Design a Digital Strategy That Works Featuring Jeanne Ross, Director and Principal Research Scientist at MIT Sloan School of Management s Center for Information Systems Research an expert on how companies develop competitive advantage through digitized platforms FEBRUARY 2, 2015 Sponsored by
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Design a Digital Strategy That Works Today s Speaker Jeanne Ross Director and Principal Research Scientist at MIT Sloan School of Management s Center for Information Systems Research FEBRUARY 2, 2015 @HBRExchange #HBRwebinar
Design a Digital Strategy That Works PRESENTER Dr. Jeanne W. Ross Director & Principal Research Scientist MIT Sloan School of Management jross@mit.edu; http://cisr.mit.edu/ This research was made possible by the support of MIT CISR sponsors and patrons. RESEARCH TEAM Dr. Jeanne W. Ross Dr. Ina Sebastian Dr. Nils Fonstad Dr. Cynthia Beath
MIT CISR gratefully acknowledges the support and contributions of its Research Patrons and Sponsors. MIT CISR Research Patrons AlixPartners, LLP The Boston Consulting Group, Inc. Gartner, Inc. Microsoft Corporation MIT CISR Research Sponsors Aetna, Inc. AGL Energy Limited (Australia) Akamai Technologies Allianz Global Corporate & Specialty Allstate Insurance Co. AMP Services Ltd. (Australia) APM Terminals (Denmark) ANZ Banking Group (Australia) Australia Post Australian Taxation Office Banco Bradesco S.A. (Brazil) Banco do Brasil S.A. Banco Santander (Spain) BB&T BBVA (Spain) Bemis Company, Inc. Biogen Idec BNP Paribas (France) BNY Mellon BP (U.K.) BT Group (U.K.) Canada Pension Plan Investment Board Oliver Wyman, Inc. SAS Institute Inc. Tata Consultancy Services Canadian Imperial Bank of Commerce Caterpillar, Inc. CEMEX (Mexico) Charles Schwab & Co. Chevron Corp. CHRISTUS Health Chubb & Son Cielo (Brazil) Coles (Australia) Commonwealth Bank of Australia DBS Bank Ltd. (Singapore) Dunkin Brands DWS (Australia) Eaton Vance Management EMC Corp. Equinox Ltd. (New Zealand) ExxonMobil Global Services Co. Ferrovial (Spain) Fidelity Investments FOXTEL (Australia) Genworth Financial Hitachi, Ltd. (Japan) 355 Main Street, NE25 7 th Floor Cambridge, MA 02142 Ph. 617 253 2348 Fax 617 253 4424 cisr@mit.edu http://cisr.mit.edu Holcim Brasil S.A. HSBC Bank plc (U.K.) IBM Corporation Informatica ING Direct Spain Insurance Australia Group Itaú Unibanco S.A. (Brazil) Johnson & Johnson Level 3 Communications LKK Health Products Group Ltd. (HK, China) MAPFRE (Spain) McGraw Hill Education National Australia Bank New Zealand Govt. GCIO Office Nomura Research Institute, Ltd. (Japan) Northwestern Mutual Orange S.A. Origin Energy (Australia) PepsiCo Inc. Principal Financial Group, Inc. Raytheon Company Reserve Bank of Australia Royal Bank of Canada Royal Philips (Netherlands) Sabadell Bank Schneider Electric Industries SAS Standard & Poor s Standard Bank Group (South Africa) State Street Corp. Teck Resources Ltd. (Canada) Telstra Corp. (Australia) Tenet Health Tetra Pak (Sweden) TransUnion LLC Trinity Health U.S. Dept. of Health & Human Services Unum Group USAA VF Corporation Westpac Banking Corp. (Australia) World Bank 2015 MIT Sloan CISR 1 January 2015
Who owns digital strategy at your company? 1. Chief Digital Officer 2. CEO 3. CIO 4. Chief Marketing Officer 5. R&D/Product Development 6. Senior management team 7. Different people own different parts 8. Other To respond to a poll, click on the show polls button in the lower-right corner of your screen, then click take poll.
