas, we can gain market feedback from the very
beginning of our innovation process, all the way through to launch, and even afterward.
Value
Traditionally, a firm’s value proposition was seen as fairly constant. Products may be updated,
marketing campaigns refreshed, or operations improved, but the basic value a business offered to its
customers was assumed to be constant and defined by its industry (e.g., car companies offer
transportation, safety, comfort, and status, in varying degrees). A successful business was one that
had a clear value proposition, found a point of market differentiation (e.g., price or branding), and
focused on executing and delivering the best version of the same value proposition to its customers
year after year.
In the digital age, relying on an unchanging value proposition is inviting challenge and eventual
disruption by new competitors. Although industries will vary as to the exact timing and nature of
their transformation by new technologies, those who assume it will be a little farther down the road
are most likely to be run over. The only sure response to a shifting business environment is to take a
path of constant evolution, looking to every technology as a way to extend and improve our value
proposition to our customers.
Today, creating an effective customer strategy requires that you understand such key concepts as
customers as strategic assets, the reinvented marketing funnel, the digital path to purchase, and the
, five core behaviors of customer networks (accessing, engaging, customizing, connecting, and
collaborating).
Build Platforms, Not Just Products
Building effective platform business models may involve becoming a trusted intermediary who brings
together competing businesses, as Wink brought together Philips, Honeywell, Lutron, and Schlage. It
may require opening up a proprietary product for other companies to build on, like Nike did with its
wearable fitness devices and Apple did with its iPhone. Or, as in the case of Uber and Airbnb, it may
mean building a business whose value is created largely by its partners, with its platform acting as the
critical connection point.
Developing a digital-age competitive strategy requires that you understand these principles: platform
business models, direct and indirect network effects, co-opetition between firms, the dynamics of
intermediation and disintermediation, and competitive value trains.
Turn Data into Assets
In an age when data is in constant surplus and often free, the imperative for businesses is to learn to
turn it into a truly strategic asset. That requires both assembling the right data and applying it
effectively to generate long-term business value.
Building a strong data asset may begin with effectively collaborating with data partners, as Caterpillar
does with its sales distributors and The Weather Company does with its most avid customers. Data
can add value by helping to identify which customers require the most attention. To create good data
strategy, you must begin with an understanding of the four templates of data value creation, the new
sources and analytic capabilities of big data, the role of causality in data-driven decision making, and
the risks around data security and privacy.
Innovate by Rapid Experimentation
Because digital technologies make it so fast, easy, and inexpensive to test ideas, firms today need to
master the art of rapid experimentation. This requires a radically different approach to innovation
that is based on validating new ideas through rapid and iterative learning.
Adapt Your Value Proposition
To master value creation in the digital age, businesses must learn how to continuously adapt their
value proposition. That means they need to learn to focus beyond their current business model and
zero in on how they can best deliver value to their customers as new technologies reshape
opportunities and needs. Adaptation may mean aggressively developing a new suite of products in
anticipation of rapid customer changes, as Facebook did during its pivot to mobile platforms. Or it
may mean experimenting with new ways to engage a business’s customers while they are still loyal
to it. To proactively adapt your value proposition, you need to understand these elements: the
different key concepts of market value, the three possible paths out of a declining market position,
and the essential steps to take to effectively analyze your existing value proposition, identify its
emerging threats and opportunities, and synthesize an effective next step in its evolution.
Chapter 2 – Harness customer Networks
Rethinking customers
On-demand, customizable, connected, shareable, that is what customers seek from every business
today. In the digital age, the relationship of customers to businesses is changing dramatically.
Chapter 1 - The Five Domains of Digital Transformation Customers, Competition, Data, Innovation,
Value
Digital technologies change how we connect and create value with our customers. The relationship is
much more two-way: customers’ communications and reviews make them a bigger influencer than
advertisements or celebrities, and customers’ dynamic participation has become a critical driver of
business success.
Digital technologies transform how we need to think about competition. We are competing not just
with rival companies from within our industry but also with companies from outside our industry
that are stealing customers away with their new digital offerings.
Digital technologies have changed our world in how we think about data.
Digital technologies also transforming the ways that businesses innovate.
Digital technologies force us t think differently about how we understand and create value for the
customer.
Taken together, we can see how digital forces are reshaping five key
domains of strategy: customers, competition, data, innovation, and
value.
These five domains describe the landscape of digital transformation for
business today.
Across these five domains, digital technologies are redefining many of the underlying principles of
strategy and changing the rules by which companies must operate in order to succeed.
,Customers
In traditional theory, customers were seen as aggregate actors to be marketed to and persuaded to
buy. The prevailing model of mass markets focused on achieving efficiencies of scale through mass
production (make one product to serve as many customers as possible) and mass communication
(use a consistent message and medium to reach and persuade as many customers as possible at the
same time).
