4
Digital Transformation
4.1. The importance of managing issues concerning the “digital transformation”
Digitization is a major strategic challenge and a matter of life and death for enterprises. Why? Because it has multiple implications; it affects the business model, the modes of management, the interaction among employees, the relationships with customers and suppliers, and the technology. Facing the myriad issues, the CEO and his or her executive committee often feel powerless and unprepared.
However, integrating digital technology and the cultural changes that come with it is no longer an option. The “uberization” phenomenon is an example of possible changes that represent a potentially fatal risk. However, it can also be seen as an occasion to grow faster or bounce back with a very classic and traditional structure. We can surely cite examples such as Airbnb for travel, Tesla in the automobile industry, Amazon and Alibaba for distribution, Netflix for entertainment and so on. In certain industries that are largely protected by regulations, digitization becomes more and more important; let us cite Sanofi1 “The idea is to have a global approach to the patient and contribute to taking better care of him”.
The evolutions currently have a pace that has not been seen before in the governance of large structures. Multiannual or annual plans are no longer appropriate for good growth management. In fact, since the year 2000, more than one in two businesses on the Fortune 500 list has disappeared or gone bankrupt.
The prerequisite for a successful digital transformation is the unwavering commitment of the CEO and their front lines. It is strongly recommended that the CEO is personally involved as is the case at AXA and BOLLORE. He or she is often surrounded by a Chief Digital Officer (CDO) who is a member of the Management Committee. He or she is close to or supervises the CIO (Chief Information Officer). A study by Forrester/Russell Reynolds in 2014 indicates that the person who embodies the digital transformation in 30% of cases is the CEO, in 27% the Marketing Director, in 13% the CIO and in 8% a new profile, the CDO. In the latter case, he or she generally has a relay to the various critical departments of the company.
Concerning product and service offers, they must be restudied entirely. This is a matter of reviewing their breakdown and mapping with the value chain, selecting various distribution channels and making them work together, and also studying the customer itinerary so that it is fluent and sound from start to finish. The stability of the offers and their associated services is often a sign of a decline and no longer, as before, of robustness. Stability is superseded by speed and reactivity, which are synonyms of agility today. The fast eat the slow! Enterprise governance is involved in digitization, no matter what happens. It has to keep the course on an invariant concern to develop the performance of the customer relationship. The new “Customer Experience” leitmotiv now guides enterprises, and new indicators for measuring customers’ emotions and delight emerge every day.
These measures of performance can be evaluated globally or according to more focused areas which are sometimes very new, such as the presence of social media networks and e-reputation. There are not many of these indicators, but they are frequently reviewed to facilitate global performance monitoring. They contribute to a better analysis of the enterprise’s agility when facing challenges in its environment, notably digital matters. Good digital performance reinforces and stabilizes the enterprise’s continuity under the condition that this performance is truly monitored with regular reviews. All stakeholders are concerned by the analysis of this performance, regardless of their internal or external status or position in the hierarchy.
Digitization is not a passing fad. It must be used as a means of monitoring the enterprise differently and more efficiently in today’s economy. Digitization serves the enterprise’s strategy.
This approach pushes us to break down the performance analysis according to different viewpoints.
4.1.1. How can we digitize while accounting for field realities?
How can we anticipate new trends on the market? Are digitization projects in touch with the latest innovations? First of all, we should assure that General Management and the members of the Executive Management Committee are aligned and involved in their enterprise’s governance of digitization. The General Management must assure the enterprise’s continuity by harmonizing the present and the future. It must facilitate employees’ transversal functioning and guarantee coherence so that everyone contributes efficiently to global performance and value creation. Digitization reinforces the necessity of monitoring. Decision-making processes must be, as the case may be, proactive or reactive in shorter and shorter periods of time. Space and time scales are getting shortened. New tools integrate the strategic vision through technological, process-related, financial, human, market and other views in order to make decisions with a better impact evaluation and to correct the problem or the focus right away when deviations appear.
