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Brillio Imagine Forum

Digital Disruption &


Digital Transformation

MOHAN SAWHNEY
McCormick Foundation Professor of Technology
Kellogg School of Management
mohans@kellogg.northwestern.edu

© 2016 Mohan Sawhney


1
Outline

01 Understanding Digital Disruption

02 Digital Disruption Designs

03 Digital Transformation Strategies

04 Social Experience Management


Defining Digital Disruption
The application of digital technologies to deliver superior
customer value by transforming products, channels, business
models, market efficiencies and user experiences.
Digital Disruptor Value Proposition

Choice

Community Cost

Digital
Disruptor
Value
Proposition

Customization Convenience

Control
Example: TechnoGym in Fitness
Seamless connection of equipment, sensors, applications
and devices to provide an interactive and personalized
experience for consumers.
Example: Tesla in Automobiles
• Car as cloud and mobile appliance
• OTA software updates
• Autopilot and Auto Park
• Cloud-based diagnostics and service
Outline

01 Understanding Digital Disruption

02 Digital Disruption Designs

03 Digital Transformation Strategies

04 Social Experience Management


3 Types of Digital Disruption

MARKET PRODUCT CHANNEL

Uberize Servicize Amazonize

© 2016 Mohan Sawhney


1. Uberization
Disruptors who create “On-Demand” asset or labor
marketplaces that match demand with existing and new
sources of supply.

• Target under-utilized assets and labor


• Bring “latent” supply into the marketplace
• Orchestrate a network without owning assets
• Rely on shared access rather than ownership
• Can create strong network externalities
• Logical extension of contract work and time-
shared assets
Uberization of… any asset and service!
Construction Equipment Private Jets Boats

Doctors Logo and Web Design Lawyers


Uberization: Is your
business at risk?
• Do you sell a service that relies on
high-value assets or high-value
human capital?
• If you sell capital goods, do your
customers utilize these assets less
than 25% of time?
• Do customers use your products or
services only occasionally?
• Is there latent capacity in your market
that can be brought online?
2. Servicization
Disruptors who use networks to add intelligence
to assets or to offer assets as a usage-based
cloud service
• Software “eats” the value in products
• Products become service-delivery platforms
• Sensors and instrumentation permits asset
and operations optimization
• Revenue model shifts to subscription-based
services
• Support model transformed with self-service
• Potential for innovative value-based pricing
models
Servicization – Usage-Based Models
Software Unmanned Arial Vehicles Agricultural Equipment

Legal Services Streetlights Tires!


Servicization: Is your
business at risk?
• Can your products be infused with
software-based intelligence?
• Can your products be connected to
and accessed over a network?
• Do customers value usage-based
pricing models instead of paying for
capital assets?
• Can you get paid for the value you
create for customers?
3. Amazonization
Disruptors who disintermediate middlemen
and create a direct-to-customer model that
has better economics and superior customer
experience.
• Take out low value-added
middlemen
• Use logistics as a competitive
advantage
• Use customer data as a competitive
advantage
• Offer unlimited choice and lower
prices
Giving optometrists a black eye!
Disrupting credit cards in Brazil
Current Credit Card Experience in Brazil
• Customers physically go to a bank to apply
• Monthly statements in the mail
• Inefficient phone-based service
• Lots of hidden fees
• Interest rates between 10% and 12% per month!

Nubank Bank Experience


• Platinum MasterCard issued over a smartphone
• 100% digital channels for customer interaction
• Transparent and honest
• 7.75% Interest rate
• Excellent customer support
• Social media marketing

Cristina Junqueira
Co-Founder and VP of Product,
Marketing and Operations
Nubank Brasil
Amazonization: Is
your business at risk?
• What percentage of sales in your
market are through e-commerce?
• What percentage of your sales go
through e-commerce?
• Do your retailers and distributors add
enough value to justify their margins?
• Is there a segment of customers that
values low-touch and no-frills
offerings?
• Is Amazon already in your market?
Outline

01 Understanding Digital Disruption

02 Digital Disruption Designs

03 Digital Transformation Strategies

04 Social Experience Management


Digital Transformation Strategies

Disrupt Acquire a
yourself Disruptor

Digitize the Act like a


Enterprise Disruptor
1. Attack - Disrupt
your own business
• Attack digital disruptors by creating
a digital disruptor of your own
• Leverage your assets and brand to
create a model disruptors cannot
copy
• Compete asymmetrically using a
Judo strategy
Attack: HBO Fights Back!

