In the fourth module, we'll focus on BCG's framework for digital transformation program. To do that, we have the pleasure of having Tom Reichert here with us. Tom is our senior partner from the New York office. He is our global practice area chief, and he also heads up our global digital and analytics agenda. In his role, Tom, together with his team, have created the digital transformation framework, where it consists of a few key building blocks for a company to be successful in digital transformation. Tom, very happy to have you here with us today. >> Thank you, Chin Fong. >> Maybe to start off our conversation, can you please describe the key building blocks in our digital transformation framework? >> The framework has four major components. The first component asks how digital is changing the business strategy of companies. It looks at major trends in digital and analytics technologies, and how these trends allow companies to fundamentally change the strategic direction of the business model that is supporting this direction. The second component looks at how companies digitize the core. All steps of the value chain, from the customer interface through the supply chain and to the shared functions. The third component looks at opportunities companies have for new growth. It asks where companies have assets that could be taken out of the company and commercialized broader across the industries. And the fourth component looks at all the components that companies have to put in place to be successful in digital transformations. All the way from recruiting, training, ways of working, to underlying technology, data and analytics capabilities and, how companies will engage in a more open architecture world with other participants in the industry. >> Well, it sounds like a very comprehensive framework. So maybe let us take it through layer by layer, starting with the strategic layer. How do you think the company needs to think about strategy in this digital role versus previously? >> We believe that companies have to think in an integrated way. There is a business strategy, but there is not really a digital strategy for most companies in the future anymore. It will all become one. So therefore, we are most interested in identifying the key trends on the digital side. And what I mean by that is how can information, for example, change the way companies interact with their customers? How can automation change the way supply chains operate? How can more digital products be created? And then to translate how these trends enable a more comprehensive evolution of the strategy of the company, which then will have to translate into the overall operating model. >> Okay, so once they have figured out the strategy, it's time now to make something happen. And you have highlighted two paths they can do, one is digitizing the core, the other is one is seeking new growth opportunity. How does one company balance between the two? >> We find that companies, very often, have opportunities in both components. They certainly have many opportunities in digitizing the core, and they usually have very interesting assets that allow plays on new digital growth. At the end of the day, the choice between these two components depends on two questions. The first one is, what value creation can be achieved in each component? And the second question is, how many operational organizational people capabilities do you have in place to pursue a broader portfolio of initiatives? >> I see. Then we come to actually doing it successfully, I would imagine the company need the enablers that you talk about. Right, ranging from people and organization, the ways of working, data and analytics, and ecosystem. It sounds like a lot of items for a company to juggle, right. What are the typical challenges companies will face in creating all these enablers, and what are some of the ways that they can do to overcome such challenges? >> It is a comprehensive perspective, as you say, Chin Fong, but that is what is needed to fundamentally transform companies in the digital age. In terms of importance, they all have their place. We find that many companies are thinking a lot about the people challenges in that time. We know that we are recruiting for different talent, you will need some more technical skills. We'll need some skills of people who work in a more agile way. And we know we need people, for example, in marketing departments that understand digital marketing versus traditional marketing. So the components around the people agenda, how workforce changes, how the ways of work is changing, is a very critical part of the agenda. Equally, many companies will have to transform their underlying technology environment. And that relates to the middle two boxes. Firstly, in order to be to allow for more real-time interactions between customer interaction points, and very often, product systems. And secondly, new data architectures have to be built. Data lakes, in a real time progressing of information across the technology environment has to be done. And then, the block that you see in the ecosystems is becoming a more and more important space. We do not believe that companies, no matter how capable they have been in the past, have all the assets to play in the new world. It is often a faster, more effective, more creative way to interact with other players in the ecosystem, and to bundle, partner, or even acquire different assets to create the business model for the future. >> Okay. So now, let's bring this comprehensive framework to life. From your experience, how does one company apply this framework to start their journey on digital transformation? How long does it take? What are, typically, the first few steps they have to do to undertake the digital transformation? >> We find that companies come at this in different ways. But let me highlight three paths that I think are very promising. Some companies work their way throughout the framework in the way we've just walked through it. They start with a strategic look at the future of their business model. They very often do that, either in executive committee strategy sessions, in board sessions, or a more open environment with other partners, be that academic environments, or consultants, or investment bankers. And then, out of that agenda they create a portfolio of opportunities, work their way through the execution, and deal with the enabling questions in the lower part of the framework to support the execution of that program. Another path that we have seen is that companies start with a very customer-centric view. They say, the customer is really at the heart of our value delivery framework. And we want to create experiences from customers backwards throughout the organization that are seamless and very powerful. This is the approach that is, very often, called a customer journey-led approach. Companies create anywhere between 20 and 40 customer journeys. Start with the customer experience, and work all the way through everything that is required to adapt those customer journeys in the digital age. Be that on a sale of a product, be that on a servicing interaction, you name it. The third path that we see is a more bottom-up approach. Companies gain advantage, have very good initiatives in the individual parts of the business. And as they learn, they expand those initiatives further. For example, they start working in an agile way in one business unit. And as that matures, they're rolling their agile activities across the organization. They do digital marketing in one part of the organization. And then, very similarly, take it further across the full company. >> Well, great, Tom, it seems like there are many paths towards this whole digital transformation framework. But what is clear is for company to successfully transform themselves to digital, they need to touch on almost all of the elements of the framework. >> That is correct, Chin Fong. All companies will have to, at least, look at all components of the framework and answer, themselves, what will be required for a winning position, to sustain and evolve our competitive advantage? And therefore, what is our journey, our trajectory throughout the changes that digital provides? >> Great, Tom, thank you very much for the insightful sharing, and also for the very comprehensive digital transformation framework. Thank you, Tom. >> Thank you, Chin Fong.