4.1.2. How does the enterprise integrate changes in its environment into its organization?
Keeping up with technological change is crucial because it avoids delays that could render offers obsolete. Choosing digital projects is aids the structuring for the enterprise because these projects must both respond to concrete needs and anticipate future needs. “If you are proud of your product, that means that you have launched it too late!”
Innovation and transformation are indispensable and call on multiple competencies. For example, having both marketing and IT competencies facilitates matching innovations with customer’s profound, implicit expectations. The legal aspect integrates ethical matters at all necessary levels by examining the rights and duties concerning the circulation and protection of data related to individuals, customers, products, markets and so on. Conversely, digital developments can potentially lead to threats that must be handled at the opportune moment before they become fatal. Notions of events and customer contacts must be integrated by the organization in order to be correctly considered, analyzed, valorized and used for the purpose of permanently improving the customer experience.
It is interesting to consider “DevOps” approaches, which are defined as a movement that reinforces the IS agility, coupled with new digital opportunities. It is indispensable to focus our attention on the value creation, whatever the constraints on the fluidity of exchanges, on space and time pressure.
4.1.3. What impacts do decisions have on the environment and stakeholders?
Digitization redistributes economic value by focusing more on the service provided to the final customer. This assumes that the business has structures and processes at its disposal that facilitate listening to stakeholders both upstream and downstream. Providing a service implies consolidating technical and organizational components at the right level, at the right time. Some of these components come from innovative upstream chains that must be consistently integrated into the enterprise’s processes. Safety and ethics are to be considered with vigilance, knowing that many issues still stand before us, and that we are still far from having imagined all possible practices. Large groups are not safe from threats originating from unknown actors who can be so agile, innovative and disruptive that they succeed in creating new markets. The involvement of leaders such as Publicis, Accor, AXA, SNCF, BNP, as well as traditional health insurance companies, etc. confirms the importance of accounting for new trends originated by new actors arriving and acting on their markets. For example, Airbnb’s first big investor claimed to have 26 reasons not to invest, yet the enterprise has a market capitalization comparable with that of the hotel chain Hilton Hotel & Resorts! Of course, competition must be monitored, but digitization can also foster the emergence of innovative partnerships such as Suez and SFR, partnered around a system of radiofrequency to transmit data.
4.1.4. What measures are taken to ensure that offers conform to customers’ emotions and expectations?
The offer and its evolution relies on the Executive Committee’s responsibility and competency. In order to do this, the transmission of reliable data on customer perception and the offer’s performance should be carried out with filters adapted for highlighting the realities of the market. Rapid analyses with Big Data technologies, streaming analytics or predictive technology have become indispensable for those in charge of monitoring offers; an already established situation in banking and financial sectors, notably with the development of blockchains. However, there is still a great deal to be explored in other sectors. Artificial intelligence and cognitive approaches are being rapidly deployed.
Digitization will encourage the emergence of new product offerings like Tesla, or Bolloré in France. These can disrupt the established order and compete with a national operator like EDF (Électricité de France) or the traditional automobile industry. The detection and analysis of latent needs that can be satisfied by new services will very quickly implicate upheaval and lead to the emergence of new markets with unknown actors. Certain companies do not hesitate to encourage the blossoming of a “start-up” ecosystem. The purpose of these light structures is to innovate and create offers, some of which will perhaps be integrated into the strategy of the groups that host them. The culture of failure with its “test and learn” and “fail fast” tactics is increasingly gaining followers. Businesses understand that innovations emerge thanks to agile approaches and can create differentiations that will be decisive to ensure new successes. Offers must be developed within increasingly complex digital systems with customer targets that are immediately accessible through multiple channels and processes in perpetual evolution.
