Peter Weill - CIO13

1. #CIOEdge #ADAPT @ADAPT Ventures
Global Guest Keynote
Future Ready?
The 4 pathways to digital
business transformation
Peter Weill
Senior Research
Scientist & Chairman

2. Future Ready?:
Four Pathways to Digital Business Transformation
Dr. Peter Weill
Chairman and MIT Senior Research Scientist
MIT Center for Information Systems Research (CISR)

3. Future Ready?: Four Pathways to
Digital Business Transformation
ADAPT CIO Edge Experience 2018
Dr. Peter Weill
Chairman &
MIT Senior Research Scientist
pweill@mit.edu
Research Team
Dr. Stephanie L. Woerner
Dr. Ina M. Sebastian
Dr. Nick van der Meulen
This research was made
possible by the support of MIT
CISR sponsors and patrons.
© 2018 MIT Sloan CISR
Wednesday, February 21, 2018
http://cisr.mit.edu/

4. MIT CISR gratefully acknowledges the support and contributions of its Research Patrons & Sponsors
Patrons
AlixPartners LLP
Avanade
BT
Huawei Technologies Co., Ltd.
ISACA
LTI
Microsoft Corporation
PricewaterhouseCoopers
Advisory Services LLC
Sponsors
Aetna, Inc.
Akamai Technologies
Allstate Insurance Company
ANZ Banking Group Ltd.
Australia Post
Australian Securities & Investments
Commission (ASIC)
Australian Taxation Office
AustralianSuper
B2W Companhia Digital
Banco Bradesco S.A.
Banco do Brasil S.A.
Bank of Queensland
Barclays
BBVA
Bemis Company, Inc.
Biogen, Inc.
BMW Group
BNP Paribas
BNY Mellon
The Boston Consulting Group, Inc.
Canadian Imperial Bank of Commerce
Cardinal Health, Inc.
Caterpillar, Inc.
CEMEX
Chevron Corporation
CHRISTUS Health
Cochlear Limited
Commonwealth Bank of Australia
CPPIB
CSBS
DBS Bank Ltd.
DentaQuest
El Corte Inglés
Equifax
ExxonMobil Global Services Company
Fairfax Media
Ferrovial Corporacion, S.A.
Fidelity Investments
FrieslandCampina
General Electric
Genworth Financial
GlaxoSmithKline
Hanover Insurance Group
Heineken International B.V.
Hitachi, Ltd.
Insurance Australia Group
Iron Mountain
Johnson & Johnson (J&J)
LKK Health Products Group Ltd.
LPL Financial
Marathon Oil Corporation
Markel Corporation
McGraw-Hill Education
National Australia Bank Ltd.
National Disability Insurance Scheme
New Zealand Government—
GCIO Office
Nielsen
Nomura Holdings, Inc.
Nomura Research Institute, Ltd.
Nordea Bank
Northwestern Mutual
OCP S.A.
Orange S.A.
Org. for Economic Co-operation
and Development (OECD)
Origin Energy
Owens Corning
PepsiCo Inc.
Pioneer Natural Resources USA Inc.
Principal Financial Group
Procter & Gamble
QBE
Raytheon Company
Reserve Bank of Australia
Royal Bank of Canada
Scentre Group
Schindler Digital Business AG
Schneider Electric Industries SAS
Standard Bank Group
State Street Corp.
Suncorp Group
Swinburne University of Technology
Sydney Water
TD Bank, N.A.
Teck Resources Limited
Tenet Health
Tetra Pak
Trinity Health
USAA
Westpac Banking Corporation
WestRock
World Bank

