InsightReportTheDigitalEnterpriseMovingfromexperimentationtotransformationSeptember2018IncollaborationwithBain&CompanyWorldEconomicForum91-93routedelaCapiteCH-1223Cologny/GenevaSwitzerlandTel.:+41(0)228691212Fax:+41(0)227862744Email:contact@weforum.org©2018WorldEconomicForum.Allrightsreserved.Nopartofthispublicationmaybereproducedortransmittedinanyformorbyanymeans,includingphotocopyingandrecording,orbyanyinformationstorageandretrievalsystem.IntroductionDigitalstrategyTodayforward/futurebackDigitaldeparture:1,000pointsofdigitallightIndustrydirection:“Autonomousandelectric”–what’syours?Companyvision:YourroleinadigitalfutureCasestudy:EquinoxandPelotonWavesandsteppingstones:TraditionalplansstarttoolateandaretoostaticCasestudy:KaiserPermanenteCasestudy:VehiclemanufacturerBusinessmodelRediscoveringtherawcustomerneedunconstrainedbythecurrentmodelCasestudy:NetflixCasestudy:WalmartCustomerandchannelengagement:Digitaltechnologymakesexcellenceviralbutmediocrityshort-livedProductsandservices:Therawcustomerneedispermanent;acompany’sproductsaretemporaryresponsesEconomicmodel:Don’tlayeraneweconomicmodelontopofalegacybusinessOperations:SynchronizeoperationsandthefrontendtoachievethevisionforthebusinessEnablersTheengineofatransformationCasestudy:FacebookDataandanalytics:Startwithvalue,notdataCasestudy:AirbnbSystemsandtechnology:TechnologyquestionsarenowquestionsforCEOsCasestudy:ElectronicArtsTalentandculture:Withdigitaltechnologies,theymattermorethaneverCasestudy:EquinorOperatingmodelandpartnerships:TraditionalmodelsareinhibitorsCasestudy:Equinor(No.2)Casestudy:NokiaOrchestrationExperimentationiseasy;transformationishardScaling:Win,scale,amplifyGovernance,metricsandriskmanagement:Setprioritiesandguardrailstogoverngrass-rootsinnovationCasestudy:KaiserPermanenteLeadershipandengagement:HarnessthepowerofcommunitiesthroughdigitalandphysicalchannelsCasestudy:ShellFundingandinvestormanagement:MakethecaseforfundingandinvestingindigitaltransformationCasestudy:MunichReCasestudy:Domino’sPizzaRegulatoryandcommunityengagement:TakeaproactiveandpositiveapproachConclusionAcknowledgements57789910111112131314141616171820202223242526272829303233333435363639394041424344Contents3TheDigitalEnterprise4TheDigitalEnterpriseDonotbefooledbytheterm“digitaltransformation”.Thedata-drivenchangesbusinessesareundergoingcertainlybeginwithdigitaltechnology,butjustasimportantasthetechnologyitselfarethesurprisingwayspeoplereacttoandinteractwithit.Thatcombinationhasmadedigitaltechnologysodisruptive.DigitaltechnologymadeitpossibleformobiletransportationplatformsUberandDidiChuxingtoefficientlymatchriderswithdrivers,inexpensivelyandonamassivescale.Equallycriticalwerecustomers’embraceoftheserviceandtheirwillingnesstojumpintothecarsoftotalstrangers.HospitalityplatformAirbnbwouldnotbeworth$31billionifcustomershadnotquicklybecomecomfortablewiththeideaofsleepinginastranger’sbed.Thewillingnessofconsumerstoask1,000onlinestrangersiftheyshouldbuyacertainproduct,andtowriteparagraphsofdetailedreviews,hasmovede-commercebeyondbeingadigitalversionoftheUSretailerSears’cataloguetoreplacingthetrustedshopowner.Theseareconsumerbusinesses,butcompaniessellingtootherbusinessesareseeingimportantshiftsaswell,sometimesinfluencedbyexperiencesintheconsumerrealm.AtarecentWordEconomicForumworkshop,anexecutivenotedthathecanordera$1millionpieceofequipmentwithmonthsofleadtime,yethavealmostnovisibilityastoitslocationinthemanufacturingprocessatanygivenmoment.Ifhe’dordera$10pizzafromDomino’sonline,however,he’dknowalmosttothemomentwhentheanchoviesareadded.Suchdigitallyenabledexperienceshavecreatedanewnormalforallindustries.Introduction5TheDigitalEnterpriseInthisenvironment,executivesunderstandthatdigitaltechnologyisbothathreatandanopportunity.Thethreatisthepotentialdisruptiontoabusinessorindustry,startingwiththebroadexpansionofitscompetitiveset.Thedigitalopportunityisthechancetosparkinnovationandlaythefoundationforaprosperousfuture.Overthepastdecade,thisdigitaldualityofthreatandopportunityhascreatedanewgenerationofcorporategiantsandkilledoffothers.ABain&Companyanalysisshowsthatdigitalnativeshavegenerated80%ofthegrowthinmarketcapitalizationofthetopcompaniesoverthepast10years.Intheirpursuitofinnovation,most,ifnotall,incumbentcompanieshavedigitaleffortsunderway.Theyeffectivelythinkupideasandtestthem.Thestrugglebeginswiththenextstep,namelyscalingthebestideas.Specifically,itmeansintegratingthemacrosstheorganizationatasizebigenoughtomakeatruedifference,andthenembracingthenewwaysofworkingrequiredtomaintainthemomentum.Tohelpexecutivesthinkthroughthesechallengesandbetterexecutetheirdigitaltransformation,theWorldEconomicForumDigitalEnterpriseprojectcreatedaworkinggroupofseniorexecutivesfrom40globalcompanies.Thisdiversegroupisfromindustriesthattogetherrepresent70%ofglobalgrossdomesticproduct.Meetingperiodicallyataseriesofworkshopsandothereventsoverthepastyear,thegroupfoundthat,despiteitsdiversity,clearcommonthemesemerged:thatexperimentationiseasy,buttransformationishard;thatdigitaldisruptionisno