Summer Session

June 2018

Book Summary

What’s Your Digital Business Model?

6 Questions To Help You Build The Next-Gen Enterprise

By Dr. Peter Weill and Dr. Stephanie L. Woerner, MIT CISR

Prepared by Adiv Sulaiman

All content based on:

Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build
the Next-Generation Enterprise. Boston: Harvard Business Review Press.
 Framework Overview

WHAT’S YOUR DIGITAL BUSINESS MODEL?

SIX QUESTIONS TO HELP YOU BUILD THE NEXT-GENERATION ENTERPRISE

1) What is the Digital Threat & Opportunity?

2) Which Digital Business Model is best for your Enterprise?
3) What is your Digital Competitive Advantage?
4) How will you Connect using Mobile and the Internet of Things?
5) Do you have the Crucial Capabilities to reinvent the business?
6) Do you have the Leadership to make transformation happen?

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 2
Prepared by A. Sulaiman July 2018
 1) What is the Digital Threat & Opportunity?
Key Considerations

! “The average senior executive believes that 28% of current enterprise

revenue will be threatened by digital disruption within the next five years.”

There’s almost no doubt about it. Your core offering is bound to be disrupted by digital technologies and data at some point in time.
What can you do about it?
If you’re a senior executive at a large incumbent firm, you can start by quickly assessing the landscape to determine the necessary
organizational response. Only then will your firm be able to potentially disrupt itself. Once you have painted a clear picture of the Digital
Danger, you can identify specific actions and opportunities to protect existing revenues.
Example Opportunities Include: improving level of standardization, automating key processes, monetizing existing sources of data, and
investing in entirely new options.

Think of your top-selling product or service. To what extent is

Assessment: this product or service: Spotlight: Domino’s record-low stock price of $2.83 in 2008 due to
poor product quality and lackluster customer experience.
> Threat/Opportunity: No choice but to rely on digital.
• Electronically specifiable or searchable?
“We needed to become an e-commerce company that
• Either is—or is going to be—delivered digitally within the sells pizza.” – Chief Digital Officer
next 5 years?
> Invested in new customer enablement technologies,
• Augmented (or can be augmented) with data? including ordering via any device/platform.
• Threatened by other industries that have relationships with > July 2018 Stock Price: ~$282.13, now largest pizza chain
your customers? in the world

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 3
Prepared by A. Sulaiman July 2018
 2) Which Digital Business Model is best for your Enterprise?
Four Distinct Digital Business Models

4 Types of Business Models Omni-Channel Ecosystem Driver

• Supplier Network of enterprises and customers,

Complete
Multi-product, multi-channel,

Knowledge of Customers
• Omni-Channel designed around life-events creating value for all participants
• Modular Producer
• Ecosystem Driver

Based on:
• Business Design: Control of key decisions such as price,
participants, regulations, and IP Supplier Modular Producer
Provider of plug-and-play
• Knowledge of Customers: Understanding of customer Sell through other enterprises

Partial
products or services
identity, purchase history, and future goals

Takeaway:
• Ecosystem Drivers outperform all other business models
in measures of Customer Experience, Time-to-Market, Value Chain Ecosystem
Revenue Growth, and Net Profit Margin Business Design
Knowledge of Your Customer: To what extent does your With customer experience ratings below hotels, airlines, and
Assessment: enterprise know: Spotlight: Cable TV providers, Aetna saw an opportunity to
• Identity of most important end customers? fundamentally change consumer access to health care plans.
• Their purchase history with your enterprise?
> Went from enterprise Supplier to Omni-Channel by
• Their business (B2B) or personal (B2C) goals?
providing a variety of customer products and services “to
• Their purchase decision making process?
build a healthier world”
Business Design:
• What percentage of product and service revenues can be > Enabled shift from Omni-Channel to Ecosystem Driver
attributed to ecosystems you participate in? through acquisitions and partnering with health insurance
exchanges and providers

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 4
Prepared by A. Sulaiman July 2018
 3) What is your Digital Competitive Advantage?
Three Possible Sources

Customer
Content Experience Platforms
• Products • Quality of interaction • How content is
• Services between customers and delivered to customers
your content
• Information • Digital Processes
• Data & Infrastructure

Takeaway: Focus on Takeaway: Focus on • External Services

content if your goal is to customer experience if Takeaway: Focus on
generate new sources of your goal is to increase platforms for maximum
digital revenue revenue per customer efficiency and flexibility.

Content:
Assessment: • How often do you continuously generate new content? Spotlight: TripAdvisor leveraged its strength in content aggregation to
build additional digital advantages.
• Of today’s content, what do customers find most valuable?
Customer Experience: > Utilized more than 500 million restaurant, hotel, and
• Do you know how good your customer experience is or attraction reviews to build out Customer Experience
who owns it? including: Online Booking, City Guides, Vacation
• How can you amplify the voice of your customers? Calculators
Platforms:
> Acquired HouseTrip (AirBnb competitor) to build Platform
• How can you expose a digital platform to customers and
presence
partners to improve the overall enterprise?