5. MIT CISR Mission
Founded in 1974 and grounded in the MIT tradition of rigorous field-based research, MIT CISR helps executives meet the challenge of leading
dynamic, global, and information-intensive organizations. We provide the CIO and other digital leaders with insights on topics such as business
complexity, data monetization, and the digital workplace. Through research, teaching, and events, the center stimulates interaction among
MIT CISR Mission and 2017 & 2018 Research Project Agenda
2017 Research Projects
 What Types of Digital Business Transformations Require
Organizational Surgery?
 AutoData 2.0: Answering Hard Questions About Your Customers
Using Your Own Data and Comparables
 What Are the Different Types of Digital Ecosystem Drivers… and
How to Get There
 Cognitive Computing: Developing the Human/Machine Partnership
 Designing Digital Organizations for Integration, Innovation, and
Agility
 Exploring Blockchain
 Data Wrapping: How Companies Effectively Use Data to Create
Competitive Products and Services
 Re-thinking Talent Management for Digital
 Orchestrating the Digital Workplace for Business Value
 Getting Digital Innovation Right
2018 Research Projects
 What is a Modular Producer and Why Should My Company Care?
 Partnering for a Successful Ecosystem
 Creating Competitive Products and Services with Analytics
 How to Make Analytics Your Business
 Investing in the Digital Workplace for Agile@Scale
 Becoming Digitally Savvy
 Creating a Digital Innovation Toolkit
 Managing Organizational Explosions During Digital
Transformation
 Designed for Digital: How Established Companies Are Reinventing
Themselves
 Digital Imperatives for Boards of Directors
 Mapping the Future IT Unit

6. Agenda
1. What is digital business transformation?
2. How much have firms transformed and how do they perform?
3. What are the pathways to transformation? Which is best?
4. Exercise: What is your pathway
5. Examples: Audi, BBVA, Flex, ING Direct, Nielsen, Schneider
6. Twists on the pathway

7. Stories of digital transformation—different pathways
Make customers’ mobile the remote control for the bank
Created a new company and now merging…
Real time advice on which client ads are working for cross channel planning
“Sketch to scale” with 8 centers of excellence (e.g., power, positioning)
New company ABI - mobility services outside of car ownership
Customer experience & cross selling, then automation… repeat

8. TransformedTraditional
What is digital business transformation?
Operational Efficiency
Improving operating margin
CustomerExperience
IncreasingNPS
TransformedTraditional
Source: MIT CISR 2015 CIO Digital Disruption Survey (N=413 and 2016 interviews) and 2016 company interviews. Customer Experience=effectiveness on customer
knowledge+omnichannel capability+customer experience projects+customer experience performance. Operational Efficiency=effectiveness on automation and employee
productivity projects+% of core capabilities with APIs+cost of operations performance. Quadrants are splits at 2/3 along each axis.
Future Ready
• Both innovative and low cost
• Great customer experience
• Modular and agile
• Data is a strategic asset
• Ecosystems ready
Integrated Experience
• Customer gets an (simulated)
integrated experience despite complex
operations
• Strong design and UX
• Rich mobile experience including
purchasing products
Industrialized
• Plug and play products/services
• Service enabled ‘crown jewels’
• One best way to do each key task
• Single source of truth
Silos and Spaghetti
• Product driven
• Complex landscape of processes,
systems and data
• Perform via heroics

9. TransformedTraditional
Future-ready firms have the best margins
compared to competitors
Operational Efficiency
Improving operating margin
CustomerExperience
IncreasingNPS
TransformedTraditional
Source: MIT CISR 2015 CIO Digital Disruption Survey (N=413) and 2016 company interviews. Customer Experience=effectiveness on customer knowledge+ omnichannel
capability+customer experience projects+customer experience performance. Operational Efficiency=effectiveness on automation and employee productivity
projects+% of core capabilities with APIs+cost of operations performance. Quadrants are splits at 2/3 along each axis. Net Margin is relative to industry average.
Future ReadyIntegrated Experience
IndustrializedSilos and Spaghetti
15%
% firms
Percentage
points above
or below
industry
average net
margin
| -3.6 23% | 16.0
51% | -5.1 11% | 4.6

10. TransformedTraditional
The four pathways to Future Ready
Operational Efficiency
Improving operating margin
CustomerExperience
IncreasingNPS
TransformedTraditional
The lines are the transformation pathways. Explosions are major changes in decision rights and organizational surgery. Quadrants are splits at 2/3 along each axis.
Customer Experience= effectiveness on customer knowledge+ omnichannel capability+customer experience projects+customer experience performance.
Operational Efficiency =effectiveness on automation and employee productivity projects+% of core capabilities with APIs+cost of operations performance.
Sources: Quadrants are derived from data from MIT CISR 2015 CIO Digital Disruption Survey (N=413) and 2016 company interviews.
Future ReadyIntegrated Experience
IndustrializedSilos and Spaghetti
• Customer gets an (simulated) integrated
experience despite complex operations
• Strong design and UX
• Rich mobile experience including purchasing
products
• Both innovative and low cost
• Great customer experience
• Modular and agile
• Data is a strategic asset
• Ecosystems ready
• Product driven
• Complex landscape of processes, systems
and data
• Perform via heroics
• Plug and play products/services
• Service enabled ‘crown jewels’
• One best way to do each key task
• Single source of truth
2 4
3
1