SMACIT: Disrupting your business
What impact are you expecting from your SMACIT-inspired strategies? Create competitive advantage 42% No impact 2% We will learn a great deal 7% Keep up with competition 11% Get into or create a new market space 16% Strengthen our competitive lead 22%
Digital Strategy Definition: Business strategy informed by the capabilities of readily accessible technologies (e.g. SMACIT) What s the big deal? SMACIT impact is greater when multiple technologies are applied to same strategic objective As SMACIT capabilities are introduced, customer (and employee) expectations expose functional interdependencies No playbook for how to be digital!
SMACIT drives multiple, interacting strategies Digital Product and Service Strategy Head of Product Development-CIO CMO-CIO COO-CIO CIO-HR Head Digital Marketing Strategy Digital Operations Strategy Digital Workplace Strategy Security CSO-CIO
Nordstrom Inc. Fashion specialty retailer offering clothing, shoes and accessories for men, women and children Known for outstanding customer service and empowered employees Founded in 1901 in Seattle as a shoe store; now has 117 Nordstrom stores; 151 Nordstrom Rack stores; growing online presence Source: Nordstrom Investor presentation 2014
Nordstrom is redefining customer service as speed, convenience, and personalization 4.4M Pinterest followers 1.3M Wanelo followers Source: Nordstrom Investor presentation, October 2014
Nordstrom s Purpose: Empower customers and employees to provide a fabulous customer experience Source: Nordstrom Investor presentation 2014
Implementing digital strategy requires enterprise capabilities Source: Nordstrom Investor Presentation, October 2014
as well as innovation capabilities Source: Nordstrom Investor Presentation October 2014
Aetna s Purpose: The place to go for [more and more] of your health and lifestyle needs Moving from plan sponsor centric to B2B2C and B2C Focusing on multi-product and multi-service customer experience Learning about their customers life style needs Emphasizing mobile so Aetna is always with you Partnering with companies that do health management, coaching and other services. 2014 MIT Sloan CISR Source: Company interviews and Aetna 2013 annual report
USAA's Purpose: Facilitate the financial security of members and former members of the U.S. military and their families Diversified financial services company # 139 in Fortune 500 Goal: Deliver integrated services to address member life events Technology innovations include Deposit@Mobile R and Auto Circle TM 2013 Revenue $21B 2013 profit margin/industry median 13%/5.8% Members and customers 10M Employees 25,800 Source: 2013 USAA Report to Members; J. Ross and C. Beath, USAA: Organizing for Innovation and Superior Customer Service, MIT CISR Working Paper No. 382, December 2010.
USAA targets member satisfaction and achieves it Industry Average NPS Score Top Performer Top Performer NPS Score Airlines 28 Southwest 56 Auto Insurance 44 USAA 81 Banking 34 USAA 81 Brokerage/Investments 47 Vanguard 65 Cable/Satellite TV 14 DIRECTV 34 Credit Cards 31 Discover 52 Department/Specialty Stores 62 Costco 82 Health Insurance 17 Kaiser 40 Home Insurance 40 USAA 84 Internet Service 5 Brighthouse 20 Laptop Computers 37 Apple 72 Life Insurance 29 State Farm 45 Online Entertainment 35 Pandora Radio 56 Online Shopping 44 Amazon 64 Smartphones 40 Apple iphone 67 Source: Stametrix 2014 U.S. Consumer Study, www.satmetrix.com/benchmarking
USAA is organized for integrated solutions President & CEO P&C Insurance FASG 1 Federal Savings Bank Member Experience CFO Chief Admin. Officer 2 3 more units 3 Investment Mgmt Co. Life Company 1. Financial Advice & Solutions Group 2. Includes IT, Transformation & Integration and others 3. USAA Real Estate Company, External Affairs, General Counsel & Corporate Secretary Source: M. Mocker and J. Ross, USAA: Capturing Value from Complexity, MIT CISR W ki P N 389 M h 2013
Propositions regarding digital strategy 1. SMACIT is disruptive and will fundamentally change businesses and industries because of what it makes possible. 2. Digital strategy starts with clear statement of purpose. 3. Competitive advantage will only accrue to firms that have strong underlying operational capabilities supporting their strategy. 4. Companies will quickly implement business components leveraging those operating capabilities. 5. The essence of the digital playbook will be a set of processes and guidelines facilitating coordination across functions, geographies, lines of business, and with customers and partners.
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