4.1.5. How can we measure the operational performance of different lines of products and services?
The reality of the market can be instantly measured with digital streaming analytics techniques that combine data from various sources, notably IoT (Internet of Things) connected object sensors. These analyses allow us to know almost in real time what the company’s performance is in terms of energy consumption, environmental impact, e-reputation, etc., beyond more traditional aspects such as production performance (cost, quality, flexibility, deadlines) which must not be forgotten. There are also tools (Process Performance Manager (PPM)) that extract from the processes performance indicators that optimize their monitoring in order to best respond to customers’ needs. People who can intervene and improve the processes in a continuous manner must be allowed to access these scoreboards.
4.2. The importance of monitoring digital developments
Digital transformation with components like the cloud, mobility, fast data and social networks shows developments that require sustained monitoring because varied innovations appear at a faster and faster rhythm. New start-up actors emerge with more and more ideas and solutions that can be quickly implemented so that they can disrupt the established situation. All sectors are affected: BtoB, BtoC, public, private, services, industry, distribution and so on.
Digital transformation is often compared to the Internet bubble in IT in the 1990s. But this is not so. This time, the development is not only technological since it entails reconsidering everything in-depth: humans, culture, organization, processes and methods. Digital transformation leads to new ethical questions related to processing personal data from various stakeholders (origin, transmittal, sales, exploitation, transformation, etc.). The use of this data is neither predictable nor controlled, see the latest debate around safe harbor. It can oblige the Executive Manager to make decisions and move forward while all indicators show the contrary. We cite Airbnb, BlaBlaCar (a French carpooling service) and Uber, to name just a few. Another interesting change to reveal concerns the “Big Four” auditors who acquire programmatic marketing companies with know-how in behavior analysis. This approach allows for traditional auditing and consulting to be broadened in order to bring in new marketing support for customers! It should be noted that in 2017, more and more large enterprises experimented with virtual or augmented reality within their marketing operations. It is thought that this new digital marketing will bring increasingly growing returns. Customers always attract more customers. It may be an anomaly in the industrial history, but it is real thanks to digitization.
Other than the positive perspectives brought by digital transformation, the resulting changes may sometimes have impacts so significant that they can destabilize the enterprise. Certain enterprises have already suffered great losses (Nokia, Kodak, etc.). The loss of value, which is detrimental especially to small- and medium-sized companies, appears systematically at the beginning of a transformation process. For Executive Managers, the negative impacts from the first stages of adaption must be anticipation, limited and controlled.
Within the enterprise, all operations are affected; certainly, changes have already started in yours. According to the industry, the strategy and the objectives, it will be necessary to make sure that the Managers in the Executive Committee are in line with the approach to be followed in order to benefit from it concretely. Digital transformation dictates continuous training that integrates technological innovations disappearing sometimes just as quickly as they may have appeared. The emergence of MOOCs is a path that is increasingly explored.
4.3. Artificial intelligence and robotization
The development of artificial intelligence (AI) has taken a turn with regard to rapid digital developments, notably that of Big Data. AI and Big Data are two new types of technology on the rise, full of promises for businesses in all industries. However, the true revolutionary potential of this technology is probably based on their convergence. AI allows us to simulate reasoning from human intelligence and discharge certain tasks that can be modeled for the purpose of handling them quickly, according to well-established rules that can be enriched through self-learning. Some of these identified and described rules open the door to new possibilities for robotization with the arrival of Intelligence Process Automation or Robotic Process Automation. This requires familiarization with processes in order to contribute to availability, speed and reliability. Information collection and its fast processing, based on predetermined recorded knowledge, opens new doors concerning automatic learning and provides precise, documented responses to the questions asked.
AI can be both descriptive, meaning that it analyzes what has already happened, and also predictive, meaning that it exploits existing information to learn from it and anticipate an event. AI has become ubiquitous in enterprises of all industries where decision-making can be facilitated by smart machines.
Big Data’s contributions to AI will allow more elaborate and pertinent decisions to be taken. All sectors must integrate this converging AI and Big Data trend, notably services (e.g. banks, insurance companies, financial services, social media, GAFAM2, etc.) and industry (automobile, logistics, construction). Customer demands and the necessity of preserving competitive advantages force enterprises to rapidly master increasingly diversified knowledge. Developing machine learning, expert systems and analytic technologies is becoming a necessity for increasingly efficient use.