,Competition
How businesses compete and cooperate with other firms. Traditionally, competition and cooperation
were seen as binary opposites: businesses competed with rival businesses that looked very much like
themselves, and they cooperated with supply chain partners who distributed their goods or provided
needed inputs for their production.
Today, we are moving to a world of fluid industry boundaries, one where our biggest challengers may
be asymmetric competitors— companies from outside our industry that look nothing like us but that
offer competing value to our customers.
At the same time, we may need to cooperate with a direct rival due to interdependent business
models or mutual challenges from outside our industry.
Data
How businesses produce, manage, and utilize information. Traditionally, data was produced through
a variety of planned measurements (from customer surveys to inventories) that were conducted
within a business’s own processes—manufacturing, operations, sales, and marketing. The resulting
data was used mainly for evaluating, forecasting, and decision-making. By contrast, today we are
faced with a data deluge. Most data available to businesses is not generated through any systematic
planning like a market survey; instead, it is generated in unprecedented quantities from every
conversation, interaction, or process inside or outside these businesses.
Innovation
the process by which new ideas are developed, tested, and brought to the market by businesses.
Traditionally, innovation was managed with a singular focus on the finished product.
Today’s start-ups have shown us that digital technologies can enable a very different approach to
innovation, one based on continuous learning through rapid experimentation. As digital technologies
make it easier and faster than ever to test ideas, we can gain market feedback from the very
beginning of our innovation process, all the way through to launch, and even afterward.
Value
Traditionally, a firm’s value proposition was seen as fairly constant. Products may be updated,
marketing campaigns refreshed, or operations improved, but the basic value a business offered to its
customers was assumed to be constant and defined by its industry (e.g., car companies offer
transportation, safety, comfort, and status, in varying degrees). A successful business was one that
had a clear value proposition, found a point of market differentiation (e.g., price or branding), and
focused on executing and delivering the best version of the same value proposition to its customers
year after year.
In the digital age, relying on an unchanging value proposition is inviting challenge and eventual
disruption by new competitors. Although industries will vary as to the exact timing and nature of
their transformation by new technologies, those who assume it will be a little farther down the road
are most likely to be run over. The only sure response to a shifting business environment is to take a
path of constant evolution, looking to every technology as a way to extend and improve our value
proposition to our customers.
Today, creating an effective customer strategy requires that you understand such key concepts as
customers as strategic assets, the reinvented marketing funnel, the digital path to purchase, and the
, five core behaviors of customer networks (accessing, engaging, customizing, connecting, and
collaborating).
Build Platforms, Not Just Products
Building effective platform business models may involve becoming a trusted intermediary who brings
together competing businesses, as Wink brought together Philips, Honeywell, Lutron, and Schlage. It
may require opening up a proprietary product for other companies to build on, like Nike did with its
wearable fitness devices and Apple did with its iPhone. Or, as in the case of Uber and Airbnb, it may
mean building a business whose value is created largely by its partners, with its platform acting as the
critical connection point.
Developing a digital-age competitive strategy requires that you understand these principles: platform
business models, direct and indirect network effects, co-opetition between firms, the dynamics of
intermediation and disintermediation, and competitive value trains.
Turn Data into Assets
In an age when data is in constant surplus and often free, the imperative for businesses is to learn to
turn it into a truly strategic asset. That requires both assembling the right data and applying it
effectively to generate long-term business value.
Building a strong data asset may begin with effectively collaborating with data partners, as Caterpillar
does with its sales distributors and The Weather Company does with its most avid customers. Data
can add value by helping to identify which customers require the most attention. To create good data
strategy, you must begin with an understanding of the four templates of data value creation, the new
sources and analytic capabilities of big data, the role of causality in data-driven decision making, and
the risks around data security and privacy.
Innovate by Rapid Experimentation
Because digital technologies make it so fast, easy, and inexpensive to test ideas, firms today need to
master the art of rapid experimentation. This requires a radically different approach to innovation
that is based on validating new ideas through rapid and iterative learning.
Adapt Your Value Proposition
To master value creation in the digital age, businesses must learn how to continuously adapt their
value proposition. That means they need to learn to focus beyond their current business model and
zero in on how they can best deliver value to their customers as new technologies reshape
opportunities and needs. Adaptation may mean aggressively developing a new suite of products in
anticipation of rapid customer changes, as Facebook did during its pivot to mobile platforms. Or it
may mean experimenting with new ways to engage a business’s customers while they are still loyal
to it. To proactively adapt your value proposition, you need to understand these elements: the
different key concepts of market value, the three possible paths out of a declining market position,
and the essential steps to take to effectively analyze your existing value proposition, identify its
emerging threats and opportunities, and synthesize an effective next step in its evolution.
Chapter 2 – Harness customer Networks
Rethinking customers
On-demand, customizable, connected, shareable, that is what customers seek from every business
today. In the digital age, the relationship of customers to businesses is changing dramatically.