HBO
Streaming
Service
Disrupting yourself
• Is your core revenue stream
under severe attack?
• Will your industry inevitably move
to the disruptive model?
• Is the transition to the new model
happening very quickly?
• Does the leadership team have
the appetite for putting the core
business at risk?
2. Acquire: Keep Cannibals in the Family
Steps in Organizational Integration

ISOLATE INCUBATE INFILTRATE INTEGRATE


Acquiring a Disruptor
• Is it better to buy than to build digital
capabilities?
• Do you have a clear path to integration
between the core business and the
disruptor’s business?
• Can you retain the team from the
acquired disruptor long enough?
3. Adapt: Transform
your Value Proposition
• Expand the scope of your offering
• Increase share of wallet
• Extend into adjacent spaces
• Open your platforms and APIs
• Build a partner ecosystem
• Leverage privileged assets
Reliance Jio – Building a digital ecosystem

Retail 4GLTE Voice and


Stores Data VOLTE Video Chat
Voice

FTTH

Live TV
(300
channels)
Connected
Car/Home

Vertical Video-on-
Solutions Demand

SMB Private
Solutions Label
Enterprise Handsets Payments
Solutions

© 2016 Mohan Sawhney 28


Jio by the numbers
Capex $20 billion
Coverage at launch 18,000 towns, 100,000 villages
Fiber 250,000 kilometers
Towers 120,000
Spectrum 850, 1800, 2300 MHZ nationwide (40MHZ min.)
Retail Points of Sale at launch 150,000
Jio Centers at launch 1,000
Subscriber base 18 months from launch 100 million
ARPU $10-$15
Revenue Run Rate in 2 years $12b-$18b
Capex $20 billion
EBITDA Positive 2.5 years from launch

© 2016 Mohan Sawhney


4. Absorb: Digitize
the Enterprise
• Reimagine business processes end-
to-end
• Create a seamless customer
experience across channels
• Automate the front-office to create a
channel-agnostic experience platform
• Embrace agility in processes
Outline

01 Understanding Digital Disruption

02 Digital Disruption Designs

03 Digital Transformation Strategies

04 Social Experience Management


Customer Engagement 1.0: Broadcast
Customer Engagement 2.0: Social Media
Function and Channel-Specific Systems
Social is many channels

Content

Planning

Campaign

Publishing

Engagement

CRM

Reporting

Governance
SOCIAL Lumascape
Point Solutions
COMPETITIVE
COMPLIANCE
PUBLISHING SOLUTIONS LISTENING SOLUTIONS ANALYTICS
SOLUTIONS
SOLUTIONS

ADVERTISING ENGAGEMENT
BUNDLED ANALYTICS
SOLUTIONS SOLUTIONS

UGC CURATION
SOLUTIONS

COMMUNITIES SOLUTIONS ADVANCED ANALYTICS SOLUTIONS COMMAND CENTER ADVOCATE SOLUTIONS


SOLUTIONS

CONTENT MARKETING
COMMERCE SOLUTIONS
SOLUTIONS
Towards a Unified System of Engagement

Experience
Unified Cloud
Technology
Towards a Unified System of Engagement
Social Experience Management

Content Content
Engagement Reporting Automation Governance
Planning Publishing

Social Data Content


Integration Listening Advertising Benchmarking
Visualization Marketing

Distributed User Asset Audience Campaign Case


Mobile
Management Management Management Management Management
We have seen this movie before
Supply Chain Back Office Front Office

Supply Chain Benefits Customer


Care

Vendors Payroll Recruiting Content Social Media


Inventory
Publishing
Demand Tools & Admin RT Offers &
Planning
E-commerce

Data & Email


Manufacturing Web Presence
Procurement Onboarding Analytics Marketing

Data & Workforce Lifecycle


Analytics CRM

Unified product ID Unified employee ID Unified customer ID


Investing in Digital Capabilities
Capability Benefits
• Facilitates collaboration between IT and
stakeholders
Digital Innovation Lab • Hands-on experience with emerging technologies
• Incubator for pilot projects
• Concentrate expertise in new skills
Digital Center of Excellence • Curate best and next practices
(COE) • Accelerate solution development

• Increased customer satisfaction


User Experience Design • Reduced support costs
• Improved stakeholder engagement
Agile Development • Predictability in delivery and costs
• Improved customer focus
Leading Digital
Enablement
• Take a top-down, enterprise wide
view of digital transformation
• Build agile cross-functional teams
with representation from Business
Units, IT, Analytics and partners
• Adapt governance to encourage
innovation, not constrain it
• Appoint a Chief Digital Officer
• Think big, start small, scale fast
• Aggressively pursue digital and
analytics talent
• Open up your platforms to third-
parties