11. Discussion questions
Which pathway(s) are you on
and what percent of your
transformation is complete?
Please prepare a one-
sentence summary to share.
What is the key lesson
you have learned?

12. TransformedTraditional
The four pathways to Future Ready
Operational Efficiency
Improving operating margin
CustomerExperience
IncreasingNPS
TransformedTraditional
The lines are the transformation pathways. 5% of firms have not yet started and 2% are not transforming
Source of quadrants: MIT CISR 2015 CIO Digital Disruption Survey (N=413) and over fifty conversations with executives in 2016 about their goals for digital business transformation.
Source of transformation pathways (lines): MIT CISR 2017 Digital Pathways Survey (N=400). Explosions represent significant organizational disruption such as changes in decision rights.
Future ReadyIntegrated Experience
IndustrializedSilos and Spaghetti
4
18%
41%
20%
14%
3
1
234%
38%
33%
48%
% complete

13. The four pathways to transformation
(Global and Australia)
Source: MIT CISR 2017 Digital Pathways Survey (N=400) and February 2018 ADAPT Survey (N=103). 5% (Aus 5%) of firms have not yet started and 2% (Aus 2%) are not transforming
Pathway Global % Complete Australia % Complete
Operational
Excellence
New
Organization
Customer
Experience
Stair Steps
20%
41%
18%
14%
15%
52%
15%
11%
33%
34%
38%
48%
19%
26%
26%
37%

14. Digital business transformation in Australia
Source: February 2018 ADAPT Survey (N=103) and MIT CISR 2017 Digital Pathways Survey (N=400). 5% of firms have not yet started and 2% are not transforming. Radicalness is
measured on a 5-point scale (1=No change to 5=Significant enterprise-wide change). Effectiveness is measured on a 4-point scale (1=Not effective to 4=Effective). Differences
between the MIT CISR global survey and the ADAPT survey are noted when they are +/-5% or greater. *Automation was not measured on the MIT CISR survey
.
Pathway Australia % Complete Radicalness Effectiveness
Operational
Excellence
New
Organization
Customer
Experience
Stair Steps
15%
52%
15%
11%
19%
26%
26%
37%
58%
70%
75%
80%
58%
80%
68%
86%
% Automation
in 2020*
38%
35%
37%
51%
Below the global
average
Above the global
average

15. Francisco González
Chairman

16. Explosions and results at BBVA
Source: P. Weill, S.L. Woerner, Future Ready? Pick Your Pathway for Digital Business Transformation, MIT CISR Research Briefing, Vol. XVII, No. 9, September 2017.
Decision Rights
Need the right people in key 5 or 6
positions, e.g., customer experience
Must get entire organization onboard
New Ways of Working
200+ agile teams
Mobile is remote control for the 71M customers
25% of revenues are digital
Amplify customer voice (NPS up 20 points)
Organizational Surgery
New management structure
separating “Execution and
Performance from New Core
Competencies” (e.g., Engineering)
Platform Mindset
Replace spaghetti with scalable,
standardized platforms that service-enable
the ‘crown jewels’
Internal and external API initiative
“World’s best banking app” (90% of
products)

17. Choose your pathway(s) to Future Ready
Choose a Pathway
1. Where are you today? What is the
digital disruption threat level?
2. Path 1 if your customer experience is
ok and threat is not high.
3. Can’t wait to improve your customer
experience or new scary competitors.
Path 2.
4. Can’t wait to improve customer
experience but a few initiatives will
make a big difference (e.g., a great app).
Start with those and then focus on
operations and repeat in small steps.
Path 3.
5. High threat and can’t see a way to
change the culture, customer
experience and operations fast enough.
Path 4.
And manage the explosions

18. Thank you