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 5
Prepared by A. Sulaiman July 2018
4) How will you Connect using Mobile and the Internet of Things?
Five Mobile Strategies and Four Tenets of IoT Commitment
Brand Enhancement: Provide a free
service to increase customer engagement
Threat: Clearly defined threat of
digital disruption boosts IoT adoption
Mobile Multichannel: Improve the customer
experience by integrating across channels
IoT
Vision: Executive committee and CIO
involvement improves IoT outcomes
B2B2C: Connect to end customers for
enterprises that typically sell indirectly
New IoT Capabilities: Successful
Enterprises established open APIs
Targeted Segment: Create a unique
offering for an important segment
Organizational Readiness: Faster IoT
adoption in firms with clear governance
Mobile First: Launch all innovations on
the mobile channel

Schindler Group’s approach to IoT Commitment:

Assessment: Mobile Maturity: Spotlight: > Threat: Competition from smaller service firms.
• What percentage of revenues come from a mobile channel?
• To what extent are you capturing and using mobile (Maintenance = 50% of revenues | 75% of profit)
customer data? > Vision: Management saw the need to shift from a
IoT Commitment: product company to customer-oriented service provider.
• How critical are IoT initiatives to your enterprise success? > Capabilities: Gained service advantage by deploying
• How much is your organization willing to change in order sensors and real-time maintenance alerts for customers.
to take advantage of IoT? > Organization: Created Schindler Digital Business Unit.

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 6
Prepared by A. Sulaiman July 2018
5) Do you have the Crucial Capabilities to reinvent the business?
Eight Organizational Capabilities for the Next-Gen Enterprise

AMPLIFY CUSTOMER’S VOICE INTEGRATED EXPERIENCE IDENTIFY PARTNERSHIPS SECURITY & COMPLIANCE
› Make the customer central to › Embrace multi-product, › Integrate offerings with › Build core competencies to
everything that the firm does multichannel opportunities providers of complementary identify digital efficiencies,
› Map customer experience › Seamless customer experience products and services responsibilities, and threats
2 4 6 8

1 3 5 7
CUSTOMER AWARENESS EVIDENCE-BASED ACTIONS DISTINGUISH TOP CUSTOMERS SERVICE-ENABLEMENT
› Gather and use great › Utilize data to guide all major › Be the first place your best › Augment what already makes
information about customers decision-making processes customers go when needs arise you great with digitized services
› Map offerings to customer › Expand analyses to include › Reach executive agreement on › Deploy internal and external
goals and life events operational, customer, market, committing to your digital APIs to connect products and
and social data distinction silos

Customer-Centric (Omni-Channel): BBVA realized that conventional banking branches were not
Assessment: • How aware are you of customer needs and experiences? Spotlight: adequate enough to engage younger millennial customers.
• How rapidly are you analyzing and acting on customer- > Invested in and scaled the iGaranti mobile app with
related data? customer-centric features such as financial coaching and
Building a Platform (Ecosystem Driver): everyday finance.
• How effective are your partnerships and acquisitions? > Although it slightly cannibalized existing products, the
• Are you equipped to digitally service-enhance your mobile ecosystem attracted more than 4 million
strongest offerings? customers.

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 7
Prepared by A. Sulaiman July 2018
6) Do you have the Leadership to make transformation happen?
Four Key Spheres of Influence and Three Management Imperatives

The Board CEO

› Educate Board on › Shape culture of TOP-DOWN FIRST
digital technologies executive committee
› Digital Subcommittee › Promote joint Clear Top-Down
accountability Commitment on:
› Desired Pace
› Goals
› Success COMMUNICATE
Metrics
Communicate
Expectations:
› Internally and
Externally
DRIVE & REINFORCE
CIO Workforce › To key teams
CULTURAL CHANGE with timelines
› Facilitate digital driven › Encourage widespread Drive Change by:
executive discussions digital innovation › New people in
› Expand influence key roles
beyond core IT › Exemplify new
behaviors

Assessment: Leadership: Spotlight: Schneider Electric overcame challenges in enabling the

transition from physical products to end-to-end digital services.
• How digitally savvy is your Board?
• How committed is your CEO to digital transformation? > Established dedicated Digital Management Review for the
• How influential is your CIO with the executive committee? Board and Executive Committee
Culture: > Created two new business units: Digital Customer Experience
• How resistant is your organization to change? and Digital Services
• How familiar is your workforce with digital initiatives? > Published “Digital Playbooks” for each business segment

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 8
Prepared by A. Sulaiman July 2018
 Critical Takeaways
Top-down support and unity are keys to the digital engine.
Align the Board of Directors, Executive Committee, and other top leadership on the importance of digital transformation for the
future of your enterprise. Successful firms all require some sort of organizational surgery, resulting in new influential roles and
completely distinct business units.

Go beyond product and technology—do what it takes to truly

understand the customer.
Find ways to create a smooth customer experience across multiple products and channels. Develop unparalleled expertise on the
customer and establish omni-channel offerings designed around customer life events.

Build (or join) an ecosystem of partners to reap the benefits of a

platform economy.
Establish partnerships with providers of complementary products and services to maximize value to the customer. Consider
investing in or acquiring an adjacent-channel player to become an ecosystem driver.

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 9
Prepared by A. Sulaiman July 2018
 Thank You!

WHAT’S YOUR DIGITAL BUSINESS MODEL?

SIX QUESTIONS TO HELP YOU BUILD THE NEXT-GENERATION ENTERPRISE

1) What is the Digital Threat & Opportunity?

2) Which Digital Business Model is best for your Enterprise?
3) What is your Digital Competitive Advantage?
4) How will you Connect using Mobile and the Internet of Things?
5) Do you have the Crucial Capabilities to reinvent the business?
6) Do you have the Leadership to make transformation happen?

Source: Weill, P. & Woerner, S.L. (2018). What’s Your Digital Business Model? Six Questions to Help You Build the Next-Generation Enterprise. Boston: Harvard Business Review Press. 10
Prepared by A. Sulaiman July 2018