Collecting increasingly numerous data from the IoT requires Big Data and AI to converge in order to be processed. This collection relies on interconnected networks (4G, 5G, etc.), whose deployment becomes strategic on a scale of nations. Sensors, chips, network nodes and software will be connected to AI. The challenge for enterprises is to integrate new means and to foster the emergence of new solutions for the benefit of employees and customers, for example, by wisely introducing conversational agents (chatbots).
The right combination of AI and human intelligence, with the power of robots, can as of now help professionals manage the security, compliance and quality of critical data, as well as help also optimize time. Robots take on a large portion of repetitive tasks and the automatization of inspections and audits. Thus, the actors have pre-processed information, targeted notifications and alerts that allow them to concentrate on decisions, based on their expertise and professional judgment. They can use their entrepreneurial abilities and creativity to accompany the challenges of the transformation.
4.4. Case study: assessing the maturity of digital transformation
4.4.1. Lise Charmel
The firm Lise Charmel agreed to test the questionnaire and evaluate its maturity in terms of sustainable development. The following rubric concerning digital transformation was provided to illustrate the method.
The test was conducted by the authors in the form of discussions with the firm’s General Manager, who we thank sincerely. The maturity evaluations obtained in this way correspond to perceptions, which would, of course, need to be confirmed by precise audits.
Lise Charmel is the reference for French lingerie all around the world. The company has a singular history paired with expected knowhow in craftsmanship, innovation and art as well as a constant concern for innovation and integrating advanced techniques into lingerie, all while accounting for fashion and trends. A communication strategy focused on the value of products, original, comfortable and elegant beauty enhancement for women has allowed the brand to benefit from a leading global position in the world of female lingerie today.
The brand was created more than half a century ago, in the birthplace of luxury, motivated by constant research on beauty and extreme comfort, and based in the heart of the Lyon silk industry. When Lise Charmel became a brand with international influence and organized distribution in more than 40 countries, it was its digital transformation that allowed it to develop its position as a leader among its customers, unite its network of distributors, open Lise Charmel showrooms in strategic locations, optimize collections, improve its supply chain from cut-outs to assembly through logistics and motivate sales representatives by assisting them.
Table 4.1. Lise Charmel: overview of the maturity of the digital transformation focus. Summary of results of the detailed evaluation grid from the guide “Performance durable de l’entreprise : quels indicateurs pour une évaluation globale ?”3
| LISE CHARMEL Overview of the digital transformation focus | Non-existent | Discovering | Deploying | Under control | Optimized | Comments |
| × | ||||||
| Technological and competitive vigilance for the digital revolution concerning your ecosystem has been put in place. | × | Yes and it is what has allowed the best digital tools to be implemented in optimized textile production for many years, well beyond main competitors. | ||||
| The strategy accounts for feedback from observations concerning your ecosystem. | × | The strategy is centered on operational excellence as cited above and focuses more and more on final client satisfaction without forgetting its distributors. Digitization has enabled the ecosystem’s creation and dynamism. | ||||
| Innovative or disruptive projects have been implemented in all of the business’ domains where a lever effect has been identified. | × | Several projects such as sales forecasts by size/model based on Big Data, networking with the final customer for retention, automating the supply chain with different distributors, collection done completely on tablets with order-taking for sales representatives, as well as logistic optimization and inspection. | ||||
| New service projects impacting the relationship with customers have been implemented. | × | For example loyalty cards, including distributor networks. | ||||
| The business has identified its needs in competencies in order to face digital stakes. | × | Evolution of competencies regarding IT in each business unit for a fruitful collaboration. A call to service providers to complement internal competencies when added value is identified. | ||||
| How responsibilities will be assigned within the business and to appointed managers. | × | Yes, in each service with an IT-involved approach that has a project supervisor role, but also assistance to the project owner. |